In an announcement late Friday afternoon, after market close and just before the long weekend, AIM listed Fusionex announced that it will seek to delist from the AIM market. It’s not clear why this is good for private investors, the company is profitable and has no need to raise funds. The RNS says that a meeting will take place in Malaysia on 15 June to vote on the matter, and that all of the Directors representing 41.93% of shares are in favour. Almost all of these are in the hands of the CEO, Ivan Teh.
Unfortunately for investors, this would leave them with no official market in the shares. While there is an intention to put in place a matched bargain settlement facility, this is unlikely to provide much, if any liquidity. Syqic, another profitable Asian company which recently delisted itself, has a matched bargain facility. The trading volume in the last few months? Nil.
It appears that the cancellation notice has already been delivered to AIM in anticipation, with cancellation expected on 27 June, less than a month away. A further RNS before the market open this morning saw the resignation of joint broker Peel Hunt, as well as Chairman John Croft. The share price reaction today was brutal, with the shares down 64% by the close. Investors participating in the IPO in 2012 have lost two-thirds of their money – so far. Shareholders will soon be in grave danger of being faced with a ‘lowball’ bid for their shares if they want to realise any value at all.
Unless many of the non-Board holders vote against this delisting, it is sure to happen. While this is a Special Resolution, requiring 75% of votes cast, Mr Teh and a colleague control 54% of the shares. In order to be defeated, at two fifths of the remaining 46% of shares need to be cast against them. Unfortunately, voting turnouts are typically low for listed companies, allowing this type of behaviour to persist; it would take a concerted effort to defeat this resolution. The nominee system makes it difficult for shareholders to obtain timely information about corporate actions, and voting can be difficult or even impossible. This is particularly true given that the meeting is only 2 weeks away. All of this works to the benefit of the CEO who wishes to delist his company, and who will soon be safely away from regulatory scrutiny and market discipline.
The net result will be that yet another name is added to the list of Asian based companies which have turned out to be a disaster for investors. Naibu, Camkids, Hirco, Jiasen, Taihua, Asian Citrus, Syqic, and many more. In the absence of any support from AIM for investors in these cases, investors would do well to be ever more wary of foreign companies listed in London.
Please support our shareholder rights campaign to reform the nominee account system, and make it harder for managements to use the barriers this system throws up to discourage shareholders from voting in their own interests.