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Torre has announced a potential delisting from the JSE by way of “a scheme of arrangement” in order (according to the company) to improve its BEE credentials.
But even after the news of a potential delisting, the share traded at about half the latest reported net asset value (NAV) of 182c for December 2017 at the time of writing.
The price was also only modestly above 52-week lows.
This has generated a flurry of questions about whether this delisting is legal, and what minority shareholders can do about the delisting of a stock they own.
On the legal aspect: yes, it is legal – as long as the appropriate laws and regulations are complied with. And there is no reason to suspect Torre won’t follow the rules.
In fact, any attempt to breach the rules would certainly see the delisting scuppered.
Another important point is that Torre says shareholders will have the option of taking cash or continuing to hold shares in the unlisted company.
Unlisted shares are a horrid experience. With no liquidity and price discovery, they’re almost impossible to sell.
They also lack JSE regulation oversight. I always recommend staying as far away as possible from unlisted shares.
What is also important is that a delisting generally requires a 75% + 1 vote by shareholders present at a special general meeting.
As such, the approval hurdle is high and minority shareholders must therefore vote if they are against the delisting.
Of course, minority shareholders are by the very definition small holders and often, even collectively, they hold a very modest percentage of a listed stock’s shares.
But even a small stake can be a tipping point.
So, voting your shares is critical. But it is crucial to organise others to vote.
The organising part is hard, but by using online platforms and social media, there is real potential for a small group to get together as much as 5% of the shares.
This potential 5% is of course still short of the 25% required to block the delisting.
So, you’ll have to find other larger shareholders, and this is where it gets grim for Torre minorities.
Torre’s large shareholders are Stellar Capital, holding almost 57%, and Newshelf 1400, which holds just over 25%.
Thus, if they vote in favour, they have more than the required 75% to delist.
Stellar will almost certainly vote in favour, while Newshelf 1400 is a “Special Purpose Vehicle owned by Mineworkers Investment Company and Sabvest Limited” and I suspect also likely to vote in favour.
So, seemingly, this delisting will happen regardless of minority shareholder views.
However, an interested party can be prevented from voting their shares. It’s a very long shot, but Chris Seabrooke is majority shareholder at Sabvest and a director at Torre.
He may therefore potentially be seen as an interested party. However, I suspect this is a non-starter, requiring legal opinion and likely a court challenge.
Therefore, for Torre shareholders, this is probably the end of the road.
More broadly I think we’ll see a few more delistings in the small-cap space over the next year or two.
There are some great-quality companies that are simply far too cheap, and some deep pockets will relish the opportunity to take full control of such companies via a delisting.
What remains very important, though, is that while the Torre delisting seems certain to go ahead, small minority shareholders should never just give in.
Although your holding, and hence your vote, may be small, you can vote. And you must vote.
