Delisting from the French stock market

Delisting from the French stock market

Even if stock markets seems to regain a little confidence at the beginning of this year, the CAC 40 Index still loses almost 9% in one year on a date-to-date basis. Moreover, the rising is not so tangible for all the issuers, especially for “small & mid-caps” ones: the CAC Mid & Small Index has lost over 14% in a rolling year. Being less liquid, shares of small & mid-caps issuers have not attracted investors back yet, and their value is often still disconnected from the reality of their economic situation.

On the opposite, results released for FY 2011 have been rather good and will for example allow French blue chips to pay out cumulated dividends of € 37 billion relatively to FY 2011.

When the gap between the reality of the economic situation of an issuer and its capitalization is that large, and when there is no more coherence between its fundamentals and its value on the market, delisting becomes an opportunity for its shareholders. For minority shareholders, this kind of operation offers a liquid exit solution at an acceptable price (necessarily higher than the market quotes) and for the majority or reference shareholders, it offers an opportunity to reinforce their stake in the issuers capital in good conditions given the growth perspectives of this issuer. It is typically a case where stock market’s inefficiency can serve shareholder’s strategy.

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