Electric bus maker Optare, the UK-based subsidiary of Hinduja flagship Ashok Leyland (ALL), has decided to delist from the Alternative Investment Market (AIM) of the London Stock Exchange. ALL, which holds over 75% in Optare, will continue to manage the company, apart from being the major shareholder.
The board, which met recently, believes the perceived benefits of admission of securities to trade on AIM typically include access to capital markets, an enhanced corporate profile, a market cap reasonably reflecting value in the company, a means to incentivise staff and a mechanism to provide a market in the company’s ordinary shares. The board reached the view that the company was not receiving many of these benefits, nor was there any reasonable chance of the situation changing in the foreseeable future. Hence, it decided to delist from AIM.
There are significant costs associated with maintaining a quotation on AIM, which are not considered commensurate with the benefits of trading on it, and the board believes these funds could be more prudently deployed in growth. After careful consideration of Optare’s long-term growth plans, the board too the decision, a statement said.
Over time, the company has become increasingly reliant on ALL, which continues to provide material financial support to it. The Hinduja flagship also assists the company by deputing key personnel, working on export opportunities, buying jointly and through common sourcing strategies and working with the supply chain. The directors expect this cooperation to deepen in future, the Optare sources said.
Sources also added that the company’s size (market cap of £3.58 million based on a share price of 0.16 pence per ordinary share) and reliance on ALL increase the difficulty of raising equity capital from elsewhere. Thus, it is increasingly challenging for Optare to take advantage of what is usually one of the key benefits of a listing.