The exchange's listing committee decided on Aug. 28 to delist Pro Kapital Group shares because the company had repeatedly violated stock exchange rules and thus harmed investors' interests. Trading in the shares will cease on Sept. 28.
Pro Kapital spokesman Margus Mets said the company may challenge the decision in the bourse's court of arbitration. "Pro Kapital's lawyers will decide whether to go to court after they have examined this committee's explanation,"he said. "Ernesto Preatoni (the company's Italian owner) is deeply disappointed."
The decision would not affect the company's day-to-day running or the finding of new investors, he added. Preatoni flew to Italy immediately after the listing committee's announcement.
The company has yet to decide whether it will offer to buy out smaller shareholders. At present, out of a total of 450 investors, 30 to 40 are Estonian.
But the majority of shares are held by Preatoni. The announcement also affects more than 500 shareholders in the Aripaev Index Fund, 20 percent of which is invested in Pro Kapital.
In terms of market capitalization the company is the third largest on the exchange.
At Pro Kapital Latvia, spokeswoman Iveta Vanaga said it was business as usual for the company's Latvian branch. "Our projects do not depend on the stock exchange,"she said. She also confirmed that Preatoni plans to list Pro Kapital Latvia on the Riga Stock Exchange. Due to ongoing investments, the value of the company has yet to be established.
Preatoni has invested about $11.2 million in high-class real estate projects in Riga and plans further investments of $76 million in coming years. In Estonia his investment plans total $146.8 million, according to the Riga-based Russian-language business daily Bizness&Baltija.
In the first half of 2001 the company reported a 25 million kroon ($1.5 million) loss on a 376 million kroon turnover. Domina Vacanze, the leading Italian hotel time-sharing company, which Pro Kapital acquired in March 2000, accounted for 80 percent of the total turnover and made a small profit. All three of the company's Baltic branches have been unprofitable this year.
Mart Selmja, a broker with Uhispank, said Uhispank had advised its clients to avoid shares in Pro Kapital because of their low liquidity. "This can't have hurt many investors,"he said. The number of people actively trading in Pro Kapital is very small."
According to the listing committee, Pro Kapital had repeatedly delayed or withheld publication of vital information. When it did release information it was frequently misleading. In addition, the committee found that persons closely related to the company had repeatedly taken advantage of privileged information and traded in the stock market before such information was made public.
The committee detailed nine cases during the period 1997 to 2001 which have attracted the attention of the securities inspectorate, the banking supervisor, the tax board and the central criminal police. It said these instances had violated stock exchange regulations and may have been fraudulent.
Pro Kapital's Mets said that the stock exchange had neither commented on cautioned the company in relation to its transactions. He described the de-listing as harsh and said it should have been preceded by a warning and a fine.
Preatoni's problems started when he accused Ilona Saari, the company's former chief executive and financial manager of spending the company's money without the management's consent. The stock exchange then suspended trading in the company's shares on July 19 and started investigating the deals made by the company.
Pro Kapital's management was also accused of attempting to issue new shares to firms related to Preatoni at a price considerably lower than the market value, a measure which conflicted with the interests of small shareholders.