Zimbabwe Stock Exchange (ZSE) and Masimba Holdings officials got a rare chance to drink during office hours this week when they popped the champagne for a new listing of newly unbundled Proplastics.
Masimba Holdings unbundled its manufacturing division, Proplastics and listed it on the ZSE on Monday.
The listing ended a three-year drought on the ZSE. And more listings seem to be coming along thanks to unbundlings.
Innscor Africa announced recently that it would unbundle its fast food business, Chicken Inn, Pizza Inn, Creamy Inn, Steers and Nandos.
The business will be listed separately on the ZSE as Quick Service. Normally, companies pursue unbundlings to unlock value for shareholders.
This is likely to bring more cheers and activity to the ZSE. “Yes it’s a good thing but soon another company will delist and it will be like taking one step forward and two backwards,” the stockbroker said.
The stockbroker’s comments come at a time more and more ZSE companies are going private.
The ZSE has gone through a listing drought with the last one being witnessed in 2012 when TN Bank came to the market.
Two years back, the ZSE had witnessed another listing when Innscor unbundled Padenga Holdings, its crocodile venture, through a dividend-in-specie.
“Apart from a series of unbundling activities that saw Dawn Properties, Red Star Limited, Zimbabwe Property Investments and Pearl Properties Limited being listed in the last 12 years, new listings have been as rare as snow in Zimbabwe. In September 2011 Padenga, was listed by way of introduction on the ZSE,”MMC Capital said.
“The prevalence of delistings doesn’t however imply the failure of a stock exchange. This was evidenced by all-time high total market turnover despite the fact that it registered the most delisted companies. The total volumes traded fell from 6,80 billion in 2010 to 3,00 billion in 2013 and then climbed to 3,18 billion in 2014. The decline in the total volumes traded can also be attributable to the decline in total investor participation.”
Stock brokers fear the listings will not be sustained in the current operating environment.
In fact, the say, more companies will delist.
The local bourse has witnessed over 12 delistings in the past five years for varied reasons.
Some of the companies that have gone private are African Banking Corporation Holdings (ABCH), Astra Holdings, Tractive Power, Interfresh Holdings, PG Holdings and others.
At its peak, the ZSE had 79 counters trading on its bourse.
Now, it is a pale shadow of its former self with only 63 counters.
Worryingly, some of the companies do not even trade but still maintain a presence on the market.
Delisting is the removal of a listing on the stock exchange. This is done when the security no longer exists, the company is bankrupt, the public distribution of the security has dropped to an unacceptably low level, or the company has failed to comply with the terms of its listing agreement.
The market is expected to brace for more delistings going forward as some of the listing rules and requirements tend to push companies from the market.
For instance, a company on the exchange that holds a 35% equity stake should make a mandatory offer to minorities. If minorities accept the offer en masse, such a business ends up being delisted.
The ZSE also requires that 30% of a listed entity’s total issued share capital be in the hands of the public.
In a market where values of companies are trading at discounts against their net asset values, more and more investors are opting out of the ZSE.
For instance, when Interfresh delisted from the ZSE it wanted to raise capital but this proved a mammoth task because the company’s market value was unbelievably lower than its net asset value.
This forced the company to eventually go private from the market.
Astra Holdings delisted this year on the market because the shareholding structure of the company was not aligned to listing rules stipulating that at least 30% of a company’s issued shares be held by the public.
Astra was not in sync with rule 4,22 and 4,25(d) of the ZSE regulations. Accordingly, the ZSE board is recommending the delisting of the company in terms of rule 1,10E.
When the new ABCH shareholder Atlas Mara came in, the firm held shares exceeding an 80% equity stake which resulted in the delisting of the counter.
The requirements also state that a shareholder who holds over 35% of a company’s total issued share capital must make a mandatory offer to minority shareholders.
This has resulted in more minorities moving out of the company because in many instances the offer will be higher than the trading price. Some companies are delisting because they fail to meet the requirements of the ZSE.
An analyst said some companies are delisting because no one is following their rights in rights issues. As a result, underwriters are ending up with a lot of stock.
Just recently, Hamish and Simon Rudland ended up with 40% equity stake in Zimre Holdings Ltd after government, a shareholder in the reinsurer failed to follow its rights.