He is hopeful Ecsponent will turn around

JOHANNESBURG Stock Exchangelisted Ecsponent Limited chief executive George Manyere has reiterated that his firm is solvent and things can be turned things around.

Speaking to Moneyweb on Tuesday, Mr Manyere blamed the group’s financial woes on its former management, but said progress has been made in restructuring the company as well as its problematic MyBucks business.

Both companies have slashed around 100 staff as part of the restructure under the new management team.

Mr Manyere said the hybrid share offer to Ecsponent’s preference shareholders is aimed at giving them a better alternative, as opposed to automatic conversion to ordinary shares, which is stipulated in the group’s current MoI (memorandum of incorporation) in the event of a default.

He said more than 2 000 preference shareholders participated in Ecsponent’s webcasts over a fortnight ago, which were aimed at updating them about the hybrid share offer.

A majority of Ecsponent’s preference shareholders will have to vote in favour of the hybrid offer for it to be passed.

Worried shareholders

Having lost out on their high-yielding dividends, many of Ecsponent Limited’s 2 800 preference shareholders are now worried they may lose the more than R2,1 billion that they have invested in the small-cap private equity and financial services group.

Pretoria-based Ecsponent hit financial trouble last year and announced in February (2020) that it will default on paying out around R188 million in dividends, due in March to preference shareholders.

The scale of its financial woes was revealed last month, when it reported a R1,98 billion loss for its half-year to December 31, 2019.

Adding to Ecsponent’s woes, Moneyweb also reported last month that its subsidiary, Ecsponent Financial Services, is facing a Financial Sector Conduct Authority (FSCA) inquiry.

The subsidiary stands accused of marketing “high risk” preference shares in its holding company to unsuspecting pensioners.

Moneyweb has been contacted by several concerned preference shareholders, most of whom are pensioners, since first reporting on Ecsponent’s default in February.

In recent weeks, Moneyweb has received more correspondence, via email and even via social channels, from worried shareholders who seem to have realised that they may lose out not just on dividends, but potentially the initial capital invested in Ecsponent.

‘Angry’

Many have been wary to comment on the record, but now for the first time, two have decided to tell their story.

This comes as they, together with the other preference shareholders, have a tough decision to make next Wednesday (May 27) on whether to vote in favour of amending their shares into “hybrid preference shares” or allowing a default conversion of their preference shares into ordinary shares in the group.

Andries Roets, a Nelspruit pensioner who turns 75 later this year, tells Moneyweb he is “angry and worried” not only about not getting the preference share payouts he is dependent on, but the prospect of losing a significant portion of his life savings.

“I have not received payouts since March, and it has affected me badly. I can’t even afford to pay levies on my house and for my medical aid now.”

Roets made the investment through Ecsponent Financial Services after hearing about it on a local radio station.

“I hope something can be done, but I am very worried that I will end up with nothing,” he says.

“Speaking to other preference shareholders [following an Ecsponent webcast meeting this week(last week)], many of us share similar concerns.

“Personally, I don’t have the means now to get a lawyer to look into this and

I don’t know what to do.”

Between Thursday a fortnight ago and Tuesday last week, Ecsponent has held nine webcast meetings with preference shareholders explaining the hybrid preference share option.

This it says is being offered to affected preference shareholders as an alternative to their shares automatically being converted to ordinary shares.

Roets was one of around 2 000 preference shareholders who participated in one of the webcasts, but he is sceptical and has not decided how to vote.

This comes as the value of the group’s ordinary shares have plummeted 70 percent on the JSE over the last year and currently trades at a nominal 6 cents a share. Roets was one of around 2 000 preference shareholders who participated in one of the webcasts, but he is sceptical and has not decided how to vote. — Moneyweb.