UK - Fund managers are backing moves by regulators to stop directors "destroying" shareholder value when they move to delist firms.
At present, if directors decide they want a company to go private, all they have to do is give shareholders 20 business days’ notice of the change.
But fund managers say this forces investors to sell their shares back to the company for far less then they are worth.
They pointed to the delisting of Fitness First and Harvey Nichols as prime examples.
But under plans being drawn up by the Financial Services Authority, companies will have to obtain approval from 75% of shareholders before they can delist.
Deutsche Asset Management head of corporate governance Andrew Tusa said: “This adds another comfort, an extra layer of cushioning for investor protection.
“We were concerned about the asymmetry of listing and delisting. When you list you’ve got to have a sponsor, cash flow forecasts, working capital statements and all sorts of things in place. But on the delisting side, there’s very little. What we’re seeing is bringing the scales back into balance.”
Morley Fund Management head of governance and public policy Iain Richards agreed.
But he warned that investors would still be vulnerable because the rules would not come into force until May 2005. Full details of the FSA’s plans are not expected to be released before the third quarter of 2004.
Richards said: “Whenever you’re in a market where prices are depressed, it presents people with a convenient opportunity to take companies off the market and realise their true value.
“Given the nature of many mandates, you can’t afford to be caught in an unlisted security. Your hands are tied, particularly if there is a controlling shareholder. You’re very vulnerable.”
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