Suzuki Motor Corp recently announced its plan to delist Pak Suzuki Motor Company from the Pakistan Stock Exchange (PSX). You can watch our summary of the events here. While the specifics of Suzuki’s strategy may be unique to its situation, it raises broader questions about how investors should respond when a company decides to delist.
Understanding the Situation
Pak Suzuki, which assembles Suzuki vehicles and motorcycles in Pakistan. The company reported a loss of PKR 6.3 million in 2022, compared with a profit of PKR 2.6 million in 2021, due to import restrictions, high-interest rates, and low purchasing power. The low valuation is one of the primary reasons for the delisting. This will reduce the need for compliance and will allow the company to keep its financial performance private.
Investor Reaction
As news of Suzuki’s delisting broke, there was a notable surge in the share price of Pak Suzuki Motor Company Ltd (PSMC). On October 12th, 2023 the share price was 132 PKR/share, and today it stands at 296 PKR/share. The share price has hit its cap day after day as investors anticipate a considerably higher price for the voluntary delisting. This indicates that investors may view the delisting as an opportunity for good returns, given the large amount of land the company has, which is valued at approximately 400 PKR/share.
Investor Advice
For investors facing a situation where a company they’ve invested in is delisting, it’s essential to consider the following advice:
1. Assess Your Portfolio:
Review your investment portfolio to understand how much exposure you have to the stock that is delisting. Consider your investment goals and risk tolerance. If you’re unsure where to start, try watching our Investing for Beginners series on YouTube.
2. Evaluate the Offer:
When the company proposes a delisting, it typically makes an offer to buy back shares from minority shareholders. Carefully evaluate this offer, considering the proposed price and terms. Seek professional advice if necessary.
3. Diversify Your Holdings:
Diversification is a key strategy in managing risk. If you receive cash or shares in exchange for your delisted shares, consider diversifying your investments to spread risk.
4. Market Reaction:
Pay attention to the market’s reaction. If the share price surges, as seen in the case of PSMC, you may want to act quickly if you intend to take advantage of the higher price.
5. Long-Term Considerations:
Think about your long-term investment objectives. If you believe in the potential of the company even after delisting, you might want to hold on to the shares.
6. Stay Informed:
Keep a close eye on news and updates related to the delisting process, as well as any regulatory approvals or shareholder voting. Stay updated by following our Facebook and LinkedIn for regular reports and news updates.
7. Consult Professionals:
When in doubt, consult with financial advisors or experts who can provide guidance based on your specific financial situation. Luckily, you’ve already found one! KTrade Securities is your investment guide and trusted informant. Visit our website to learn more!
Conclusion
Suzuki’s decision to delist its Pakistan business serves as a reminder that changes in a company’s ownership structure can have significant implications for investors. It’s essential to stay informed, assess your options, and make decisions that align with your financial goals. While the situation may present challenges, it can also offer opportunities for investors to make informed choices regarding their investments.
