Montreal-based IT services provider Alithya will leave the NASDAQ within ten days.
The organization believes that the benefits resulting from dual listing of the stock in Canada and the United States no longer justify the additional expenses and administrative efforts associated with maintaining a listing on NASDAQ. The stock is also listed on the Toronto Stock Exchange, where it will continue to trade.
“Between registration, insurance, compliance, audit, legal and other costs, we are talking about an amount that can easily reach 1 million Canadian dollars, not counting the time invested by our employees in internally,” explains Alithya spokesperson Benjamin Cerantola.
He specifies that the reduction in various expenses will however be gradual and could take up to a year to be fully achieved.
“The consolidation of the trading volume on the Toronto Stock Exchange, and therefore increased liquidity, should not be overlooked as an additional advantage for our shareholders,” adds Benjamin Cerantola.
Investors pushed Alithya’s stock down 13% during Tuesday’s session. The stock closed at $1.56 in Toronto, near its all-time low reached last month.
The company, which specializes in the implementation of Oracle management software, went public six years ago after a merger with a Boston company which was already listed on the stock exchange.
The current price gives Alithya a market value of less than $150 million. The stock has lost more than half its value since its listing on the stock exchange in 2018.
Financial analysts’ opinions remain divided about Alithya. Three of the six analysts who officially follow the company’s day-to-day activities are offering to buy the stock. Their average target over a 12-month horizon is $2.66, which suggests a return of approximately 70%.
Founded in 1992, Alithya is led by Paul Raymond, a former high-level executive at the CGI Group.
Several factors can explain investors’ disinterest in Alithya’s stock. Unprofitable companies are less popular when economic conditions get tough and the cost of capital increases.
Revenues and gross margins remain under pressure, and as executives recently mentioned on a conference call, companies in the financial services sector have responded to the impacts caused by rising interest rates by reducing costs, including IT expenses.
“Although Alithya is poised to rebound when the macroeconomic environment improves, we do not know how soon this recovery will occur and when growth will accelerate again,” said analyst John Shao of Bank Financial. Nationale, in a note recently sent to its clients.