FTSE Russell evicts Home Reit from indices

‘It is clear there have been serious shortcomings in the operations and governance’ says Liontrust, one of its biggest backers


Home Reit will be removed from the FTSE Global Small Cap Index on 2 March after a two-month long suspension of its shares.

It will also be ejected from the FTSE Small Cap, All-Share ex-Multinationals and All-Small indices.

The trust had initially been put on notice on by index compiler FTSE Russell on 30 January, having suspended its shares at the beginning of the month. Home Reit then had a further 20 business days to reinstate its shares or face being delisted from FTSE indices. The AGM was held on 20 February, but no resolutions were passed.

The suspension was announced on 3 January due to Home Reit’s failure to publish its year-end results. FCA rules state that firms must post their annual results no later than four months after the end of the financial year, which for Home Reit was the end of December.

This was due to enhanced auditing procedures carried out in response to shareholder concerns over how strictly it was adhering to its stated investment philosophy.

A spokesperson for Liontrust, one of Home Reit’s largest stakeholders, told Portfolio Adviser: “It is clear there have been serious shortcomings in the operations and governance of Home Reit. As part of this, the company has revealed that a significant number of tenants are withholding rent.

“We have been engaging with the board and other significant shareholders to determine the best way forward and will continue to do so. Through this engagement, we are looking to achieve a resolution that meets two objectives. First, we are seeking to protect shareholder value.

“Second, we want to ensure that good quality housing continues to be provided to vulnerable people. We still believe that this could be a very effective way of allocating capital to alleviate a major social issue in a way that leads to better outcomes for vulnerable people and reduces costs for government and local authorities.

“There is more than one proposition that may enable these two objectives to be achieved. It is not appropriate for us to comment on any of the propositions at this stage, but we do believe there are ways in which a much better outcome can be achieved in time.”

What could removal mean for investors?

With a potential takeover bid from Bluestar in the works, it remains to be seen how long it will be before Home Reit re-emerges and in what form it may take. However, industry commentators see the move from FTSE Russell as symbolic in comparison to the overriding uncertainty surrounding the future of the trust.

On the impact the removal could have, Fairview Investing director Ben Yearsley said the move to eject the trust from FTSE indices will force tracker funds to dispose of the shares eventually.

He added: “However, that is largely secondary to the shares being suspended and the ongoing uncertainty.”

Laith Khalaf, head of investment analysis at AJ Bell, said: “Removal from the FTSE indices is another blow to the embattled Home Reit, but it is more symbolic than substantial compared to the failure to publish its results and the subsequent suspension of the shares, which clearly had a much bigger impact on investors. Normally removal from the FTSE indices would entail a drop off in liquidity, but if the shares aren’t trading anyway, that’s a somewhat academic concern.”

See also: Scrooge-like short selling attack on Home Reit raises questions



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