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Uncertain future for DX shareholders

The delivery company faces expulsion from the London Stock Exchange after falling out with its auditor – but what does this mean for investors?
Uncertain future for DX shareholders

Investors in DX Group (DX.) have faced a barrage of bad news this year. In January, the courier was suspended from trading on Aim after it failed to publish its annual results on time. The hold-up was due to a corporate governance inquiry, sparked by an earlier internal investigation.

One month later, DX’s auditor, Grant Thornton, resigned over “serious concerns” stemming from its latest audit. These related to "the company’s governance and to executive conduct, specifically arising in connection with... actual or potential breaches of law", the auditor said in a letter. 

Since then, DX has struggled to appoint a new auditor and is facing the “material risk” that it will not publish its accounts by 5 July 2022 – a year after the end of the relevant financial period. If this happens, the London Stock Exchange could permanently remove DX’s shares from Aim, unless an exemption to the rules is agreed. 

Things aren’t looking promising. Even if DX manages to appoint an auditor immediately, the company will have less than two months to carry out its review. According to one analyst, this is a tighter timeframe than most auditors have for businesses they have worked with before, let alone a new company accused of rule-breaking. The likelihood of DX filing its results by 5 July seems slim. 

A delisting would leave investors in an extremely awkward position. While they would retain ownership rights, they would be holding shares in a private company. As a result, much of the regulation that keeps public groups in check would fall away. Reporting obligations, for example, are more relaxed for private companies, making financial information harder to come by, while it is also far trickier to sell shares when they are not being traded on an exchange. The normal process of price formation cannot take place and there is a general lack of transparency. 

A cloud of mystery still hangs over DX’s troubles. Grant Thornton claimed that DX provided it with “inaccurate information”, which failed to give a “full picture of the scale and seriousness” of what had taken place, without going into more detail about what offences might have been committed, or by who. 

DX’s board said these reasons do not accurately reflect the current situation, and stressed that its inquiry relates to a disciplinary matter, rather than to the group’s financial performance and position.

Expulsion from the stock exchange due to late results is unusual. Companies typically delist after a failed attempt to squeeze out a minority shareholder, during which the majority offers to buy the shares or threatens to delist. 

A DX spokesperson said shareholders would hold shares in a private company if the company were removed from Aim. DX's nominated adviser (Nomad) did not respond to a request for comment. All Aim companies are required to have a Nomad to advise them of their obligations once on the market, and during admission.