Magix AG decides to delist

Magix AG released a short press release today in which the company announces that it intends to delist from the Frankfurt Stock Exchange. Apparently this is legal in Germany without shareholder approval, without appraisal rights and without launching an offer for minority shareholders. The only thing that shareholders get are six months notice…

I’m obviously not very thrilled about this latest development because if I decide to hold the stock it will be totally illiquid: there is no German equivalent of the pink sheets, so it would be (nearly?) impossible to trade. I think small investors should embrace illiquidity, but no liquidity is probably a bridge too far. A delisting also creates more corporate governance risk and is probably going to result is less disclosure to minority shareholders. I’m not very familiar with the laws and regulations in Germany, so if I have a reader that is more knowledgeable w.r.t. to the position of minority shareholders in delisted companies and other related issues I would love to hear from you!

The market reaction to the delisting news has been pretty extreme: shares are down more than 28% today. That could represent an interesting opportunity if you don’t need liquidity, but the big question is of course if you want to remain a shareholder. A delisting could also be the first step in the abuse of minority shareholders…

Disclosure

Still long Magix AG at the moment…

8 thoughts on “Magix AG decides to delist

  1. Jacob

    Frustrating. The piece you linked to is a good summary. German law has very strong protections for minorities in the event of a squeeze-out, in which the court-ordered compensation is often at a premium to the original offer by an acquirer (albeit after long and sometimes contentious legal battles). However, there’s not much preventing a company from simply going dark. To the extent it’s a prelude to a squeeze out attempt later, a back door way for insiders to acquire shares at a lower price, maybe it’s an opportunity for you, but you’d need quite a bit of patience and a potential willingness to enforce your legal rights down the road. Good luck!

    Reply
    1. Alpha Vulture Post author

      Thanks for the insight. Was kinda afraid that this would be the situation… unfortunately defending your legal rights is often not cost effective if you don’t have a large position.

      PS. Like your blog! Great post on shorting.

      Reply
  2. memyselfandi007

    Hi Alpha,

    this is the result of a very strange ruling of the top German administartive court (BGH) from last year (the so called “Frosta ruling”.

    Magix seems to be the first test case. I assume there will be people suing the company for this but for now, minority shareholders in Germany ar treated worse than for instance Hungary etc.

    mmi

    Reply
    1. Alpha Vulture Post author

      Lucky me to own the first company to test the new ruling…

      Any idea if something like a class action law suit is possible in Germany, and is it likely that one will be started? or is it going to be every shareholder for himself?

      Reply
  3. pietje

    I’m also quite curious what the board is thinking about this transaction. They should be our fiduciaries even though our stake is much smaller than that of the insiders. Of course Investor Relations does not respond to emails and does not pick up the phone. Nice developments ..

    Reply

Leave a Reply

Your email address will not be published. Required fields are marked *