GETBUCKS Financial Services failed to transact on its debut on the Zimbabwe Stock Exchange (ZSE) in an unprecedented development that left the market puzzled and analysts warning of a potential crisis on the domestic bourse.
The ZSE, once a go-to heaven for companies seeking cheap funding, lost nearly US$1,3 billion in market capitalisation last year alone, a significant diminution in shareholder value for stockholders in the shifting sands of Zimbabwe’s turbulent economy.
The failure to find buyers by Getbucks on a day usually characterised by a pre-listing hype highlighted the extent of a liquidity crunch in the domestic economy, which has resulted in a sharp contraction in the fortunes of even those firms once considered bellweather stocks, and a consequent pummelling of share prices.
Getbucks debuted on the domestic bourse on Friday after an initial public offering (IPO) that was grossly undersubscribed, again underpinning the gravity of the liquidity crunch.
The Getbucks share listed at the same price as its IPO price of US$0,0342 per share. The market resisted this price, resulting in a no-sell for the company’s stock on the debut.
The valuation on listing was at US$34,2 million which translates to a price-to-earnings ratio of 7,5.
Getbucks’ IPO was the first since the country adopted a multiple currency regime in 2009, giving Zimbabwe investors a chance to participate on a new offering on the market.
But the microfinance lender’s stock suffered the worst start in the local stock exchange’s 120 year history, according to sources familiar with the history of the domestic bourse.
The Reserve Bank of Zimbabwe (RBZ)’s director responsible for bank supervision, Norman Mataruka, who was the guest of honour at the listing ceremony, rang the opening bell to signal GetBucks’ first trading session on the ZSE.
This was followed by a lacklustre response from investors, despite earlier projections there could be significant appetite for a new listing given that the stock market had experienced a seven-year IPO drought since ZECO and Kingdom Meikles listed in 2008.
Investment analysts said Getbucks’ debut was “a disastrous start” for the stock, indicating that the stock could be pummelled in future trades unless the company exhibited great potential to buck an economic trend that appears to suggest contraction of incomes for both corporates and individuals.
Getbucks’ underwriters, DBF Capital, had anticipated selling overallotment shares, sometimes called a “greenshoe option”, as the expectation was that there would be huge demand for the shares.
Under this arrangement, the underwriter was to sell shares additional to what the company had issued in its IPO within 30 days of the original public offering in the event of a high demand in the company’s stock.
This had been the case in previous IPOs on the ZSE but GetBucks’ stock was poorly subscribed during the offer period that closed on January 8.
The company had issued 93 567 251 ordinary shares through its IPO.
However, only 2,29 percent of the IPO shares, which translates to 2 145 120 ordinary shares, had been subscribed for.
This was dismal even after taking into account the state of the country’s worsening economy.
What this meant was that the unsubscribed shares had to be taken by DBF Capital, a Mauritian-based investment holding company.
During the debut session, sellers and buyers failed to agree on a price.
Sellers offered US$0,04 per share for the Getbucks stock, while buyers bid at US$0,035 cent per share.
An investment expert said underwriters were to hold on to the unsubscribed shares because they were unlikely to find a willing buyer for the stock any time soon.
The company, which was recently granted permission by the RBZ to also take deposits, was raising money to comply with the regulator’s requirements.
Brainworks Capital owns 34,06 percent of GetBucks Zimbabwe and will need to reduce its shareholding to a maximum of 25 percent in order to comply with RBZ rules on shareholding for deposit taking institutions.
GetBucks Limited, a company registered in Mauritius, has a 55 percent stake in the company, while the balance is owned by various local pension funds.
Simbarashe Mangwendeza, a research analyst with Old Mutual, told the Financial Gazette’s Companies & Markets when asked to comment on the unprecedented lack of sell for Getbucks’ shares on debut: “I am not surprised.”
Mangwendeza added: “First of all, the company is not raising funds to expand the business but partly to regularise its shareholding structure to comply with the Reserve Bank of Zimbabwe.
“Also, if you look at its share register, you will find the underwriter (DBF), a few individuals and a number of pension funds. Naturally, pension funds are in for the long haul and they don’t trade and I also don’t expect the underwriters to trade.”
He said he did not “expect a lot of market trade, maybe few block trades” on the Getbucks counter.
Flotation for successful IPOs at many stock exchanges is at around 70 percent but that for GetBucks’ was at 8,5 percent.
Another investment analyst, Kudzi Sharara, of Lynton Edwards Stockbrokers, said: “The buyers were there bidding at US$0,035 but the sellers were not willing to sell below US$0,04. In other words, there was no meeting of the minds between the sellers and buyers, who did not agree on a price.”
GetBucks’ listing, which came four years after the company began operations in the country, is meant to unlock shareholder value and access more appropriate risk-adjusted capital than it has been able to obtain as a private company.
Its current loan book is worth over US$11 million and has a footprint of 14 branches in all the major cities and towns, servicing approximately 18 240 clients.
The listing is also meant to comply with the shareholding structure as prescribed by the RBZ and to attract focussed and permanent capital.
The listing is also expected to strengthen and enhance the visibility of the GetBucks brand to both the public and private sectors, which is expected to lead to new business opportunities.
There was high expectation that the listing could help grow the ZSE which has been experiencing declining investor interest and trading volumes in the past five years.
Five companies – Celsys, Interfin, Cottco,PG Industries and Phoenix – are currently suspended, leaving 61 active counters.
During the hyperinflationary era, the ZSE was voted among Africa’s best performing capital markets on the continent as investors sought stocks to hedge themselves against an erosion of value on the domestic currency.
The ZSE’s fortunes changed when the country ditched its domestic currency for a multiple currency regime to escape hyperinflationary scourge.
The hard currency regime brought with it a liquidity crunch as imports soured while exports shrunk, reducing the stock of currency in the economy.
A total of 16 companies including Apex, Interfresh, Lifestyle Holdings, Trust Holdings, Cairns, Gulliver and Steelnet, have de-listed from ZSE since 2009, when the country adopted the hard currency regime.
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