14 Reasons why there is so many delistings on the JSE

The JSE has seen excessive delistings over the past few years and is expected to see quite a few more in the near future. On average, there have been 25 delistings every year from 2015-2022. As of June 2023, there has already been 14 delistings this year alone with only two new listings, Copper360 and Premier Group. We have seen a few reasons for delistings such as mergers between Implats and RBPlat and favourable tax rules as a benefit rather than retail investors. Additionally, reasons for delistings can be the following: 

1.  Cost Reduction: Publicly traded companies incur significant costs associated with compliance, reporting, legal, and administrative requirements. Delisting can reduce these expenses.

   
   

2. Privacy and Confidentiality: Public companies are required to disclose extensive financial and operational information, which can be a disadvantage if the company wants to keep certain strategies or proprietary information confidential.

   
   

3. Flexibility and Long-Term Planning: Delisting allows a company to focus on long-term strategic plans without the pressure of quarterly earnings expectations and short-term market volatility.

   
   

4. Control and Ownership: Going private can provide the management team and existing shareholders with greater control over the company's operations and decision-making.

   
   

5. Short-Term Pressure: Public companies often face pressure to meet short-term financial targets, which can hinder their ability to invest in long-term growth opportunities.

   
   

6. Regulatory Relief: Delisting can reduce the regulatory burden and reporting obligations that come with being a publicly traded company.

   
   

7. Reduced Shareholder Scrutiny: Public companies are subject to scrutiny and criticism from shareholders and the media. Going private can provide a reprieve from this constant scrutiny.

   
   

8. Volatility Mitigation: Publicly traded stocks can experience significant price fluctuations due to market sentiment. Delisting can shield the company from extreme market volatility.

   
   

9. Change in Ownership or Strategy: Delisting might occur following a merger, acquisition, or management buyout when the new owners want more control over the company's direction.

   
   

10. Lack of Benefits: If a company finds that the benefits of being public, such as access to capital or enhanced visibility, are not outweighing the costs and drawbacks, it might choose to delist.

    
    

11. Hostile Takeover Prevention: Delisting can be a strategy to prevent hostile takeovers by making it more difficult for external parties to acquire a controlling stake in the company.

    
    

12. Regulatory Compliance Complexity: For companies that operate in multiple jurisdictions, the complexities of complying with various regulatory requirements can be a factor in their decision to delist.

    
    

13. Market Conditions: If a company's stock price remains consistently undervalued or if it's facing challenges in the broader market, it might consider delisting to seek a more favorable environment.

    
    

14. Return to Private Equity Control: In some cases, private equity firms might want to delist a company they own to have more operational control and flexibility.