Investors feel cheated by Hili Ventures buyback offer

Investors who placed their trust and capital into Hili Properties Plc just three years ago are now voicing strong dissatisfaction with the company’s recent voluntary share buyback offer. Many shareholders feel that the proposal significantly undervalues their investments and represents a financial setback.

The buyback, open until March 25, proposes a repurchase price of €0.24 per share—three cents lower than the initial €0.27 per share price at which investors originally bought in. This offer has triggered backlash, especially in light of the company’s recent financial performance, which shows substantial growth. According to the latest financial reports, the Net Asset Value (NAV) per share had risen to €0.324 as of June 2024.

Hili Ventures insists that the offer is reasonable, citing the stock’s current market value of €0.193 per share on the Malta Stock Exchange. However, shareholders argue that this rationale does not align with the company’s actual growth trajectory, questioning why the buyback offer is significantly lower than the NAV.

Shareholders Denounce the Offer as Unjust and Unfair

Frustrated investors have described the offer as unfair and exploitative, accusing regulatory authorities of failing to intervene in what they see as a predatory move. Critics have also turned their attention to auditing firm PricewaterhouseCoopers (PwC), which provided an analysis supporting the offer. While PwC acknowledged that the buyback price is lower than the reported NAV, it justified the valuation by citing additional operational costs associated with managing the company’s real estate portfolio.

Discrepancy Between Promised Dividends and Current Actions

When Hili Properties launched its public share offering in 2022, the company assured investors that they could expect a 4% net dividend. However, the recent buyback proposal raises concerns over whether such assurances were realistic. Many investors now feel misled, given that they are being asked to sell their shares at a price below both the original purchase price and the reported NAV.

Compounding the unease is the clause in the Offer Document stating that if Hili Ventures acquires at least 90% of shares through the buyback, it can force the remaining shareholders to sell at what it deems a “fair price.” This has heightened anxiety among minority shareholders, who fear being left with no alternative but to comply with an offer they consider deeply undervalued.

Financial Analysts and Stockbrokers Weigh In

While many local stockbrokers have chosen not to comment on the controversy, some industry veterans have expressed strong criticism. Financial expert and stockbroker Paul Bonello has openly condemned the buyback, arguing that it does not serve shareholders' best interests.

Bonello pointed out that a financial analysis published by The Times of Malta failed to mention key details, including the fact that the public share issue at €0.27 per share took place as recently as January 2022. He also noted that the analysis omitted the critical fact that the last published interim accounts in June 2024 showed a NAV per share of €0.322.

Additionally, Bonello accused PwC of using convoluted arguments to justify the buyback offer, suggesting that the auditing firm’s assessment was more of a public relations exercise than an objective financial analysis. He highlighted the broader implications of such actions, arguing that they could undermine confidence in the local stock market and discourage investment.

Hili Ventures Defends Its Offer

Despite widespread criticism, Hili Ventures remains steadfast in defending its buyback terms. A company spokesperson stated that the voluntary offer was set at €0.240 per share, a figure that exceeds the current market price by approximately 24.4%. The company also pointed out that the offer is higher than the six-month volume-weighted average price (VWAP) of €0.219 per share, reinforcing its stance that shareholders are receiving a fair valuation.

Hili Ventures maintains that the offer reflects current market conditions and is in line with the company's financial position. However, this explanation has done little to appease investors who believe that the buyback represents an attempt to repurchase shares at an undervalued price to the company’s advantage.

The Potential Impact on Investor Confidence and Market Trust

The controversy surrounding Hili Ventures' buyback offer has raised significant concerns about investor protection in Malta. The situation has sparked debate over the role of regulatory bodies in overseeing corporate governance and ensuring that minority shareholders are treated fairly.

Hili Properties Plc is a key player in the European real estate market, with a portfolio spanning multiple countries, including Malta, Estonia, Latvia, Lithuania, and Romania. The company’s holdings include office buildings, grocery-anchored shopping centers, healthcare facilities, and McDonald's restaurant properties in prime commercial locations.

Despite its strong market presence, the current dispute has cast a shadow over its reputation. Investors fear that this case sets a worrying precedent, potentially discouraging future participation in Malta’s stock exchange. Many are now calling for stronger regulatory oversight to prevent similar incidents from occurring in the future.

With the buyback deadline approaching, shareholders must decide whether to accept Hili Ventures’ offer or seek legal and financial avenues to challenge the proposal. Regardless of the outcome, the controversy has already left a lasting impact on investor sentiment and raised serious questions about corporate governance in Malta’s financial sector.

Conclusion

The controversy surrounding Hili Ventures’ share buyback offer has ignited significant backlash from investors, financial analysts, and stock market observers. Shareholders argue that the offer undervalues their shares, contradicting the company’s own financial growth and previous commitments. While Hili Ventures defends the proposal by citing market conditions and valuation methodologies, critics view it as an opportunistic move that prioritizes corporate interests over investor fairness.

This situation highlights broader concerns about corporate governance, regulatory oversight, and investor protection in Malta’s financial sector. With the buyback deadline approaching, the decision now rests with shareholders—whether to accept the offer or challenge what they perceive as an unjust devaluation of their assets. The outcome of this dispute may set a crucial precedent for future dealings in Malta’s stock exchange and influence investor confidence in the long term.

FAQs

Why are shareholders upset about Hili Ventures' buyback offer?
Shareholders argue that the offer undervalues their shares, as it is lower than the company’s net asset value and their original purchase price.

What price is Hili Ventures offering for the buyback?
Hili Ventures is offering €0.24 per share, which is below the original issue price of €0.27 but above the current market price of €0.193.

How has the company’s financial performance changed since the initial share issue?
According to financial reports, Hili Properties' net asset value per share increased to €0.324 by June 2024, indicating significant growth.

What justification has PwC given for supporting the buyback offer?
PwC argues that after adjusting for ongoing property portfolio management costs, the net asset value per share is lower than the offer price.

Can Hili Ventures force shareholders to sell their shares?
Yes, if Hili Ventures acquires 90% or more of the shares through the buyback, it can compel remaining shareholders to sell at a “fair price.”

What do financial analysts say about the buyback offer?
Some financial experts, including veteran stockbroker Paul Bonello, have criticized the offer, calling it unfair and misleading.

How does the buyback offer compare to the company’s promises in 2022?
In 2022, Hili Properties suggested investors could expect a 4% dividend, but the buyback offer now values shares below their original price.

What impact does this buyback offer have on investor confidence?
The controversy raises concerns about investor protection in Malta and could discourage future investments in the local stock market.

What does Hili Ventures say in defense of the buyback offer?
The company argues that the offer price is a 24.4% premium over the last traded market price and reflects fair value despite stock fluctuations.

What is the deadline for shareholders to accept the buyback offer?
Shareholders have until March 25 to decide whether to accept Hili Ventures' voluntary buyback offer.