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Increasing trend of voluntary delisting
Source : Daily Times Date : 15 Apr 2013  
KARACHI: In Pakistan, a new trend has emerged as a number of corporate companies have been opting for voluntary delisting options from the capital market in order to avoid regulatory oversight among other reasons. It was learnt that since 2009 around 90 companies have been delisted at the Karachi Stock Exchange. Out of them, a total of 71 companies were taken off the capital market under voluntary delisting scheme, while only 19 companies were removed from the capital market on defaults and other regulatory issues. During the said period only 18 new companies were listed, so the number of listed companies has reduced from 650 in 2009 to 573 by the end of 2012, which shows how this thing is taking toll on this important stock exchange. It is worth adding here that any company can apply for delisting if 75 percent of the shareholders vote to do so. The voluntary delisting option was provided to companies with small capital base that were not paying dividends and were unable to generate capital from the market. The sponsors in most cases provided higher value to their small shareholders that happily availed themselves of this opportunity. However, small investors started raising concerns when some big corporate entities started delisting. Some of the big companies that under the scheme got their companies delisted include Tawakkal, Schon, Jahangir Siddiqui, Valika and Ittefaq. This trend reached its height when recently a giant multinational company on the 100-share index with market capitalisation of Rs 145 billion opted for delisting. This has called for dealing with the gaps in the mechanism of delisting to provide maximum benefits to the minority shareholders but it is still a far cry, as regulators in the country are not paying heed to this issue. Now, one of the repercussions of this biggest delisting is that the company would no more be under the scrutiny of the regulators like the stock exchanges. There is a flaw in the voluntary delisting law that has to be reformed to protect small investors.

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