Lame excuses for delisting

August 27, 2010 at 1:53 pm Leave a comment

Companies that want to delist shares often cite these 3 reasons:

1)Low liquidity,thus offering the minority shareholders a chance to sell

2) Saving of listing expenses

3) No need to raise funds thro stock market

However,they are just lame excuses

1) Unless the minority shareholder is holding too much shares (likely to be an institutional holder), for minority shareholders like the individual, the low liquidity is not a problem as the individual does not own much anyway.

2) If saving expense is the reason,then why list in the first place? The company derives benefits from listing which cover the expenses.

3) Does that mean that they need not raise funds if they are private companies? Anyway, raising funds thro equity market is not cheap unless your share price is overvalued.

Next time,you hear these 3 lame excuses for delisting, just think “Sell high, buy low” for the majority shareholder. They are eating you for lunch.

Entry filed under: Watch your step. Tags: .

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