An analysis of why public listed companies go private in Malaysia

Abstract

The trends of public listed companies going private in Malaysia‟s stock exchange Bursa Malaysia has experienced a surge with 17 public listed companies being taken private in the first half of the year in 2007 together with approximately RM46.29 billion of market capitalisation being “wiped out” from our local bourse Bursa Malaysia. In contrast, Bursa Malaysia only added RM3.74 billion in market capitalisation from the new public listing of 16 companies within the same period. Global leverage buyout volume for the first six months in the same period was estimated at US$450 billion (RM1.56 trillion), more than double the whole of last year 2006. For the year of 2008, there have been already 29 privatisation proposals and only 18 new public listing on the Bursa Malaysia. Traditionally, private companies going for public listing was a sign that a company had reached a certain threshold of size and profitability to attract public investors for further funding requirements and the expansion of business. This study aims to examine this new trend on the Bursa Malaysia and also to find out the reasons for the public listed companies for choosing to go private whereby it is the reverse of a public listing exercise.