Hospitality and accessory retail company Innlanz (ASX: INL) is set to delist from the ASX, surrendering to the COVID effect on its business.

The Company’s board of directors noted that its financial position and the COVID-19 pandemic-forced changes in its business, the costs and administrative burden of remaining listed on ASX outweigh the benefits of a continued listing.

As part of the delisting proposal, Innlanz intends to offer its shareholders the opportunity to realise some or all of their investment via an equal-access off-market buy-back before the delisting. INL is offering to buy back up to 100% of each minority shareholder’s shares.

Listing some key reasons behind the delisting, the Company noted that the main one was costs. If it stays listed, it would have to incur major corporate and administrative costs, including listing fees. Though the board and management are optimistic for the Company’s future, given the lessening impacts of the COVID-19 pandemic, Innlanz has limited available cash and cash equivalents of $462,000 as of 31 March 2024. Ultimately, it wants to put a stop to more losses.

If Innlanz is delisted, the board expects that it will save at least approximately $268k each year in ASX listing fees, audit and insurance costs and other ASX compliance and regulatory costs.

Secondly, there is no liquid market in its shares on ASX. Over the three-month period to April 25, 2024, the average daily volume of shares traded on ASX was approximately 77, which equates to approximately 0.00002% of Innlanz’s total issued share capital of approximately 313.3 million Shares. The low level of liquidity has resulted in limited trading opportunities for shareholders seeking to exit their holdings.

The small daily trading volumes have negatively impacted share price, which is not in the best interests of the shareholders.

Between Q2 and Q3 FY24, the Company’s operating cash outflows improved from $129k to $58k. Its cash receipts increased by $74k from $597k in Q2 to $671k in Q3; however, this was offset by increased staff costs and admin expenses. At the end of the quarter, its cash equivalents stood at $462k, a decline from Q3 FY23’s $889k.

The Group’s main income is generated from its hotel assets in Hamilton, New Zealand. The hotel finished the quarter with an occupancy of 84.2% which is a mixture of corporate, leisure and group-based travellers, raking in a revenue of $660k.

The Company expects its delisting date to be July 22, 2024. After the date, shares will only be capable of sale by private transaction. If shareholders want to sell their shares on ASX, they will need to do so before INL is removed from the Official List.

As for the buy-back, Pacific Merchants Group (PMG), as INL’s only substantial Shareholder with voting power of approximately 79.80% of the total issued capital of INL, has undertaken not to participate in the Buy-Back. On this basis, the maximum number of shares that it will buy back off-market will be 63,263,608 shares, i.e. 20.20% of total shares. The buy-back price is $0.013 per share, a 30% premium to the closing price of the shares on ASX on May 2, 2024.

Of course, the delisting is contingent on shareholder approval. The board has recommended that the shareholders approve both the delisting and buy-back. If the delisting is approved, shareholders will be able to continue trading their shares on the ASX for one month after the general meeting in June.