Date: 2013-07-31

Wazhou B Delisted Temporarily from Shenzhen Stock Exchange

Wazhou B Delisted Temporarily from Shenzhen Stock Exchange

Wazhou B, trade name of Wafangdian Bearing Group Corporation (WBG), has been delisted from Shenzhen Stock Exchange temporarily by securities regulatory authority. Because equity composition of Wazhou B may lead to WBG's losing its position of the largest shareholder to SKF.

At present, WBG hold 200 million shares, being the largest shareholder. With 65 million shares, SKF is the second largest shareholder. Other 65 million shares are controled by the public holders. From the above figure, SKF can't threat the dominant role of WBG. But things would be different, if WBG carried out the Equity Division Reform.

Equity Division Reform is inevitable for all state-involved listed enterprises. The purpose of this reform is to change all non-float shares into float. In past when stock system were introduced in China, state-owned enterprises began to carry out reform to employ stock system. Limited by China's condition, shares of the stock enterprises were classified into non-float share and float. Only float can be traded on the stock exchange.

It is clear that this system is not rational. So the state government have begun to carry out equity division reform to solve this problem in recent years. According to content of the reform, all non-float shares should be changed into float. Of course, there are several means to practise such idea, you can find them on relavant source.

Let's back to the case of Wazhou B. To carry out the equity division reform means that large number of their 200 million shares, the non-float shares, may be aquired by others. SKF will be the first one being interested in these shares. Because since SKF became shareholder of WBG in 2001, they have experienced several times of stock price fluctuations and never showed any sign of quitting. It is enough to express their long-term strategy in China.

Therefore, the securities regulatory authority delist Wazhou B temporarily until they take some effective measures to rationalize their equity composition.

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