ONE HALF OF THE PROB­LEM

Finweek English Edition - - INVESTMENT -

African Bank has an­nounced that it is in ne­go­ti­a­tions to fi­nally sell El­ler­ines. One of the ques­tions is what it will get for the re­tailer. Con­sid­er­ing African Bank paid some R10bn for it, it is go­ing to be a fire-sale price what­ever the price is. (I pre­dict, with my tongue firmly in my cheek, maybe one of those 99c sales.) This cer­tainly will help stem the losses at African Bank but leaves two is­sues. Firstly, will it keep the El­ler­ines book and still be able to of­fer the debt to El­le­rienes clients, or will the buyer want the whole busi­ness? African Bank ini­tially in­di­cated it wanted to keep the book.

Sec­ondly, El­ler­ines is only half the bank’s prob­lem. It still needs to fix the other, which is lend­ing. That is doable but still very tough. I think an­other rights is­sue might oc­cur. The in­vestors ex­pect that suc­cess to fil­ter through to the new ven­ture. But there is one crit­i­cal in­gre­di­ent miss­ing: win­ning. A large part of a large com­pany’s win­ning ways is about just that – it is the win­ner within its sec­tor or in­dus­try and it uses the force of win­ning to con­tinue win­ning; al­most in a sense bul­ly­ing the other com­pa­nies in the in­dus­try. In short, it is eas­ier to con­tinue to be a large win­ner then to try start­ing from scratch.

Start­ing from scratch is ex­actly what these van­ity com­pa­nies are do­ing. That said, Brain Gil­bert­son has fi­nally seen the share price of his Pallinghurst Re­sources mov­ing. It’s up over 100% in the last year, al­beit still be­low the stated net as­set value (NAV).

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