Zombie listings

Spadel, producer of the well-known Spa mineral waters, announced last weekend that it wants to delist. This makes it the third Belgian company in one week to announce its intent to leave the stock market. The question with Spadel is not: why do they want to delist?, but rather: why are they still listed? The family Du Bois owns more than 90% of Spadel shares, so the number of marketable shares is limited. Not surprisingly, the liquidity of Spadel shares is very, very low: there are only a few trades per week. The company has not publicly issued new shares for a very long time, and the company has much more cash on its balance sheet  (€ 84 mio at the end of 2014) than is needed to buy out the few remaining outside investors (€ 36 mio).

This is actually Spadel's second attempt to delist. In december 1999, Spadel repurchased 52,249 shares held by minority shareholder Interbrew (nowadays called AB Inbev) and reduced its outstanding shares from 150,000 to 100,000. It also offered to buy the 20,351 shares held by the public at the same price it paid to Interbrew: € 1,115.5. Since this was approximately the price at which Spadel shares traded on the market, the attempt to delist unsurprisingly failed, although they came close to the 95% threshold which in Belgium allows for a squeeze-out. After a first bid in March 2000 and a reopening of the bid in April 2000, 5,358 of the 100,000 Spadel shares remained in the hands of the public, just enough to avoid a squeeze-out.

There are many zombie listings like Spadel: the listing does not serve any real purpose anymore, but as long as the costs of delisting (you have to buy out the outside investors, which costs a lot of money) are perceived to be higher than the listing costs (administrative expenses, information provision to investors, corporate governance rules) the controlling shareholders prefer to let the company vegetate on the stock market. It would be interesting to know how many companies on European stock exchanges have not raised any capital in the last 20/30 years (idea for research).

Note that a listing might still be useful even if the company has not sold shares to the public for a long time. Lotus Bakeries, a Belgian producer of cookies, gingerbread and other sweet things, has been listed on Euronext Brussels since 1988. At the initial public offering, no capital was raised, but the existing shareholders cashed out by selling a minority portion of their shares. Since then (as far as I know) Lotus has never used the stock market to raise new capital. Why is Lotus listed then? The answer probably lies in their takeover activity. Since 1988 Lotus has acquired several firms. When a company is listed, it can pay acquisitions with its own, liquid shares instead of having to pay cash. For Interbrew (AB Inbev) that was a big motivation to go public in 2000 (as noted at the time in the IPO prospectus). See where it brought them.

A final note: a spokesman of Spadel told the newspaper De Standaard that at Spadel they don't know for sure anymore when Spadel shares were introduced on the Brussels stock exchange (if someone from Spadel is reading this: it was 15 May 1922). I find such an apparant lack of interest in its own history remarkable: seems a lack of pride in the company.