Adverse perceptions about being a publicly listed company on the ASX have prompted financial services provider E&P Financial Group (ASX: EP1) to voluntarily delist from the ASX, citing an undervalued share price which has negatively impacted its ability to attract and retain talent.
The Board of E&P (previously known as Evans & Partners and Evans Dixon) believes that its trading price on the ASX has remained consistently below its assessment of its intrinsic value.
The delisting proposal will be put forward for shareholder approval at an Extraordinary General Meeting (EGM) scheduled for 24 October 2024. If approved, the delisting is expected to take effect on 12 December 2024. The vote however, should be a mere formality with E&P’s Board having already secured in-principle approval from the ASX for this action, pending certain conditions, including shareholder endorsement.
E&P’s management expressed frustration over the persistent undervaluation compared to its peers, which they argue does not fairly reflect the Company’s financial health or strategic potential. This disconnect has also hindered the company’s ability to offer competitive equity-based incentives to employees, thereby limiting talent acquisition and retention efforts.
Beyond the share price disconnect, E&P’s decision to exit the ASX is driven by relatively low share trading volumes and an inability to attract significant institutional ownership. As a result, existing investors have faced challenges in accessing liquidity without impacting the share price.
E&P also highlighted the financial burden associated with maintaining its ASX listing, estimating that by delisting, it could save around $2.5 million per year in administrative and compliance costs.
Another strategic reason for the delisting is the greater flexibility E&P believes it would have in pursuing corporate transactions and growth opportunities without the constraints of being a publicly traded company. The Board believes that operating as a private company would allow them to make faster decisions and execute more opportunistic moves to enhance shareholder value.
To accommodate shareholders who may wish to exit their investment before the delisting, E&P will seek approval for a share buyback at $0.52 per share. The buyback is intended to provide liquidity for shareholders who prefer not to hold unlisted shares post-delisting.
E&P’s largest shareholder, Mercury Capital, along with its directors, support the proposed delisting, believing it offers greater long-term upside for the Company and its investors.
Delisting from the ASX would end a troublesome period for E&P which in November 2023 settled a class action for $16 million, stemming from accusations that its subsidiary Dixon Advisory provided inappropriate financial advice to its clients.
The class action was part of a wider controversy surrounding Dixon Advisory, which was placed into voluntary administration in 2022. The Australian Financial Complaints Authority (AFCA) had estimated consumer losses at around $357 million due to investments in the US Masters Residential Fund. Additionally, Dixon had been hit with a $7.2 million fine by the Australian Securities and Investments Commission (ASIC).
E&P Financial Group currently has 7,400 clients and manages $29.4 billion in funds under advice.
Mitch Korver is a Business Writer focused on high-growth companies listed on the ASX in the small and medium cap space.
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