From a daily transaction of only 1 hand and a transaction amount of less than 600 yuan, to a daily turnover rate exceeding 3% and a transaction amount exceeding 26 million yuan, after a "surge" in stock price for a month, Tianjin New Materials was suddenly suspended due to the withdrawal of market makers.

Tianjin New Materials recently disclosed that Guoyuan Securities withdrew from its market making on May 8th. With the number of market makers falling below two, it did not comply with the relevant regulations of the stock transfer company, and was suspended on the 9th. Subsequently, it was suspended again for additional checks due to significant stock price fluctuations. The regulator then issued inquiries, requiring the company to explain the reasons for the large increase in stock prices and significant growth in performance.

Tianjin New Materials, which has hitched a ride on the "Trimellitic Anhydride (TMA) concept," saw its stock price start to rise at the beginning of April, with a cumulative increase of nearly 2 times that month. There is no limit to the rise and fall of the stock in the new third board market making transactions, and the daily increase of this stock once exceeded 94% within the month. Before the suspension, Tianjin New Materials had a cumulative increase of more than 6 times in a little more than a month, with a cumulative transaction amount of more than 90 million yuan.

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Why did the market maker suddenly withdraw? Some people believe that there may have been a short squeeze situation for the market maker during the surge in Tianjin New Materials.

"From the company's announcements and the recent trend of the company's market, it is not ruled out that this is a short squeeze behavior of the market maker," said Zhou Yunnan, the founder of Beijing Nanshan Investment. One of the market makers, Guoyuan Securities, was continuously bought, driving the company's stock price to soar sharply. Some industry insiders also believe that it is not ruled out (short squeeze), but it cannot be determined according to public information.

There are also some senior people in the new third board who believe that the market maker may have taken the initiative to sell. Yu Wei, an expert from the Economic Development Work Committee of the China Xiaokang Construction Research Association, told the reporter, "The market maker who withdrew may have taken the initiative to sell the position, after all, the company's stock price has increased sharply in a short period of time, and the profits are substantial."

Tianjin New Materials, which has twice failed in the IPO and was the first company to be rejected by the Beijing Stock Exchange, has once attracted market attention. It was listed on the new third board in 2014, transferred to the market in February 2016, and made a sprint to the GEM and the Beijing Stock Exchange in 2017 and 2022, respectively, but was rejected at the meeting. Tianjin New Materials' A-share listing has been a bumpy ride, and the company's performance has been repeatedly concerned by the regulator.

The stock price "soared", and it nearly doubled in a single month.

The background of this round of sharp rise in Tianjin New Materials is the continuous fire of the TMA (Trimellitic Anhydride) concept. Since April, affected by the rise in the price of the chemical raw material Trimellitic Anhydride, the TMA market has been hot. The concept stock Zhengdan shares have increased by more than 400% in the past month.

Tianjin New Materials was established in 1999 and belongs to a company in the chemical industry's sub-industry. The company's leading product is Trimellitic Anhydride. There are not many manufacturers in China engaged in the production of this product, mainly distributed in Jiangsu and Anhui, including Baichuan shares, Zhengdan chemistry, etc.As a TMA concept stock, Taida New Materials also witnessed a significant surge in its stock price. Prior to the suspension, over the three trading days from May 6th to May 8th, Taida New Materials accumulated a 150% increase, with daily increases of 17.57%, 68.47%, and 26.21%, respectively, and daily transaction volumes of 10.25 million, 18.32 million, and 26.4 million yuan.

According to data from Eastmoney, in the recent month (from April 2nd to May 8th), Taida New Materials' cumulative increase within the period was 648.8%, with a total transaction amount of 97.73 million yuan.

In contrast to the past, Taida New Materials was once "neglected" in the secondary market, with some trading days having only one buy order and a daily transaction volume of less than 600 yuan.

According to Wind, in the first three months of this year, Taida New Materials' average daily transaction volume was about 68,000 yuan, with an average daily trading volume of about 11,000 shares. On March 5th, the transaction volume of Taida New Materials was 608 yuan, with only one share purchased that day. On December 27th and 29th last year, the stock also only had one and two shares purchased in a single day, with daily transaction volumes of 592 yuan and 1,184 yuan, respectively.

Due to the popularity in the secondary market, the number of Taida New Materials' shareholders has surged. As of the close on May 8th, the company had more than 200 shareholders, up from 74 ordinary shareholders at the end of last year.

However, after a month of significant increases, Taida New Materials was suddenly suspended due to the withdrawal of market makers. Guoyuan Securities withdrew from providing market-making quotation services for the company starting May 9th, and due to the lack of more than two market makers, Taida New Materials was suspended from trading starting that day. At the same time, Taida New Materials added the matter of abnormal stock price fluctuation for the suspension review.

