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Summary
- Kina Petroleum gets shareholders’ approval to delist from the ASX and PNGX.
- The company also intends a buyback of $1.28 million to give the shareholders a fair chance to exit.
- The company attributes the delisting to the lack of liquidity which led to price volatility and high shareholding concentration.
On 31 December 2020, Kina Petroleum Corporation (ASX:KPE) addressed an Extraordinary General Meeting to discuss the reason and the implications of its decision to delist from the ASX and PNGX. Kina Petroleum also discussed its plans for the buyback and capital return.
Delisting of Kina Petroleum
The company has received all the necessary approvals from the regulators to make an exit from the Australian Securities Exchange (ASX) and Port Moresby Stock Exchange (PNGX). However, the delisting is subject to certain conditions which were discussed thoroughly in the Explanatory Memorandum.
In line with the delisting process, the company is also utilising a total of $1.28 million out of its available cash reserves for the purpose of buyback. Kina Petroleum intends to offer its shareholders a chance to sell their holdings in the company if they wish to.
After the delisting process, the management also intends to distribute a portion of the remaining fund from the buyback cash return (after the share buyback) by way of an equal capital reduction (capital return). While the buyback ensures that shareholders get a fair chance to exit the company, capital return makes sure that those who want to remain invested, are not disadvantaged.
The sole purpose of these corporate actions is to provide an orderly and equitable market to the shareholders till the time of delisting.
Read More: GrowthOps’ (ASX:TGO) shares nosedive as it delists from ASX
Result of the Meeting
All these corporate actions needed the approval of shareholders, which the company received in today’s meeting. All three resolutions were passed with majority votes.
- Delisting of the company received 99.55% votes.
- Approval of share buyback received 99.63% votes.
- Approval of capital return to the shareholders received 99.63% votes.
Reasons for the delisting
The management believes that the delisting of the company is in the best interest of the shareholders. The low trading volume in the company’s share was having a disproportionate effect on its price. The lack of liquidity often becomes the reason for increased volatility in the share price.
To put it in perspective, in the last 18 months (from the relisting to delisting announcement) the share traded for 36 days only but fell massively from A$1.8 to A$0.38. The company believes that this price behaviour is not a true reflection of the company’s value.
Due to this discounted price, the company was facing difficulty in raising additional capital at a fair price. Any further fundraising at this share price would have had a dilutionary impact on all the shareholders.
The low liquidity also resulted in a high concentration of shareholding. The management believed that the increased ownership of shares among limited shareholders diminished the investors’ interest in share trading.
The administration and compliance costs to fulfil the obligations of being a listed company coupled with the high executive time to maintain the listing norms were not justified, when compared to the benefits reaped. The saved expenditure from these compliance obligations can now be better used towards other objectives.
