In a circular on Ariston’s proposed rights issue, Sec CEO Tafadzwa Chinamo said there was need for detailed background on the underwriter, Afrifresh, particularly as to whether the South African firm’s role was confined to underwriting or whether it already had a stake in the business.
He questioned Ariston’s use of an unlicensed advisor in the proposition and the absence of a licensed independent advisor. Sec needed to know the dilutive impact of the rights issue.
Sec also demanded an entire debt maturity profile so that investors or shareholders could make their own assessment on who was owed by the company and how much was owed. In addition, the commission also required projections and impacts of the recapitalisation exercise on the business over the next five years as well as a breakdown of application of funds from the rights issues, what capital expenditure would be undertaken and disclosure on the ownership status of the estates.
“The Commission has already communicated its concerns to the ZSE, Ariston management and the advisors,” Chinamo said.
Chinamo raised the similar queries on RioZim’s proposed recapitalisation exercise, saying there was need for disclosure on who the underwriters GEM, Raintree and GEM Raintree were.
In addition he said the company’s circular to shareholders was based on a comparison of unaudited and audited financials, a development that he said posed a challenge given that the numbers could change post auditing.
“There is need for an illustration on the dilution of the shareholding structure, particularly assuming full conversion of the debenture. Top of page 12 implies Riozim will not draw down the debenture facility all at once to limit dilution yet there not mention of any cashflow projections,” he said.
He added there was need for a detailed illustration on the dilutive impact of the transaction and a debt maturity profile so that shareholders could make their own assessments on who was owed and the size of the debt.
The Sec boss argued the permission granted by the ZSE Listings Committee nullified the whole process, saying the committee’s constitution was ultra vires.
He said SECZ would engage the committee and “rectify any underlying problems.”
He advised the investing public to exercise caution in exercising their rights. ZSE CEO Emmanuel Munyukwi was said to be out of office at the time going to press.