Eight years after NMC Health made a splash on London Stock Exchange, it is now asking for a cancellation of the listing. Image Credit: Gulf News Archive

Dubai: NMC Health is seeking to delist its shares from London Stock Exchange - eight years to the month after it floated there.

The UAE hospital operator has requested that the cancellation takes effect "as soon as possible". Getting the go-ahead from the LSE is a formality.

At one point in time, NMC was one of the blue-chip shares on the FTSE, finding a spot on the FTSE 100 and had rocketed to a market capitalization of $10 billion. (That too, incidentally, happened during April, in 2018.)

At the time of its de-listing, the market cap was $2.38 billion. (When NMC was listed in 2012, 40 per cent of shares was on "free float".

Between mid December to late February, the NMC share received a hiding as more details came to light about its inner workings, and had shed more than 80 per cent of its value. 

“Continued listing of the shares in NMC Health incurs significant cost and adds complexity in a situation where decisions need to be made quickly in partnership with the Group's stakeholders,” NMC said in a statement on London Stock Exchange. “Against this backdrop, the Administrators have concluded that delisting NMC Health's shares is appropriate.”

Market sources say this was the only viable option for the Abu Dhabi headquartered company to pick from. NMC’s shares had been under suspension since February 27, as more revelations kept coming about financial ongoing at the company.

In April, NMC was placed under UK High Court ordered administration, stripping the management of al powers to take decisions on behalf of the company. Three administrators from turnaround specialists Alvarez & Marsal are now running the show.

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Clears the pitch

While NMC’s hospitals and clinics are operational, on a parallel track the administrators are trying to come up with a plan to reduce its $6 billion plus debt pile and co-operate on the criminal investigations that have been launched against the previous management and some board members. They are also trying to find prospective buyers/investors who can take the NMC operations forward.

Amidst all this, de-listing from London Stock Exchange is the done thing. “Financially ailing companies are allowed to delist from exchanges if they cannot meet minimum requirements of the exchange in which they are listed,” said Vijay Valecha, Chief Investment Officer, Century Financial.

“Causes for delisting may include failure to file timely financial reports, lower-than-required stock price, or insufficient market capitalization.

“In the end, companies can have a clear bottom-line incentive for delisting their stock from public exchanges, which is not necessarily a bad thing, for financially ailing companies.

“Each exchange has different provisions on how companies can be delisted. The most common of which are to lay down any specific procedure to complete delisting of shares or provide an exit option to existing public shareholders at a price specified in the resolution plan.”

A delisting could also work on the operational side. The (interim) CEO Michael Davis can now keep working with administrators and the Board of Directors to restructure the company, banking sources say.

It could lead to a smaller entity that it is now - but that would be a better fit in the coming times, the sources add. "It's about being "right-sized, not being the biggest. That would help speed up decision making and its implementing."

What next for NMC shareholders?
For shareholders in a company where the core business model is sustainable, a buyout is a much desirable way forward," said Abdul Moiz Khan, CEO at Fursa Consulting. "However, the market generally sees a delisting as a major negative, which can damage investor confidence in the company and lead to lower interest from institutional investors.

"Generally when a company's stock delisted in the event of a buyout or merger, in case the company is bought out by another public company, stockholders might receive cash for their shares or could get shares of the acquiring company. If the company is taken private, shareholders will generally receive a cash payment at the time the shares are delisted at an agreed intrinsic company value.

"Once delisted, the company can still trade on the Over-the-Counter Bulletin Board (OTCBB), which has more relaxed regulations when compared with the major exchanges, or on the Pink Sheets, which has almost no regulation or listing requirements. There are brokerages that deal in delisted shares."

NMC shareholders live on hope

Whether they are the big institutional investors or private ones, the NMC de-listing will only raise collective anxieties. Especially among the small investors, who had come on board when the stock was flying high and it seemed nothing would bring it back down.

Now, they will have to wait until the administrators manage to find a new buyer or investor, and they decide to buy out the shares that were floated on the London Stock Exchange.

For NMC’s hospitals, clinics, nothing changes

The operating entities of NMC Health are unaffected by the de-listing, the administrators said in the statement.

“NMC's hospitals, medical centres, care facilities and other operations in the Group continue to operate, under existing management, with patients continuing to be treated as they are currently.”

According to Richard Fleming, Joint Administrator of NMC Health and Managing Director of Alvarez & Marsal, “We are working at pace to ensure continuity of patient care, stability for staff and suppliers and financial security for NMC's operating companies. Delisting shares in NMC Health is the logical next step, given the situation we have inherited.”