(Yicai Global) June 5 -- Debt-laden Leshi Internet Information & Technology, one of China’s largest online video firms, plunged by the exchange-imposed limit as it started the delisting process from the Shenzhen Stock Exchange after its expulsion last month due to its failure to regain a positive net worth.

Leshi’s shares [SHE:300104] slumped 10 percent today to close at CNY1.52 (USD0.21) each, giving the company a market capitalization of CNY6.74 billion (USD846.8 million). Just CNY1.09 million (USD154,000) worth of stock changed hands.

The delisting process takes 30 trading days. During this time, firms are not permitted to undergo major restructuring of assets, so as to prevent them for resurrecting themselves through a backdoor listing. They are also not allowed to go public again after delisting.

Many investors are trapped. As of the end of March, the Beijing-based firm had around 280,000 shareholders. Four organizational investors are among the top 10 with a collective stake of 2.31 percent. They include Shanghai-based Caitong Fund Management and Zhong Ou Asset Management.

Real estate giant Sunac China Holdings, the second-largest shareholder, has already given away its 8.56 percent stake which it paid CNY6 billion (USD845.8 million) for three years ago. The recipient is a new firm called Zhixin Yunwang Corporate Management, half owned by a former manager at Leshi unit LeTV, now a brand operating under Sunac Culture, Leshi said on June 3.

Disgraced founder Jia Yueting, the largest shareholder with a 23.1 percent stake, his elder brother Jia Yuemin, who has 1.6 percent equity, and parent firm Leshi Holding, which holds 0.6 percent, have all had their shares frozen as an investigation into the finances of Jia’s businesses continues.

Mired in Debt

Leshi had its Shenzhen listing suspended last May after a dismal performance that saw net assets attributable to shareholders dwindle to CNY304 million (USD42.9 million) at the end of March 2019 from CNY13.6 billion (USD1.92 billion) a year earlier.

The firm has been dragged through the mud by Jia Yueting who borrowed heavily in its name to fund diversification into new energy vehicles as well as other ventures that have not paid off. It has amassed losses of CNY30 billion over the past three years.

At the end of last year, the company’s net assets were down to minus CNY14.3 billion. Operating income fell 69 percent from 2018 to CNY490 million (USD70 million), according to an unaudited earnings report.

Leshi’s revenue from advertising, subscribers and content has plummeted due to the sustained damage to its brand and goodwill, it added. Income from long-term assets such as the copyright to films and television dramas can no longer cover their costs.

Editor: Kim Taylor