Corporate delistings have gained significant traction globally, raising important questions about the health of public markets. Over the past year, a notable number of companies have chosen to exit stock exchanges, highlighting the interplay between economic downturns, geopolitical instability, as well as the financial burdens and intellectual capital requirements of being publicly listed.
This trend is particularly concerning for small and mid-cap companies, which face significant costs associated with going and remaining public.
Global delisting trends: A year in review
In 2024, global public equity markets have to date seen a net decline of over $120 billion, driven by a surge in delistings – three times the total recorded in 2023 according to the Economist. In the US, the stock market now features only about half as many companies as it did 30 years ago. Similarly, Germany has faced a 40% decline in public firms since 2007. The London Stock Exchange has followed the same trend, with the number of listed companies falling from 2,429 in January 2015 to just 1,775 by May 2024, according to Statista. Companies frequently cite rising operational costs, increased regulatory scrutiny, and a need for strategic flexibility as primary reasons for exiting public markets.
The growth in private capital markets has also contributed to the trend of increased delistings, allowing companies to focus on long-term growth without the pressures of public scrutiny. However, operating in the private market can also present challenges, including illiquidity, limited information, and reduced transparency.
JSE trends: A closer look at the numbers
Focusing on the JSE, the data reveals several companies delisted in past few years. This highlights a trend within the South African market, which has faced its own set of economic challenges.
Notable examples include PSG, which was taken private in 2022 after consistently trading at a discount to intrinsic value. To unlock shareholder value, management opted for delisting and an unbundling of its listed assets. Similarly, Alviva delisted from the JSE through a take-private transaction led by a consortium that included management and key shareholders, with the aim of unlocking strategic growth and driving future expansion. Distell Group delisted as part of a takeover by Heineken International, while Imperial Logistics delisted following its acquisition by DP World. There is a growing interest in local assets, which may increase the delisting trend following the introduction of the Government of National Unity and lower geopolitical risk of South Africa.
Despite the number of delistings, there have also been recent unbundlings followed by listings on the JSE, such as Zeda, Thungela Resources and We Buy Cars Holdings, which have shown the potential to unlock greater value for shareholders compared to their previous positions under larger holding companies such as Barloworld, Anglo American and Transaction Capital, respectively.
Economic and regulatory pressures: Contributing factors
Economic factors significantly influence delisting trends, with fluctuating currency values, inflation, and regulatory challenges making public markets less attractive for some companies. To encourage new listings and counteract delistings, regulators should create a more favourable environment for initial public offerings by reducing compliance costs and simplifying listing requirements. In response to these trends, the JSE has implemented initiatives such as “Cutting the Red Tape”, “Market Segmentation” and the “Simplification Project”.
As companies weigh their options in an increasingly complex environment, the decision to remain public or transition to private ownership will be critical.
How can we help?
Tamela provides tailored advisory services designed to address the technical and regulatory challenges of listing on and delisting from the JSE. We specialise in deal structuring, compliance with regulatory frameworks, and managing shareholder communications to ensure that transactions are completed smoothly.
Our extensive experience in corporate finance enables us to guide South African companies through every stage of the listing or delisting process, from initial planning to post-transaction support, ensuring that the process is executed effectively.
For more information contact Larisha Govind on +2711 783 4907 or Larisha@tamela.co.za.