When deposit-taking micro-finance institution GetBucks Financial Services in December announced plans to raise US$3,2 million last year through an initial public offering (IPO) on the Zimbabwe Stock Exchange (ZSE), it was hoped an IPO drought going as far back as 2007 would end.
The ZSE had last witnessed an IPO when Zeco listed on the local bourse.
As news of the GetBucks IPO filtered, the market watched with excitement. Observers were keen to see the results at a time Zimbabwe was suffering from a general lack of confidence among investors that had culminated in a wait-and-see attitude and a tight liquidity crunch that hinders inward investment.
An IPO is the first sale of stock by a private company to the public. IPOs are often issued by smaller, younger companies seeking capital to expand, but can also be done by large privately-owned companies looking to become publicly traded.
Last week, GetBucks was to make good on its promise to list in January 2016 as part of a four-year journey that started in 2012 when the company commenced operations as a credit only micro-finance institution (MFI).
GetBucks made its debut last Friday on the ZSE after its US$3,2 million registered a measly 2,29% subscription rate of the total 93 567 251 ordinary shares on offer, a price per share of US0,0342.
Results show the company was listed at a valuation of US$37,4 million. Mauritius-based underwriters, DBF Capital Partners, took up the balance of the 1 093 567 251 GetBucks shares that were listed.
A leading financial analyst said undersubscription of the GetBucks stock came as no surprise at a time investors were guided by extreme caution and preferred to invest in consumer stocks such as Delta and Innscor (Simbisa Brands Limited).
“The macro-economic environment is generally tricky and investors are more cautious, hence this comes as no surprise,” said a financial analyst who requested not to be named, adding GetBucks was a unique stock on the bourse hence the need for even more caution. “GetBucks is the first micro-finance to be listed in the market and investors don’t have anything to measure it by so they will obviously wait for the company to prove its worth before they become excited. You should also remember MFIs have high returns, but the risk is greater and this is not good news when banks are struggling with NPLs (non-performing loans) to a point the authorities established Zamco (Zimbabwe Asset Management Company).”
“Banks charge lower interests rates, but they have huge NPLs. Obviously, one would be concerned about MFIs.”
The analyst said the performance of stocks was hampered by tight liquidity, with people using the little incomes they get only for basics.
“Companies, even government, are now struggling to pay salaries and you can see where that puts us, people use their US$100 to buy bread and milk and not shares,” he said.
Zimbabwe National Chamber of Commerce CEO Chris Mugaga said GetBucks’ listing was one of the bravest moves in the market in a long time.
“We are seeing a situation where companies will leave the bourse due to failure to meet listing requirements very soon,” said Mugaga, adding the undersubscription merely reflected Zimbabwe’s difficult macro-economic environment.
“Undersubscription is not a big issue in this market where even the big counters have been shaky. I want to believe that what GetBucks wanted was not the capital, but to make a statement that they mean business and they are here to do things differently,” he said.
Mugaga said the ZSE was to some extent affected by lack of confidence among foreign investors who have been very active.
“Foreigners have been defining this market since dollarisation with about 60% of activity; so it’s basically a foreigners’ market. We must open up the environment to be more conducive for foreign space and also grow domestic activity to make this a more inward market,” he said.
Mugaga said the ZSE was currently more of a sellers’ market that has not seen any real growth in terms of share values.
He said there were other factors inhibiting good performance of the stock market, such as the use of antiquated technology being one of them.
“Our failure as a nation to invest in technology means we are lagging behind. As a market, we are 30 to 40 years behind prevailing international standards in terms of the technology we use at the ZSE,” he said, adding the market remains narrow and dominated by a few players. “In terms of how we trade at the moment, we have three or four guys basically controlling the market which is tantamount to manipulation.”
GetBucks has a US$11 million loan book and is offering unsecured loans whose repayment is deducted at source. The company sees its loan book growing after the capital raising initiative.
“On conclusion of the IPO, it is envisaged that the entire issued share capital of GetBucks of 1 093 567 251 ordinary shares will be listed on the ZSE,” the company said prior to the listing.
South Africa’s GetBucks owns 55% shareholding of the company with the remainder being controlled by local investment firm, Brainworks.