Minorities exiting companies complain that their shares are undervalued

The recent evaluations of some companies drawn up to determine the price they have to pay to shareholders who withdraw from companies, following corporate operations such as divisions or changing the object of activity, have caused dissatisfaction among investors.

According to the law of commercial companies, the price paid by a company for the shares of the person exercising the right of withdrawal is established by an independent authorized expert, as an average value resulting from the application of at least two valuation methods recognized by the legislation in force.

However, investors claim that, by applying inappropriate methods to the companies' activity, valuations are reached far below the real values, to the disadvantage of the minority shareholders who do not agree with the changes in the life of the companies. The cases of Compa Sibiu and Mecanică Fină stand out, where the evaluators set prices for the withdrawal of investors equivalent to 26% and 54%, respectively, of the accounting values of the shares.

Marius Motogna, old investor at the Bucharest Stock Exchange, says: "The companies that are now coming to the market are listed at a multiple compared to the book value. But when shareholders withdraw from companies, valuation reports appear in some cases where the price is far below book value. Or, from this perspective, any listing will automatically raise questions".

In particular, investors are clamoring for valuers' avoidance of the asset-based approach for companies that are essentially real estate. They referred the cases to the former management of the Financial Supervision Authority, but they did not take any action. "ASF washed its hands and sent the investors to ANEVAR and to the court. But this is not a solution, because the ASF must protect investors in the capital market. Investors with small holdings cannot afford to enter into a lawsuit with an appraiser. In the past, the ASF even withdrew the authorizations of some appraisers. The authority notified ANEVAR, which verified the report, and if it found major non-conformities, it withdrew the appraiser's authorization and ordered the evaluation report to be redone," says Marius Motogna.

It should be noted that the attempted division of Compa Sibiu from December 2023 - January 2024, which wanted to transfer almost half of the company's assets to another unlisted company, with activities in the real estate field, was interrupted, following requests from the part of the investors, as the company claims in the report from the Bucharest Stock Exchange. Previously, the BURSA newspaper and several investors had reported the case to the current management of the ASF. The market supervisor informed us that the authority in a position to issue a point of view related to an evaluation report is ANEVAR but that, within the limits of its attributions and powers, it monitors the situation and, as the case may be, can order specific measures including from the perspective of ensuring compliance shareholders' rights.

Two weeks ago we addressed the ANEVAR regarding the opportunity to use the asset approach when valuing a company whose activity is almost entirely real estate and what solutions investors have when they consider that the price set by the appraiser is far below the real value of the company /action, but I haven't received a response yet. Today we present the case of Fine Mechanics, and in the following days we will present other cases.