Delistings of AIM companies always distress investors. Out of the blue your shares in a company can drop in value very substantially, and you can be left holding an unsaleable stock. Two recent announcements of delistings have been Security Research (SRG) and Rethink (RTG). These are both companies with patchy trading histories and low market capitalisations (£9m and £5m respectively after the announcements).
It requires a vote of 75% of shareholders to approve delisting. In the case of Security Research the General Meeting to approve the delisting proposal is on the 18th December but the directors already claim to have 70% of shareholders in favour. So it looks almost impossible to get sufficient voters opposed to defeat it. Even if everyone voted, which they never do, and even if they all opposed delisting, the problem would remain of getting those investors in nominee accounts to actually get their votes recorded in time. This is often very difficult which is why ShareSoc has been running a campaign on shareholder rights – see www.sharesoc.org/campaigns/shareholder-rights-campaign/.
In the case of Rethink the vote has already taken place and was approved. The big difference between the above two cases is that in Rethink the company has announced a tender offer to buy back shares from investors at a slight premium to the previous market price. Although some investors still think the tender offer of 5p per share undervalues the business.
Investors in Security Research are even more unhappy. Apart from the lack of such a tender offer, they claim that the previously announced interim results were very positive with no hint that a delisting was being considered. This might have caused investors to purchase shares at a significantly higher price to what they are now worth.
Comment: allowing such companies to delist is not unreasonable if the prospects for the business do not look great and the costs of an AIM delisting (both in fees and management time) make it no longer worth continuing. If there is no liquidity in the shares, then there is little advantage for management in having the listing. In Security Research there were often no trades at all on some days in the last year, and likewise in Rethink. Both these companies looked at risk of delisting and the share prices may already have reflected that to some extent. Clearly investors need to be very wary of such a risk if they invest in such companies, or ask for reassurances from the directors. The view of the risk might also be coloured by how much you trust the directors to treat small minority shareholders fairly if they do delist – not just with the provision of an exit sooner or later, but how they are going to run the business as a private company.
Roger Lawson
