Example for others

Idon’t have many Sabvest ordinary and N-shares, but it’s the one part of my humble portfolio that does not keep me awake at night. I can’t say I’m not delighted that the Sabvest brains trust has decided to amend its current short-term and long-term executive incentive schemes to include a performance metric of narrowing the discount at which Sabvest shares trade relative to the company’s published NAV per share. More investment companies should do this.

The development follows the offer for sale of a material block of Sabvest N-shares owned by mercurial investor Ronnie Price that are being placed at a price of R34.60 a share — a hefty 37% discount to the last-stated NAV.

With Sabvest shares likely to trade a little more freely after the placement, it makes sense to tinker with the incentive schemes, which are mainly driven by growth in NAV. The schemes will vest only if the share price discount to NAV meets the quantitative targets set by Sabvest’s remuneration committee for each calculation period, in addition to the existing NAV targets.

I appreciate any effort to better align the interests of executives and shareholders, especially — as is the case with Sabvest — when the modifications don’t immediately trigger an increase in overall cash incentives. As I’ve said before, getting rid of the N-share structure will help enormously too.

Lapsed or collapsed?

Small-cap punters who believed the market was overlooking a potentially generous special dividend at African Equity Empowerment Investments (AEEI) will be frantically reassessing their positions in this illiquid stock.

AEEI was set for a R950m windfall — equivalent to about 190c a share — from selling its 30% stake in technology company British Telecoms SA (BTSA) to subsidiary Ayo Technology Solutions. But the time frame for the deal has lapsed, so the parties have to engage further.

Some deals take longer than others to finalise, and AEEI is not the first company to extend the dealmaking period. What is worrying is that this should be a fairly simple affair, as the companies buying and selling are corporate cousins. AEEI CEO Khalid Abdulla is also the kind of executive who prides himself on delivering what was promised. That leads me to believe the hold-up might lie at BTSA.

Here is a theory. The circular required for the proposed deal would need to have detailed financials from BTSA — something AEEI shareholders have not seen in the past due to confidentiality agreements. The question is whether it is a deal breaker if BTSA is reluctant to let AEEI/AYO publish these numbers in the circular to shareholders.

It’s possibly just an audit snarl-up in getting the required financial figures ready for the circular. The AEEI and Ayo share prices are hardly making a confident pronouncement, though.

Dawn of the dead

African Dawn Capital (Afdawn) — one of several walking-dead JSE counters — will make another attempt at a new lease on life. Without being too prejudicial, I would not hold my breath for a resuscitation.

In any event, little-known investment holding company Arvesco Proprietary wants to gain a 55% stake in Afdawn after an issue of shares for cash set at 35c a share. The rescue package is worth barely R10m, though Arvesco is forking out R400,000 of interim funding to the cash-strapped Afdawn.

I note the capital raised will be mobilised specifically to fund Afdawn microlending subsidiary Elite and to settle the company’s outstanding tax debts. Elite has previously battled to nail down a buyer, so the sudden interest by Arvesco does raise an eyebrow.

I also note Afdawn shareholders will be asked to waive the mandatory offer that will be triggered if Arvesco’s investment proposal is successful. It’s a pity. I think quite a few would take 35c a share and run — unless Arvesco is bringing new assets to the table.

I appreciate any effort to better align the interests of executives and shareholders