Pak Suzuki Motor Company Limited (PSMC) is grappling with a formidable challenge as shareholders, representing over 15.39 percent of the company’s paid-up capital, unequivocally reject the proposed delisting. Their dissent is accompanied by a stern warning of legal action if the brewing issues remain unaddressed.

Shareholders express deep-seated concerns about the alleged oppressive and unlawful management practices at PSMC in recent years. They contend that such practices have led to the diversion of substantial funds from the company, prompting a vehement rejection of the proposed delisting as a potential escape route for the management and holding company.

“We formally reject both the delisting proposal and the minimum purchase price determined by the Voluntary Delisting Committee (VDC) of Pakistan Stock Exchange Limited (PSX) and accepted the board of directors of PSMC,” Pak Suzuki shareholders said in a letter addressed to PSX. pic.twitter.com/yUoupRb0it

— Muhammad Luqman ( محمد لقمان) (@LuqmanSheikh) January 31, 2024

Concerns Over Oppressive Management

A critical point of contention revolves around the perceived undervaluation of PSMC’s shares. Shareholders argue that the proposed delisting and the minimum purchase price, as determined by the Voluntary Delisting Committee (VDC), do not accurately represent the company’s true intrinsic value. They highlight a potential attempt by the management to take advantage of their alleged wrongdoing, significantly impacting minority shareholders.

🚨 Shareholders Rebellion! Owners representing 15.39% of Pak Suzuki Motor Co. Ltd reject the proposed delisting and purchase price, citing concerns about oppressive management practices. 📉 Full story below ⬇️ #PSMCL #StockMarket #CorporateGovernance

— Sanie Khan (@khan_sanie) January 30, 2024

Allegations of financial irregularities further intensify the dispute, with shareholders pointing to the use of transfer pricing, discounts, and various fees that have reportedly led to significant profit diversion to PSMC’s holding company. This, they claim, has resulted in reported slender profit margins and abnormal losses, raising questions about the company’s financial health.

Lack of Transparency in Reporting

Shareholders emphasize a lack of transparency in financial reporting, noting that despite repeated requests, the adjusted earnings per share (EPS) crucial for a comprehensive understanding have not been provided.

In a bold move, shareholders reject the determined EPS of Rs. 46/share, citing it as disproportionately low. Moreover, they refuse to sell their shares at this price, invoking the PSX Rule Book that mandates sponsors to hold at least 90 percent of total shares for delisting—an ownership threshold unattainable due to their collective rejection.

This shareholder backlash leaves Pak Suzuki at a critical crossroads, not only grappling with the imminent threat of delisting but also navigating the intricate legal landscape shaped by disgruntled investors.

How the company addresses these concerns will undoubtedly leave a lasting imprint on its trajectory and influence corporate governance practices in Pakistan.