Duolun asked to submit more info after it changed name and said will enter the P2P business
Shanghai Duolun Industry Co has been ordered to halt its stock trading from Wednesday by the Shanghai Stock Exchange (SSE) until the company provides more complete information about the change of its name and business, Duolun announced on Tuesday.
Before the trading suspension order, Duolun had witnessed an increase of its stock price by the daily limit of 10 percent for two consecutive trading days after the company announced Sunday that it will shift its business to Internet finance and change its name to P2P Financial Information Service Co.
Duolun has decided to become the first Internet finance company listed on the A-share market and will change its name to reflect its new business, according to the company's Sunday statement.
In another Sunday announcement replying to the Shanghai Stock Exchange's inquiries about the changes, the company said that the change is aimed at creating a new profitable business because its real estate business, its former main business operation, has suffered a profit decline in the past two years.
The company also said that the change of the company's name has been pre-approved by Shanghai Administration for Industry and Commerce, but the change of business scope has not been approved yet.
The company has not had a feasibility study issued by a third-party institute, or formally begun Internet finance operations or allocated personnel to this business at present.
About Duolun's latest move, Li Chao, an analyst at consultancy iResearch, told the Global Times on Tuesday that "some companies have shifted into Internet finance to attract more investors since the Internet finance industry is a hot sector while the property industry is undergoing a hard situation."
Duolun admitted in its reply to SSE that Internet finance has little relation to real estate.
"This is not a single case, since many listed companies have done this as well," You Tianyu, a research director of a local private equity fund, told the Global Times on Tuesday, "More companies are trying to connect with the Internet by acquiring Internet companies or promoting their products and services online."
It is not rare for companies listed on A-share market to change their names. More than 80 listed companies have changed their names this year, and the figure was 180 in 2014 and 151 in 2013, news portal cs.com.cn reported on Tuesday.
Not all companies have made a real transformation into Internet-related businesses.
"Some of them did what they declared, but many did not," You said.
"China's capital market likes stories about the Internet and investors are willing to buy related stocks. That's why Duolun's stock price was able to soar after it declared it was getting into the Internet sector," Zhang Ya'nan, a research manager at consultancy IDC, told the Global Times on Tuesday.
"Some investors buy Internet-related stocks out of speculation and others are just following the trend," You echoed with Zhang.
The company also said that it has been authorized by its controlling shareholder Duolun Investment (Hongkong) Co Ltd to use a domain name www.p2p.com for free for one year, claiming it gave Duolun an advantage in the Internet finance industry, according to another statement released on the same day.
The homepage of www.p2p.com claimed that the domain name is worth $100 million, but You doubted that and said the price is just an exaggeration to attract attention.
Most Internet firms are high-tech companies and they are an important component of Shenzhen Stock Exchange's ChiNext, China's NASDAQ-like board for high-tech and fast-growing companies.
The total market value of Chinext was 5 trillion yuan ($805.5 billion) as of Monday, according to Shenzhen Stock Exchange.
"High-tech companies that are at an early stage usually have high growth potential, which causes more profit-seeking capital to enter the Chinext, pushing it extremely higher," Li said.
