14 April 2023

Rare delistings

The Amsterdam Exchange took a rare step today. It announced the delisting of six exchange funds if they failed to ensure submission of audited financial statements by early November. The companies have been sitting on the exchange’s penalty bench. This has never happened since the introduction of the penalty bench measure in 1981. The companies in question are ladder manufacturer Alumexx, property investor Bever Holding, holding company Lavide, mapmaker Geojunxion, sustainable investor New Sources Energy and developer of CO2 projects DGB.

These are all small exchange funds, with Lavide even being seen as the smallest exchange-listed fund in Amsterdam. Quite a few of them originally came to the stock exchange via the short route of a reverse listing. None of them have so far been able to find qualified auditors willing and able to audit their financial statements. The same applies to the investment companies Value8, SME Nedsense and digital publisher IEX-Group, three related exchange funds that have also been told that their delisting is imminent, but have been given a little longer to submit their financial statements.

The underlying core problem is that there are too few auditors in the Netherlands who are allowed to audit the financial statements of listed companies. The politicians in The Hague should also be worried about this, according to those involved. There have also been calls for the stock exchange to mediate between the listed funds and the six approved auditing firms (PwC, EY, Deloitte, KPMG, Mazars and BDO). The exchange says it has a clear understanding of the problem, but indicates that it is primarily up to the auditors whether or not they accept a stock market fund as a customer.

With delisting looming, many of the companies are already looking at alternatives. The idea of moving to a Euronext-run growth market is often put forward. The advantage to this is that the requirements for the auditing of financial statements is less strict in these markets. The disadvantage is that there is no longer such a growth market in Amsterdam and a move to, say, Dublin or Paris is then necessary. In November, it will become clear where the companies ultimately choose to go.

Meanwhile, the aforementioned investment company Value8 has already found an alternative. It has opted to have its financial statements Audited by Portuguese auditors. And while this has been met with criticism from Dutch investor umbrella organisations and auditors – who say the audit is of a lower quality – it is now clear that Euronext does accept this route. That is possibly why other companies will also choose this path.