The shares of buy now pay later company Splitit were suspended from trading on Friday, ahead of the company’s delisting from the ASX on Wednesday, December 13 – the latest in a long line of small financial services companies leaving a securities exchange that no longer provides them with access to the funding support they are looking for.
Financial services companies that have delisted from the ASX this year include Laybuy, Payright, Yellow Brick Road, Sezzle and Partners Group Global Income Fund.
Data services company 9Spokes delisted in November last year.
Splitit’s move to delist followed a A$76 million “strategic investment” in the business in August by offshore investor Motive Partners. Splitit will merge with a newly formed entity formed by Motive and move its base to the Cayman Islands.
Splitit’s fate highlights a few common themes in the great delisting. The company’s operations were principally in the US but it listed in Australia because, for a time, the ASX was seen as a good place for emerging financial services businesses to raise capital.
Sezzle, which will delist in January, is in a similar situation. The US company was listed on the ASX in July 2019, with an issue of CHESS depository interests.
In March this year it announced plans to list on the Nasdaq Global Market and keep its CDIs on the ASX. But following the listing on Nasdaq in August it was clear that there was not enough liquidity in the stock to maintain listings on two markets, and in November it announced that it would delist from the ASX.
Since 2019, the ASX has lost its status as a good place for fintechs to lost.
Another theme the Splitit delisting highlights is the shrinking investor base for emerging financial services companies and fintechs, few of which are making any money. Where Splitit might have been able to rely on a range of investors for capital in the past, in the end it was left with just one opportunistic backer, Motive.
Payright (now called Navolo Financial Services Group) went the same way. Another loss-making buy now pay later company, it ended up in the hands of Metrics Credit Partners, whose shareholding grew from 9.5 per cent to 85.2 per cent over 12 months as it continued to back Payright in a series of funding rounds, while the other investors dropped out.
A third theme playing out with Splitit and other delisting companies is the availability of alternative share trading platforms that are cheaper and offer more flexibility than the ASX.
Splitit has appointed PrimaryMarkets to facilitate the off-market purchase and sale of its shares. PrimaryMarkets operates a platform for trading private securities.
PrimaryMarkets also provides trading services for 9Spokes and Mint Payments (which delisted in 2020). It was the home of Tyro Payments before it listed on the ASX in 2019.
PrimaryMarkets executive chair Jamie Green said the delisting phenomenon might be more than a short-term response to current economic circumstances.
Green said: “The ASX has made life difficult for micro caps because of its arduous listing process. It is no surprise they are looking elsewhere.”
The PrimaryMarkets Trading Hub was launched in 2016 and now hosts more than 100 companies. It offers a bespoke service, allowing each company that uses the platform to set their own conditions. For example, some companies offer daily trading in their shares, while others might have a trading window for a few weeks each quarter.
Green said it was very hard for small companies to raise capital on the ASX. If there is limited liquidity, brokers are not interested.
“We have a steady flow of inquiries about using the platform and we have a steady flow of capital raisings. Coming to us may not make it any easier but we provide an alternative distribution channel at a lower cost. Most of the capital raised through the platform is early stage growth funding.”
The ASX might be a tough environment for small companies but some of them don’t do themselves any favours.
Yellow Brick Road was delisted at the end of November. The company was listed on the ASX in 2008 and the stock never traded above its issue price of A$1 a share. In recent years it bumped along in a range between 5 and 10 cents.
Founder Mark Bouris occupied the roles of chief executive and chair from the get-go. One of the other two directors is his brother. As a listed public company, YBR should have had better governance standards.
In strategic terms, it made a host of mistakes. Its attempts to diversify its business beyond mortgage broking, including moves into wealth management and accounting, were not successful and it has been a consistent loss maker. It’s no wonder investors abandoned the stock.
The move by Partners Group Global Income Fund to delist was a surprise. The fund invests in a global portfolio of more than 300 private debt investments. Since listing in September 2019, it consistently achieved its goal of producing an annual distribution of the RBA cash rate plus 4 per cent, net of fees.
However, the timing of the listing meant it was hit by market volatility at the onset of the pandemic and suffered further instability as markets anticipated a global recession as rising inflation triggered monetary policy tightening over the past 18 months.
At the end of May the fund had net assets of $491.1 million and a market capitalisation of $464.9 million – a discount of 5.3 per cent. Delisting will allow investors to sell their units at net asset value.
There is nothing new about listed trusts trading at discounts to their NTAs and over the years many have traded at much deeper discounts then the Partners Group fund.
But Partners Group said there has been a lack of liquidity in the fund, making it hard to see it trading back to NTA in the foreseeable future.