I would like to know about buying shares in a listed company that wants to delist. What happens to those shares if the company delists? Are these valued at the current share price or at net asset value, if they decide to sell after delisting?
Thank you for your very interesting question.
Let me begin by saying that we do not typically provide advice on shares. Investing in individual shares should, in our opinion, be left to a specialist stockbroker or asset manager that focuses on this every day and has developed a skill in this type of investment over a long career.
I will, however, try and respond to your question on buying shares in a company that is delisting.
If you buy shares in a company on the listed exchange market, this is quite easy to achieve as there are stockbroking firms that will allow you to trade, and many of these firms have online share trading platforms that you use. Once you have bought the share in the company that is listed, as long as the company remains listed on the exchange it is relatively easy to sell your shares depending on the demand for that share. You have to remember that just because a share is listed on an exchange this does not always mean that this company’s shares are traded every day. The most popular shares are included in the major indices like the JSE All Share Index or the JSE Top 40 index. These shares will trade every day, but some of the smaller shares may not.
If a company delists, then to trade (buy or sell) the shares becomes a little more difficult.
This is because the stock exchange is a big market that facilitates the coming together of willing buyers and sellers, whereas in a non-listed company there is no real market for you to trade these shares on. Some companies (the larger non-listed companies) do sometimes have a ‘trading desk’ of some sort where they try to facilitate a buyer and seller market but in many cases should you wish to sell your shares in a non-listed entity then you would have to find a buyer yourself.
We would not advise an investor to purchase shares in a company that is delisting or in a non-listed company. As previously mentioned, we would prefer if these types of share trading decisions are left to a specialist fund manager who has many years of experience, has access to a research and analytical team, and is able to watch these types of investments on a daily basis as part of their profession.