There is a clear zero sum illusion among the top shareholders at CFI with regards to the tussle for supremacy.  The circus between the 2 top shareholders in pursuit of control has been going on for long and as it deepens, so is shareholder value destructed. CFI is majority owned by Starlap which is an investment vehicle with 3 controlling parties - NSSA, ZIMRE and Baobab Re. The vehicle controls 42% of the company’s issued share capital. The second top shareholder in CFI is Nic Van Hoog Straten through several of his investment vehicles, who officially own 35% of the issued share capital. To demonstrate the extent of maneuvers by either side in recent periods, the remaining free-float accessible in the market is now less that 15%. The collaboration by NSSA and the Rudlands through ZHL and Baobab was designed to create a combative force which could easily muscle out Van Hoog in turn clearing the way for an envisaged “restructuring”. The rational was that housing the respective shareholdings under one vehicle would automatically create single investor with a shareholding above the ZSE threshold, subsequently leading to a minority offer which in turn would ensure more consolidation. The earlier reservations by ZSE were therefore drawn from the view that the duo had an agenda they intended to push against the minorities.

The scheming was however not limited to one party. On Nic’s part there has been overtures in the market as the tycoon countered the other party identifying other minorities and offering them attractive prices with huge premiums to market. The sharp surge in the share price on the market was a sure pointer although it was far from reflecting reality. That exercise has seen Nic expand his holding in CFI to near or slightly above Starlap’s level although the official position remains that it is in line with the ZSE threshold.

In the latest phase Starlap has offered to buy out minorities at a price of 22c and the market has not been forthcoming which clearly shows that there were better bids elsewhere or the other party had been paying more unofficially. Although unconventional and not verified, it largely points in that direction. Starlap slow to realize the counter maneuvers has upped its bid directly in the market to 25c which is beyond the company’s NAV - a valuation measure cited in the abridged circular accompanying the offer.  The battle at CFI has now largely become one of satisfying egos, with Nic flexing his billionaire muscle while NSSA dangles the bottomless pensioners’ purse.

CFI in its current intensive care cannot attract such insane valuations as fundamentals point otherwise. A number of the company’s units have been placed under judicial management. Corporate governance at the company is still under spotlight while capitalization and model reconfiguration remains outstanding. CFI has reported a net loss position since 2010 averaging $9.5 million a year. Its equity position plummeted from a high of high of $81 million in 2014 to $3 million in 2017. The stock price has however risen by a ridiculous 240% since the beginning of the year.

It is imperative for either side to trade their ego and reach a compromise. The counter maneuvers is no doubt bleeding the company performance. The capital committed to control the fight could have found better use in capitalization of operations. Whats quite evident is that either side will not win in isolation.  No resolution will be passed without the support of the other as neither of the 2 parties has the capacity to individually pass such. At this point it is in the interest of the company for the shareholders to find common ground because both parties are fighting a losing war.

It is also worth noting that caution should be taken wherever public funds are in question. While an individual in Nic’s right has the allowance to blow his cash for ego’s sake, NSSA does not have that luxury and boundaries guided by investment rationality should be followed. The yesteryear $12 million overpriced splurge on Star Africa that came back to haunt the previous board should always be kept in mind.