The shattered market confidence, and reduced capital resulted from market exposure could drive many issuers to go private. Experts say companies choose to delist shares for a variety of reasons such as the liquidity shortage, cost saving and to reduce market exposure.
The most common reasons for delisting stocks from the market
Over the past few years, delistings from the Bucharest Stock Market of companies such as Dacia Pitesti, , Terapia Cluj Napoca, Arctic Gaesti, Sidex Galati and more recently Policolor have narrowed traders’ options to diversify investments, given the low flow of IPOs in terms of quantity and quality.
There is variety of underlying reasons for a delisting from the stock market, but all have one thing in common: majority shareholder.
Therefore, if he wishes to stop disclosing financial results to regulatory bodies, or not to be compelled from meeting the minority shareholder requirements or to clear the way for inside operations (partitioning, capital raise/reduction), processes burdened if the company is listed, the first thing he would do is to deregister stocks,” said Silviu Enache (photo) manager of KD Capital Management.
On the other hand, a lower free-float would be a good reason to go private.
“The lack of required liquidity makes the shares of a company unattractive, enough to turn the odds of benefiting of the advantages arising from listed company statute to minimal. In default of access to funding, of a positive image, notoriety in the economic landscape, the costs of trading stocks on the market can be unsustainable and thus companies can choose to deregister them instead.
Another reason is the majority shareholder’s intention to acquire as many stocks from the market as possible before running massive investment programs (such as Dacia or Automobile Craiova), said Brendea.
Advantages and
