Fulcrum Utility Services (LON: FCRM) shares are down 70% this morning. FCRM shares have collapsed on the decision to delist the company. This makes sense from the point of view of the operation of the company. Maintaining an AIM quotation is an expensive business when you’re a small company. So, if times are hard, money’s tight, not being listed can be an entirely sensible decision. However, that share price reaction tells us something important about the value of liquidity. Which is that it is valuable. Being a shareholder in a private company without a liquid market in the shares is worth less than being in a more liquid publicly quoted one. Not that Fulcrum’s shares were hugely liquid before this but that 70% decline is at least partly to do with even less.
The other part of this decline is of course the actual results: “Revenue down 18% to £50.6 million (2022: £61.8 million) Adjusted EBITDA1 of £(6.2) million (2022: £0.5 million) Loss before tax of £25.7 million (2022: £14.2 million) Cash outflow from operating activities of £12.5 million (2022: £7.6 million)” On the positive side they’ve been able to extend their loan facility and so are not in immediate need of more capital. Which is useful, given the decision to delist - because delisting means they’ll not be able to raise cash from hte markets. Obviously.
Fulcrum Utility Services share price from Google Finance
It should be said that these trading results are not a huge nor terrible surprise. That decision to leave the smart meter business had been flagged in advance for example. And what a mess that has turned out to be as well - another of those examples of why we never should allow bureaucrats to try to define markets.
The reason for the decline really is this: “An outcome of the Group's ongoing strategic review is the Board's recommendation to seek to cancel the Company's admission to trading on AIM (the "Cancellation"). A separate announcement has been made with regards to the Cancellation, but it is the Board's considered view that the Cancellation will support the Group's return to profitability by removing significant ongoing costs associated with the Company's shares being admitted to trading on AIM. Cancellation is also expected help to simplify the business and improve its agility.”
Anyone who remains a shareholder is locked in. That’s much less attractive than something that can be evaluated and moved on when the fancy takes. Therefore the shares are worth much less simply by fact of the delisting.