Dealing With Delistings

An increasing number of small-and mid-cap stocks are announcing their intentions to delist. What does this mean for investors holding these shares?

- Simon Brown

We are seeing a spate of small- and mid-cap stocks delisting, or at least announcing intentions to delist. These include Clover, Verimark and Howden Africa. In all three cases, at the time of writing (22 October), the companies had issued Sens announcements to that effect, but no details in terms of prices at which the delistings would happen.

What this tells us is that there are some really decent quality small- and mid-cap stocks trading at cheap valuations. These cheap and quality stocks are certainly known, and the delisting surge is not unexpected. And I think we will see a lot more delistings coming our way.

In reality, this is how a stock market works. When quality is cheap, we as investors are buyers. The difference with delistings is that the buyers want the entire company and plan to take it off the JSE to be privately held.