Powerspeed in shock delisting plan
POWERSPEED Electrical Limited is the latest Zimbabwe Stock Exchange (ZSE)-listed firm to announce a shock exit plan, with directors telling shareholders in a detailed proposal that a continued presence on the bourse would drain vital resources.
Firms list on stock exchanges to raise capital.
But in Zimbabwe, a string of firms have either exited or are at various stages of delisting because their share prices are either trading at a discount, or there is little trade in their stocks.
Powerspeed's proposal, which will be put to a shareholder vote during an extraordinary general meeting in the coming weeks, painted a sombre picture of the ZSE, saying there was “very little benefit and considerable costs” associated with listing.
“The board of directors of Powerspeed are of the view that in the current environment in Zimbabwe, a listing on ZSE has very little benefit and considerable costs,” Powerspeed directors said.
“Powerspeed is a very illiquid stock and trading often does not represent a realistic valuation.
“The lack of capital from institutional investors means that the listing has limited value in terms of a mechanism to raise capital and ongoing legal, compliance and audit costs are an impediment to shareholder returns.
“In the face of a difficult trading environment the additional costs of being listed, with no compensating benefits, can no longer be borne by the company. Powerspeed has decided to propose to shareholders its delisting from the ZSE.
“The ZSE has directed that Powerspeed provide a mechanism to shareholders wishing to exit their shareholding prior to the delisting, which mechanism is detailed in the offer,” the circular said.
Zimbabwean companies are battling to ride out of a difficult period highlighted by 471% inflation at the end of October, depressed demand due to extensive de-industrialisation and retrenchments, as well as low disposable incomes.
Under the circumstances, the Powerspeed board said it had become difficult to preserve shareholder value, and the feeling was that eliminating costs like those associated with listing on a struggling stock exchange would save one of Zimbabwe's most resilient industrial operations.
But it's been a difficult year for the ZSE. It was shut down by authorities in June after a prolific bull run unnerved authorities, before the bourse was hit by a string on delisting announcements by key firms.
Since the beginning of the year, five other counters have either announced plans to delist, or have already left the bourse, precipitating fears that a new forex denominated exchange, the Victoria Falls Stock Exchange ( VFEX), could be attracting the attention of the delisting league.
In a flurry of delistings that hit the ZSE from 2011, exiting firms have indicated that maintaining a presence on a bourse that has suffered prolonged IPO droughts had turned into a nightmare.
Resources outfit, Falcon Gold, ZimRe Property Investments and the SeedCo group have delisted from the ZSE for various reasons this year, while Dawn Properties is on its way out.
In a recent paper, researchers at Morgan&Co warned that there could be a risk the ZSE would be “cannibalised” by the VFEX unless stock market bosses play their card maturely.
“Is there any strategic logic for an issuer to list on the ZSE only to raise capital in Zimbabwe dollars?” Morgan&Co queried in a paper titled Economics and Market Intelligent Report, October 7, 2020.
“We are witnessing a wave of voluntary delistings from the ZSE for various reasons.
“Falgold has scheduled an extraordinary general meeting where it will seek shareholder approval to terminate its ZSE listing.
“Boundary Investments, a wholly owned subsidiary of New Dawn Mining Corp will make a cash offer of 13c per share to minority shareholders.
“Dawn Properties is also set to delist from the bourse after African Sun Limited made an offer to acquire 100% shares in the company in a deal that will see it assume ownership of the firm's key assets.
“ZimRe Properties will also be delisted given that ZimRe Holdings Limited (ZHL) is seeking to acquire the entire shareholding of ZPI and make a simultaneous application for delisting,” Morgan&Co said.
Two other blue-chip counters with fungible shares were suspended in June after a bull run.
Financial services giant Old Mutual Limited and cement maker PPC remained suspended when the ZSE reopened in August after a week's hiatus, with authorities requesting them to switch to the VFEX.