Good morning! It's Paul here.
I'm heading into London shortly for an investor seminar, so will rattle off a few comments on today's news, more briefly than usual.
De-listings - Interquest & Fusionex
This is becoming a big issue. Companies which decide to abandon their stock market listing are usually hopeless cases - tiny, loss-making, and strapped for cash. So they're pretty easy to avoid.
However, I'm becoming increasingly concerned at companies which are leaving the markets when they really shouldn't. A good example is Interquest (LON:ITQ) - a small staffing company. It previously had a good track record, but the shares crashed when it warned on profits last year.
As you can see above, there was a nice progression of profit growth, until things went wrong last year. Obviously the share price has reflected this period of poor performance:
If a company performs badly, then management have a duty to rectify things. Over time, the market will reward improved performance with a recovery in the share price.
However, in this case, management has decided to stuff outside shareholders with a low-ball takeover bid. They're offering just 42p (a lousy 9.3% premium to the previous share price) to take the company private! In the relevant paperwork, management bemoan the low share price, whilst seemingly oblivious to the fact that it's their poor performance which is the root cause of the low share price. A ridiculous loan note alternative (redeemable in 2027!) only adds insult to injury.
In my view this takeover bid is unethical. It's also damaging to the reputation of the stock market, and undermines investor confidence. Why would any of us buy shares in any company, if we're going to be forcibly bought out, at a low price, if things go wrong?
The only independent Director at Interquest has urged investors to reject the offer, and has the support of shareholders with 20.1% of the company. Unfortunately, I don't think that will be enough to stop this shabby, opportunistic deal. A share can be de-listed once a takeover bid has the support of 75% of shareholders. In cases like this, where management have a large shareholding, the interests of outside shareholders can be seriously…
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