The fate of shares in a delisted company | Fin24

The fate of shares in a delisted company

Mar 02 2015 17:21

A Fin24 user has shares in a company which was delisted from the JSE and he is not sure what the value thereof would be now. He writes:

I had some Alliance shares, a company that delisted from the JSE. Since then the last value of these shares have been refected on my portfolio at the stockbroker account.

I have, however, been told that they cannot be traded. Must I accept that this investment is a total loss or can I re-invest those funds elsewhere?

What are the procedures when a share is withdrawn from the JSE? Where would those remaining funds be situated? Would it be with the company or the brokers? Why do the brokers still show that amount as part of one's portfolio?

Your advice will be truly appreciated.

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Brett Birkenstock, director Overberg Asset Management, responds:

The main ways a share leaves the stock exchange, are by acquisition (usually good for shareholders) and then suspension and then delisting (usually bad for shareholders).

If the company is acquired, the monies are paid to the shareholder’s portfolio. However, if the share is suspended, the payment for ownership is usually very delayed if there is going to be a payment.

Generally, the events that lead to a share being suspended are due to a negative event or functioning of the company and therefore, the company is often insolvent.

In the event of the share being suspended, the value of the share is shown on the client’s statement as the matter has not been finalised yet and no value can yet be attached to the share besides its last traded value.

Upon delisting, the share is removed as is the value.

Alliance mining was suspended due to various non-compliance that included overstating profits, not reporting results to securities exchange and having cover for its own shares, which is against the Companies Act.

Unfortunately, in such circumstances the shareholder’s capital investment is often lost. It is very important to have adequate diversification in a share portfolio and to also get accurate and reliable research on companies held.

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Disclaimer: Fin24 cannot be held liable for any investment decisions made based on the advice given by independent financial service providers. Under the ECT Act and to the fullest extent possible under the applicable law, Fin24 disclaims all responsibility or liability for any damages whatsoever resulting from the use of this site in any manner.

investments  |  jse  |  money  |  money clinic


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