Edgars migrates to VFEX this week
EDGARS STORES LIMITED traded for the last time on the Zimbabwe Stock Exchange (ZSE) on Wednesday last week and will now be listed on the Victoria Falls Stock Exchange (VFEX) on April 5, 2024.
By close of trading, the counter had gained 402,2 percent year to date.
The ZSE instituted a halt on the counter’s trading on Thursday to officialise the company’s last dance with the local currency-denominated bourse.
The halt allowed a smooth transition and settlement of existing shares before Edgars transitions to the new exchange.
Shareholders overwhelmingly approved this move during an extraordinary general meeting held on March 25, 2024.
Trading of Edgars shares is expected to resume on the VFEX on April 8, 2024, pending final approval from the Securities and Exchange Commission of Zimbabwe (SECZIM).
Edgars becomes the first clothing retailer to list on the VFEX, a US dollar-denominated exchange established in 2020.
According to a circular to shareholders issued by the company on March 1, 2024, the decision to delist from the ZSE and list on the VFEX presents Edgars with a multitude of strategic advantages.
Firstly, it grants the company enhanced accessibility to much-needed US dollar capital. With the ability to raise funds in foreign currency, Edgars can directly address its USD requirements and fuel its future endeavours.
Furthermore, the VFEX’s potential to evolve into a regional exchange broadens Edgars’ investor base significantly. This expanded pool of potential investors can significantly bolster Edgars’ domestic and regional expansion strategies.
Moreover, the mandatory USD reporting on the VFEX is expected to reduce risk perception for Edgars, potentially leading to more favourable terms for alternative financing avenues.
Beyond capital access, the move to VFEX offers Edgars a chance to optimise its trading efficiency. The exchange boasts significantly lower trading costs compared to the ZSE. This translates to a direct benefit for shareholders, who can retain more value when selling their shares.
Lower trading costs, coupled with the reduced risk perception arising from USD pricing and the possibility of foreign currency dividends, are expected to stimulate trading activity in Edgars shares, fostering greater liquidity.
For foreign shareholders, the switch to VFEX presents a welcome relief. Unlike the ZSE, which is limited by the local currency and plagued by foreign currency shortages, the VFEX allows for the unrestricted repatriation of dividends and proceeds from share sales. This eliminates a significant hurdle for foreign investors and opens doors for broader international participation in Edgars’ future.
The VFEX does not stop at just improved access to capital and streamlined trading. It also offers a package of tax incentives designed to attract investors.
Foreign shareholders can benefit from a reduced withholding tax on dividends, while enjoying complete exemption from capital gains tax on share disposal. This translates to a more attractive return on investment compared to the ZSE.
According to the management, Edgars’ migration to the VFEX also promises greater stability and a clearer picture of the company’s true value.
The exchange mandates USD valuation, providing both existing and potential shareholders with a more transparent and accurate understanding of Edgars’ financial health.
This USD valuation acts as a hedge against the volatility of the Zimbabwe dollar (ZWL), minimising valuation fluctuations and protecting the company’s intrinsic value. This not only offers increased investor security compared to the ZSE but also serves as a mechanism to preserve Edgars’ long-term financial well-being.
Financial transparency extends beyond valuation. VFEX-listed companies are required to present their financial results in USD. This facilitates a more comprehensive assessment of the company’s performance, particularly for foreign investors who may find deciphering ZWL financials challenging.
Furthermore, adherence to stricter governance and reporting standards on the VFEX is expected to contribute to enhanced overall management practices and improved company performance.