ZECO’S initial public offer could be a brief chance for small investors to enter the market after most stockbrokers firms hiked their share purchase
threshold to $1 billion, a figure far beyond the reach of many.
Most stockbrokers have raised their minimum threshold to make the funds easier to manage. The move has effectively barred smalltime investors from participating on the stock market as they cannot raise the $1 billion minimum limit.
Zeco’s IPO could however offer some reprieve for the small investors because it does not have a limit. Those interested in buying a stake in Zeco will need to have money enough for 4000 shares which has been set as the minimum to participate in the IPO.
Zeco’s offer price of $24 927 will afford even those with just more than $100 million to participate in the IPO. Analysts told businessdigest Phillip Chiyangwa, who owns the company through his Native Investment, was deliberately excluded from Zeco’s 10-member board as a strategic decision to dispel stereotypes attached to the business magnate. CBZ Holdings will underwrite the IPO.
The mechanical engineering group has two subsidiaries, namely Delward Engineering Ltd and Crittal-Hope Ltd and a net asset value of more than $150 trillion as at October 1. Chiyangwa has had the controlling stake in Zeco since 1997. To avoid the effects of the current cash crisis Zeco said it will only accept RTGS transfers, bank drafts and cheques.
“Cash will not be accepted. Applications will be considered complete only when the RTGS transfer, cheque or bank draft has been paid or confirmed/ received,” said Zeco’s prospectus.
“Applications may not be made in the name of a minor, a deceased estate; an insolvent estate or partnership.”
ZSE chairman, Bart Mswaka, said the latest trend by some stockbrokers to increase their threshold is a result of the activity on the stock market where top perfoming counters require an excess of $1b to make proper portfolio.
“In order to get a reasonably balanced portfolio with a minimum of 100 shares you need at least $1b. Take for example Econet shares, one might need that same amount to invest 100 shares in this counter,” Mswaka said.
He however said would-be investors still had the chance to diversify their investments to unit trusts.
Kingdom Meikles Africa chief executive officer, Nigel Chanakira, said the move by Kingdom stockbrokers to increase the threshold to $5b was made because of “administrative reasons” adding that the stockbrokers would only review the threshold if stock market investors raised concerns.
“We are the pioneers of equities and those wishing to raise their concerns should come to us,” said Chanakira.
Slightly over 87% of these shares are locked in fixed assets such as property, plant and equipment.
The engineering group is expected to start trading on the stock market on February 15.