Regulatory inquiries followed closely. On May 11th, the National Equities Exchange and Quotations (NEEQ) sent an inquiry letter to Taida New Materials, requiring the company to explain the significant increase in stock trading prices and substantial earnings growth.

Were the market makers forced to exit or did they withdraw voluntarily?

After Guoyuan Securities' exit, Taida New Materials was left with only one market maker, Huayuan Securities (formerly known as Jiuzhou Securities).

Currently, Taida New Materials belongs to the innovation layer and began market-making transfers on February 16, 2016. In mid-April of this year, one of the market makers, Changjiang Securities, withdrew.Why did Guoyuan Securities withdraw?

Zhou Yunnan mentioned that due to the single market-making transaction implemented in the New Third Board, there would be extreme long behaviors during the single market-making transaction, that is, continuously buying the inventory stocks of the market makers. "Market makers have to keep reporting higher prices, and the less inventory stocks they have in their hands, the easier the price will soar," he said.

"Around 2015, in the New Third Board market-making tickets, this kind of extreme situation of blowing up the market makers to achieve a sharp rise in stock prices often occurred," he mentioned.

"Whether there is a (short squeeze) cannot be seen from the transaction, but only from the result," said the above-mentioned New Third Board investor, adding that the stock price soared rapidly within a few days, coupled with the withdrawal announcement, it is not excluded that there is a possibility of being short-squeezed, but it cannot be determined.

Yu Wei believes that it is also possible for the market makers to sell actively.

"There is no regulation for New Third Board market makers to hang a certain number of buy and sell orders at each price, only need to provide trading quotes on trading days. Market makers, in addition to fulfilling market-making obligations, can also be considered investment institutions, pursuing investment returns, and will not blindly buy a large amount of high-priced chips," he mentioned.

According to the stock transfer regulations, the company needs to restore the number of market makers to more than 2 within 30 trading days, otherwise, it will be forcibly changed to a centralized bidding transaction method.

As of May 8, Taida New Materials closed at 46.8 yuan per share, with a daily trading volume of 580,000 shares, a daily turnover of 26.4 million yuan, and a total market value of 2.036 billion yuan.

"The key is that at such a high price, it is not easy to find a new market maker, unless there are shareholders willing to privately discount a large amount of bulk transactions to new securities companies for market making," Zhou Yunnan believes.

"It is still quite difficult to add another market maker, and it is hard to find a new securities company without tickets in hand, and it cannot be traded when it is suspended," Yu Wei believes that if a new market maker cannot be found, Taida New Materials will become a bidding transaction. "Most New Third Board companies choose bidding transactions, and Taida New Materials does not necessarily have to continue to maintain market-making transactions."Performance Fluctuations Frequently Draw Attention

In addition to stock prices, what has attracted market attention to Tide New Materials is its bumpy path to going public. During its two attempts to list on the A-share market, the growth of its performance has always been a key focus of regulatory scrutiny.

Since 2019, Tide New Materials has entered a period of rapid performance growth, with revenue climbing year by year, and the average annual growth rate of revenue in the past five years is close to 30%. In 2020, the net profit attributable to the mother company increased by as much as 516% year-on-year.

According to the annual report, from 2019 to 2023, the company's operating income was 139 million yuan, 209 million yuan, 282 million yuan, 355 million yuan, and 474 million yuan, respectively; the net profit attributable to the mother company was 5.74 million yuan, 35.3883 million yuan, 65.8168 million yuan, 35.2562 million yuan, and 49.4581 million yuan.

The growth of Tide New Materials' revenue and profit has always been a key issue of concern for the exchange.

As early as 2017, when attempting to break into the GEM (Growth Enterprise Market), the review committee noticed that the company's main business income in 2016 had declined, but the net profit excluding non-recurring gains did not decrease synchronously. That year, Tide New Materials' operating income was 175 million yuan, a year-on-year decrease of 15.06%; the net profit excluding non-recurring gains was 26.8917 million yuan, a year-on-year increase of 0.13%.

In 2022, when attempting to list on the Beijing Stock Exchange, the authenticity of Tide New Materials' performance was once again a focus of attention. In September of that year, when Tide New Materials went public on the Beijing Stock Exchange, the exchange required the company to explain why the net profit showed a significant downward trend from 2016 to 2019, but increased sharply in 2020. The main influencing factors for the change in the net profit trend and the significant rise in that year were also requested.

Recently, in the inquiry letter issued by the stock transfer company, the company was asked to explain the reasons for the significant increase in revenue.