THE GOOD, THE BAD & THE UGLY
DIVIDE AND CONQUER COMBINED MOTOR HOLDINGS (CMH) hit reverse last week by subdividing its share (trading at 10 000c) on a fiveto-one basis “to encourage more participation by private investors”.
There’s still a perception in the market that it’s more profitable, or cheaper to buy 100 shares at 100c each than one share at 10 000c. The exact opposite actually applies.
Some time ago, PSG issued perpetual preference shares with a nominal value of 100c each, priced low to attract the public. These shares were last quoted at 98c/99c, a difference of one cent or one percent between buyer and seller price. This gap can never narrow as price adjustment on the JSE cannot be for less than one cent.
At the same time, Absa also issued perpetual preference shares but instead it opted for a nominal value of R1 000 per share. These shares were quoted at R926,10/R927,95 at the time of writing. The difference between the buying and selling prices was a mere 0,2%.
The Absa price, if the nominal value was also 100c to compare it with the PSG preference share units, would be 92,6c/92,8c – much narrower and more competitive than PSG’s. PSG will actually do the investors in its preference shares a favour by consolidating.
This will substantially reduce the in-and-out cost on these shares, which are interest rate investments where additional dealing costs of up to 0,8% are important.
Warren Buffett is also a firm supporter of highpriced shares. The shares of Berkshire Hathaway, of which he holds 500 000, have never been subdivided. DONNING THE 2010 CAP... THE BELEAGUERED Don Group looks as if it’s been playing football with a nine-member team for the last few financial reporting seasons, but the 2010 World Cup looks set to give the company the freekick it has longed for.
CEO Thabiso Tlelai says the company's hotels have been roped in by Fifa to be used as accredited accommodation for the sporting spectacle. Also, the World Cup has created “momentum to attract normal business” in the leadup to the event. Finweek hopes this will get the outfit to move up from the bottom of the league tables. BUILDING THE ZEDER BRAND(Y) SPEAKING AT Nedbank’s midcap conference, Zeder CEO Antonie Jacobs presented some fascinating insights into the intricacies of buying up tightly held agribusiness shares.
He noted that networking with shareholders in some of SA’s smaller centres involved braaiing and drinking brandy. Sounds rather nice…