by Mark Lauber, Director, ShareSoc
Eurasia Mining is a junior mining company listed on the AIM market. Having traded in a range of 0.4 to 0.7p for the last two years, it spiked up in October 2019, reaching a price of 7.2p by the time it was suspended on 11 February. The reason given for the suspension was that clarification of the relationship with CITIC was required.
On 9 April a further RNS was issued, stating that WH Ireland had resigned as Nomad, and that the company was in discussions with a new Nomad candidate. It noted that if a new Nomad was not appointed by 30 April the shares would remain suspended, and if a new Nomad was not appointed by 29 May the listing would be cancelled.
Given that Nomads must give 30 days’ notice of resignation to a company, it would appear that WHI had resigned on 30 March, and the company delayed notification to the market by 9 days. No reason for the resignation of WHI has been given, and I’ve no criticism to make of them.
A quick perusal of RNSs and news around the company raises a number of questions and flags, most notably around related party transactions. Some of these have been addressed by an intermediate RNS, but much remains open.
That said, it is a shame that the company is facing delisting at the end of this week. Delisting is usually very bad for shareholders. Not only is any opportunity to trade the shares gone, but the information flow to/from the company is seriously impaired, and of course oversight of company management is much more difficult.
It reminds me of another case, that of Syqic Plc. They were originally suspended for non-filing of accounts, and once these were filed, the suspension was extended pending ‘clarification of the company’s financial position’. In this case, a 6 month clock started ticking at the first suspension, and continued on to the point where the company was delisted. Despite promises by the Board, communication with shareholders ceased and a share trading facility was never put in place. The company never filed further accounts, and the company was eventually struck off – investors lost everything.
While the circumstances of these two cases appear slightly different, I’m not optimistic on the outcome for Eurasia shareholders. It appears that delisting, while generally a horror for investors, and an embarrassment for executives and directors, can be a useful tool for evading scrutiny should management so desire.
Usually a delisting must be approved by shareholders. It’s not right that a company can achieve delisting through non-votable events, particularly if these events can be influenced by company management.
DISCLOSURE: The author has never held shares in Eurasia Mining.
So what happens to shareholder cash?
Unfortunately shareholders’ cash is gone. According to the company’s last interim report, net cash was £0.32m (0.01p/share) and net book value for the entire company was £6.46m (0.24p/share). There is little that can be recovered for shareholders.
The time-based delisting criteria is a disgrace.
Normally if management wish to delist a company, they would put a motion to shareholders, and a supermajority in favour would be required. What therefore is the logic in structuring regulations such that an unscrupulous management team can circumvent the regulations by simply failing in their management duties?!
Imagine a situation where a listed company is 25% owned by management. There is very little chance that they would be able to disadvantage minority holders via a democratic process. So why don’t they simply not bother filing accounts on time, citing some spurious inhibiting factor, and hey presto, the suspension automagically turns into a delisting, and effectively turns full control over to the unscrupulous management, as minority holders have no effective power in an unlisted entity, away from protective listed regulation.
How can the the FCA and LSE permit such actions?