The money chan­nel

Po­ten­tial ex­ists for BEE shares to dou­ble in value — de­spite the lock-in clause

Financial Mail - - BETWEEN THE CHAINS - Ann Crotty

In­vestors in Mul­ti­choice’s BEE scheme, Phuthuma Nathi, were the big early win­ners of Naspers’s de­ci­sion to un­bun­dle the video en­ter­tain­ment group, as those shares shot up 44% im­me­di­ately after the an­nounce­ment.

Phuthuma Nathi holds 20% of Mul­ti­choice’s SA oper­a­tions, which are be­lieved to ac­count for around 90% of the group’s to­tal earn­ings. Jpmor­gan has es­ti­mated Mul­ti­choice’s value at $8bn — which would make the Phuthuma Nathi shares worth around R265 apiece, more than dou­ble their cur­rent value of R115.

Naspers has un­der­taken to in­crease the BEE stake to 25%, by top­ping up ex­ist­ing share­hold­ers.

The Phuthuma Nathi shares trade on the Sin­gu­lar Sys­tems plat­form, which is au­tho­rised by the Fi­nan­cial Sec­tor Con­duct Au­thor­ity but is not a li­censed stock ex­change.

This means in­vestors aren’t al­lowed to hold cash in their ac­counts for more than seven days. Only those Phuthuma Nathi in­vestors lucky enough to have had cash in their ac­counts within this seven-day pe­riod were able to re­spond im­me­di­ately to the an­nounce­ment and buy more shares.

The share price shot up from R87 ahead of the an­nounce­ment to R125 in early trade on Tues­day.

Most share­hold­ers are ex­pect­ing it to dou­ble from its pre­an­nounce­ment level. Still, Phuthuma Nathi in­vestors have a per­ma­nent lock-up, which re­quires them to sell to other BEE share­hold­ers — im­ply­ing there should be a dis­count on the R265.

Mus­taq Brey, CEO of black­con­trolled in­vest­ment com­pany Brim­stone, says it was not one of the lucky early traders. But he is de­lighted by the move, which he says is “long over­due”.

Brim­stone is one of Phuthuma Nathi’s largest in­vestors and holds about 7% of the ve­hi­cle — an in­vest­ment Brim­stone val­ued at R500m at end-june.

“This val­u­a­tion will prob­a­bly dou­ble as a re­sult of the un­bundling,” says Brey. Gen­er­ous div­i­dend pay­ments have pro­vided a div­i­dend yield of around 18%.

But Brey says this has been flat­tered by the chronic un­der­per­for­mance of the shares. He says cor­po­rate SA should start ask­ing how long BEE in­vestors have to be locked in to their in­vest­ment.

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