Shareholders of Pak Suzuki Motor Company Limited (PSX: PSMC), holding more than 15.39 percent of the paid-up capital of the company, have rejected the offer to delist the company and threatened legal action if the issue remains unresolved.
“We formally reject both the delisting proposal and the minimum purchase price determined by the Voluntary Delisting Committee (VDC) of Pakistan Stock Exchange Limited (PSX) and accepted the board of directors of PSMC,” they said in a letter addressed to the managing director of the Pakistan Stock Exchange.
Buyback Price Too low
The shareholders expressed strong concerns regarding the oppressive and unlawful manner in which PSMC has been run over the past few years, resulting in the siphoning of billions of rupees from the company. “This proposed delisting and that too at an artificially low price seems to be an attempt on part of the management/holding company to escape accountability and take advantage of their wrongdoing, at the cost of the minority shareholders like the undersigned,” they said.
They explained that the intrinsic value fails to accurately reflect the true financial standing of the company. PSMC’s utilization of transfer pricing, discounts, commission, royalty & technical fees, etc. has led to a significant portion of profits being diverted to its holding company, resulting in frequently reported slender profit margins or abnormal losses.
Despite repeated requests, the adjusted EPS, crucial for a comprehensive understanding, has not been calculated after auditing related party transactions with the holding company over the past five years, they said.
The shareholders asserted that the latest EPS of Rs. 46/share, which is the price determined by the VDC, is disproportionately lower and fails to reflect the fair value of the company. They further mentioned that despite numerous requests, access to the company’s five-year business plan along with delisting files and annexures has been denied.
“As owners representing 15.39% of the total shareholding of PSMCL, we collectively reject the delisting of PSMCL and the purchase price of Rs. 609/- per share. Hence, we will not be selling our shares to the sponsors of PSMC,” the shareholders stated.
They recalled clause 5.14.5 (a) of the PSX Rule Book, which mandates that when the sponsors’ shareholding is below 90 percent, they are obligated to increase their shareholding to at least 90 percent of the total shares to qualify for delisting. “As a result of our rejection, it is a foregone conclusion that the maximum shareholding the sponsors of PSMCL will be able to reach is 84.6%, which is much below the threshold to qualify for delisting. Therefore, the entire exercise will be pointless and futile,” they added.
The shareholders urged PSMC to refrain from convening the Extraordinary General Meeting (EOGM) scheduled for February 09, 2024, to vote on the voluntary proposed delisting, and requested the management/sponsors to take appropriate actions to redress the concerns raised by the undersigned.
They called on the Securities and Exchange Commission of Pakistan and PSX to fulfill their statutory duties and protect the interests of the minority shareholders by taking appropriate action as highlighted above.
The shareholders warned that in case and without prejudice to the foregoing requests, they will pursue appropriate legal action. On a lighter note, they expressed optimism that the aforementioned requests receive due consideration and that they’re “open for any discussion on the matter”.
What will happen now? PSMC will cancel delisting process?