THE TN family is suffering from the ‘Facebook effect’ after both Lifestyle Holdings and TN Bank, recently demerged from TN Holdings, recorded losses following their listings on the Zimbabwe Stock Exchange last month.
The Facebook effect is a phenomenon where a share rapidly falls in price by wide margins after its listing on a stock exchange.
The phrase was coined following the listing of social network company Facebook, whose share price has tumbled by about 43% from its US$38 per share initial public offering price in May.
Lifestyle Holdings is currently trading on a year-to-date loss of 56%, with a market capitalisation of US$8,259 million. The company listed at 2,5 US cents.
TN Bank is down 54% on a market capitalisation of US$22 million as at its listing last month.
TN Bank listed on the ZSE at a trading price of 32,08 US cents and at a market capitalisation of US$44, 5 million. Econet paid 32,08 US cents per share for its 45% stake in the bank. TN’s market cap upon listing was greater than that of FBC Holdings and ZB Holdings. However, FBC’s market capitalisation is now at US$44,38 million, with a year-to-date gain of 15%, although ZB’s remains much lower with a year-to-date loss of 50% on a market capitalisation of US$17,519 million.
Launched in a blaze of publicity on May 18 this year, Facebook’s shares fell below US$30 with two weeks and have continued to slide.
On its first day of trading, Facebook was briefly valued at US$104bn, more than the combined value of Nike and Goldman Sachs.
Its market capitalisation has since more than halved. In its second day of trading on the ZSE, TN Bank lost US$2,89 million of its market capitalisation.
TN Bank was demerged from the holdings company through the issuance of 76,2 million TN Bank shares at a subscription price of US$0,0000001 per share at an allotment ratio of one TN Bank for every 10 Holdings limited ordinary shares held. The 30,3 million ordinary shares held by TN Financial Holdings were converted into 3,03% non-cumulative preference shares with a nominal value of US$1 per share.
Analysts have noted that there is a huge disparity between the bids and the offers as the market tries to discover the counters’ true valuation after the demerger.
At one point, there was a quote of US 10c/24c as arguments continue to rise over the initial valuation of the counter.
Valuations of TN Bank were done by MBCA for TN and by Standard Bank of South Africa for Econet.
Market analyst Jerome Negonde said that what could work in the bank’s favour was if there could be disclosures on the involvement of Econet in the bank. Most analysts were questioning whether Econet brought in new money into the bank or it was ‘squaring off’ old deals that had been transacted between the two.
However, other analysts say that the fall could be influenced by the liquidity situation where investors are realising cash from the scrip dividend which arose from the demerger.
— Staff Writer.