JSE hiatus needed after a life-altering notice
Just after 10am on Friday, Clover issued a Sens statement advising shareholders that it had entered into negotiations with a third party regarding a potential acquisition. The share price shot up from just over R14 to R16.70, and almost three times the daily average volume was traded.
As the JSE contemplates the submissions it has received in response to the consultation paper it released in September, perhaps one thing it should consider is suspending a share when a company releases a potentially life-altering Sens announcement.
The prospect of a third party acquiring Clover’s entire issued share capital would certainly qualify as a life-altering event for the company. There was nothing untoward in Friday’s heavy trading in Clover shares. But there may be a few shareholders who were not alert enough to notice the Sens announcement and are now feeling a little disappointed they are no longer Clover shareholders.
Many of the sales might even have been prompted by automated processes. Something as short as a 30-minute suspension would be sufficient to ensure no-one in the market had an information advantage.
And then there is the matter of results announcements. In many overseas markets, these have to be released an hour or two before the market opens or after the market closes. However, it is not unusual for JSElisted companies to release results during trading hours.
Particularly problematic are the companies that release the information just seconds after the opening. Given the huge complexity of a set of interim or preliminary results, the timing of their release can give insiders a substantial advantage over traders who are seeing them for the first time.
Some directors claim that they have no control over the timing of the Sens announcements and that they often get clogged up in the system. If accurate, it is time the JSE streamlined the Sens system.
It looks ever more likely the takeover of Lonmin by Sibanye-Stillwater in an allshare deal is going to succeed, with the world’s third-largest platinum miner actively managing its balance sheet.
While operationally the company has hit its stride, the balance sheet has remained an area of concern.
Sibanye CEO Neal Froneman took a swipe at Lonmin early in 2018, warning that his shareholders could vote against the transaction if there is too much debt on Lonmin’s balance sheet. He has a point. Sibanye is sitting with a hefty chunk of debt after the $2.2bn cash purchase of Stillwater Mining in the US.
Lonmin has the veritable sword of Damocles hanging over it, with a $150m debt repayment pending if the Sibanye deal fails. While the company had net cash of $114m in September, its operating costs and narrow margins would quickly erode that tiny buffer.
Lonmin has put in place a $200m deal for a Jiangxi Copper Company associate to buy platinum and palladium for that value plus a 15% margin over a three-year period. Lonmin will immediately repay the $150m debt and put $50m on to its balance sheet. It will terminate all undrawn loan facilities and shake itself free from the crippling loan covenants under which it has been toiling.
If the deal is concluded in the next week or so, Sibanye shareholders would have cash in Lonmin of $164m, or R2.3bn, and a suite of good mines to add to its Rustenburg footprint.