Financial Mail - - CROSSWORD 2031 -

the afore­men­tioned fact that, at bot­tom, the pub­lic has a real aver­sion to the kind of small is­sue that it bought so read­ily in its care­less mo­ments. Many of these is­sues fall, pro­por­tion­ately, as much be­low their true value as they for­merly sold above it.”

Be­sides scru­ti­n­is­ing the lead­er­ship of a com­pany plan­ning to go pub­lic, clues as to whether it is likely to sink like a stone af­ter its flota­tion can be gar­nered from who its JSE spon­sor and other ad­vi­sors are.

Check­ing the cre­den­tials of the fi­nan­cial in­sti­tu­tions which man­age IPOS is not as easy as check­ing up on its CEO, as ad­vis­ers with a his­tory of bring­ing duds to the mar­ket tend to re­brand them­selves.

For in­stance, Ar­cay Moela brought to the JSE Pin­na­cle Point, IFCA Tech­nolo­gies, Ububele, Del­rand Re­sources and oth­ers that have been con­ve­niently for­got­ten by share data providers, so as not to scare off a new gen­er­a­tion of in­ex­pe­ri­enced in­vestors who think the trick is to get in early. It now trades as Ar­bor Cap­i­tal.

Be­sides its in­volve­ment in Pem­bury Lifestyle, whose share was sus­pended for fail­ing to pro­duce au­dited re­sults just nine months af­ter its Altx de­but in Au­gust 2017, Ar­bor has not been too ac­tive on the IPO front re­cently — in­di­cated the cur­rent bull mar­ket has not caused the IPO merry-gor­ound to swing that wildly yet.

An­other ex­am­ple of a re­cent IPO whose share is al­ready sus­pended for fail­ing to pro­duce au­dited re­sults within the JSE’S dead­line is fast-food fran­chiser Gold Brands In­vest­ment, whose orig­i­nal JSE spon­sor was River Group, which was sub­se­quently re­placed by Mer­chantec Cap­i­tal.

Av­ior Cap­i­tal Mar­kets, which traded at about R1.60 when it made its de­but on the JSE in June be­fore tum­bling to about 50c in April, fared bet­ter than Pem­bury, in that it did re­lease its re­sults for its fi­nan­cial year ended April in July, re­port­ing that its af­ter­tax profit was less than sixth of that re­ported in the prior year.

A bad omen for Av­ior share­hold­ers was its first Sens state­ment an­nounced the res­ig­na­tion of the chair of its au­dit and risk com­mit­tee with im­me­di­ate ef­fect. It was soon fol­lowed by the de­par­ture of its fi­nance di­rec­tor. Its new fi­nance di­rec­tor and au­di­tors found their pre­de­ces­sors had made ma­te­rial ac­count­ing er­rors, forc­ing them to re­state the pre­vi­ously is­sued re­sults.

Since Av­ior does ap­pear to be clean­ing up its act, it is too early to judge its spon­sor, Pal­lidus Cap­i­tal, whose sole IPO so far ap­pears to be Av­ior.

The share price of Kore Potash, which placed its shares at A$0.20 — which equated to R1.82 — has halved to about 90c since it listed in April.

Aus­tralian min­ing com­pa­nies that dual-listed on the JSE have tended to suf­fer from low trad­ing vol­umes.

For in­stance, Re­source Gen­er­a­tion spent more than three years on the JSE be­fore its share recorded its first trade.

Liq­uid­ity is a dou­ble-edged sword, as demon­strated by Kaap Agri, whose move from over-the-counter trad­ing to the pre­sum­ably bet­ter price dis­cov­ery of the JSE re­sulted in the price of its shares slid­ing from about R55 to un­der R42.

Gra­ham gave two rea­sons why in­vestors should shy away from IPOS. “The first is that new is­sues have spe­cial sales­man­ship be­hind them, which calls there­fore for a spe­cial de­gree of sales re­sis­tance.

“The sec­ond is that most new is­sues are sold un­der favourable mar­ket con­di­tions — which means favourable for the seller and con­se­quently less favourable for the buyer,” he wrote.

Pic­ture: LIB­STAR

Lib­star CEO An­dries van Rens­burg with Wendy Luhabe, lead in­de­pen­dent nonex­ec­u­tive di­rec­tor, at the JSE in Sand­ton at the com­pany’s JSE de­but in May.

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