- The company says listing is no longer beneficial
- EGM to be held in December to vote on the proposal
- Shareholders who want to exit shareholding before delisting offered ZWL1,90 per share.
Electrical, hardware, building and home improvement products and services supplier, Powerspeed Electrical limited is intends to delist from the Zimbabwe Stock Exchange (ZSE) citing that the listing on the bourse was yielding little benefit and considerable costs.
Powerspeed listed on the Zimbabwe Stock Exchange in July 2000 by way of a Dividend-in-Specie from Mashonaland Holdings, originally as a light engineering business focused on the electrical sector, it is now dominated by the Electrosales retail and trades through a chain of hardware retail stores known as Electrosales hardware.
The company has a total of 425,757,779 issued shares, of which only 68,293,626 shares, amounting to about 16% of the total are held by approximately 1,100 minority shareholders outside of the top 20 shareholders.
Only nine shareholders, including the Powerspeed Employee Share Trust, hold a stake of 5% or more, however, there is no controlling shareholder, as defined by the ZSE Listing Requirements or the Companies and Other Business Entities Act.
In a circular released to the company shareholders informing them about the proposed move and inviting them to an Extraordinary General Meeting to be held on the 14th of December deliberate on the matter, the board chairman, Simba Makoni said the first reason which rationalized the delisting was that Powerspeed’s liquidity is very limited on the bourse.
“In the past six months total ZSE trading, outside of the share buyback, has been under 0.23%, on an annualised basis, of the total shares in issue,” the chairman reported.
Secondly, the chairman said the ZSE has not been helpful in one of its main tasks that is to help the company attract new capital and thus a continued listing on the bourse is no longer senseful.
“While one of the often cited benefits of a stock exchange listing is the ability to easily raise new capital, this is clearly not the case for Powerspeed. Foreign investors previously active on the ZSE have seen significant real losses in the last 18 months following currency weakness and, more importantly, an inability to remit proceeds on disinvestment. This unprecedented crisis is likely to remain an obstacle to attracting new capital through the ZSE for the foreseeable future,” stated Dr Makoni
Furthermore, the company stated that the new reporting structure by the ZSE which has made quarterly reports mandatory was very onerous and was an added expense due to an increase in legal and accounting costs.
“The ZSE has recently implemented new reporting regulations that have increased the issuance of shareholder reporting from semi-annual to quarterly, with an attendant increase in legal and accounting costs.”
In addition, the exchange now requires the issuance of an annual compliance certificate, letters of representation, electronic (website) publication of results, publication of results on the ZSE Data Portal, and other new requirements.
The company also lamented the valuation of the ZSE, calling it unrealistic in the prevailing economic climate.
“inflationary business cycle the onus on management has to be to preserve long term value in the business, sometimes at the cost of short term considerations. In this environment the focus needs to be on preserving and building balance sheet strength in hard currency terms. While Powerspeed has been able to maintain its balance sheet in real terms, the ZSE pricing has not matched this as the market tends to focus on historic price earnings ratios rather than ongoing asset values.”
Powerspeed shareholders wishing to exit their shareholding before the delisting are being offered ZWL1,90 per share by the company which is urging the remainder of the shareholders to vote in favour of the delisting come the EGM in December
Equity Axis News.