Shares in China Biodiesel Intl Hldg Co Ltd (LON:CBI) shot up by 30% to 14.5p this morning on news that the Chinese renewable energy company was set to ditch its AIM listing and buy back shares from investors at 16.5p. It blamed the move on its recent share performance, which it described as “disappointing” and “a source of frustration”. From a low of just 6p last June, China Biodiesel’s share price rose to a high of 17p last September before falling back to 11p at yesterday’s close.

The company, which develops biodiesel as a substitute for diesel or petrochemical materials, said that the development of the business and its growth potential had not been adequately reflected in the value attributed by the public market to the ordinary shares. In a statement it said: “The directors believe that the reasons for this under-valuation are multiple and complex, but principally include a lack of liquidity (common to many small cap companies) impacted by the structure of the company's share register and also a lack of interest in Chinese small cap companies.” The company added that the costs and regulatory requirements associated with maintaining admission to AIM were “a significant burden” on its financial resources and outweighed the benefits gained from maintaining admission.

Under AIM rules, China Biodiesel needs approval from shareholders representing 75% of its share capital to complete the delisting. This is exactly the proportion of shares held by the company’s board, who have given irrevocable undertakings to support the move. The buy back of the remaining shares will involve a tender offer handled by the company’s broker, Evolution Securities, with the de-listing due to complete on July 15.

In a trading update for the year to date, the company said the recovery seen in the second half of 2009 had continued into 2010, with increased sales volumes and higher year on year margin performance. However, it said that management expectations remained cautious on the outlook given its reliance on government grants, exposure to raw material price change and the overall global economic outlook which, as demonstrated in 2009, has a large impact on biodiesel demand.

Unlock the rest of this article with a 14 day trial

Unlock with Email
Unlock with Google

Already have an account?
Login here