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Delistings mirror economic crisis

Over 10 counters have delisted from the Zimbabwe Stock Exchange (ZSE) in the past five years and experts warn that potential investors’ choices were now limited.


Companies that have exited the bourse include African Banking Corporation, Astra Holdings, Tractive Power, Interfresh Holdings and PG Holdings among others.

Astra, Dawn Properties and African Sun are set to follow suit, a blow to ZSE that had withstood the economic headwinds.

The local bourse now has 63 counters trading from a peak of 78.

Worryingly, some of the companies that have remained do not trade at all despite maintaining a presence on the bourse.

Delisting is done when the security no longer exists, the company is bankrupt, the public distribution of the security has dropped to an unacceptably low level, or when the company has failed to comply with the terms of its listing agreement.

The market is expected to brace for more delistings going forward as some of the listing rules and requirements tend to push companies out of the market.

For instance, a company on the exchange that holds a 35% equity stake should make a mandatory offer to minorities so that they become the majority shareholder.

Securities Exchange chief executive officer Tafadzwa Chinamo said delistings were not good for the market but it was something that happened in any stock market.

“It’s a sign of the time and it’s more to do with the economy. With any market, one requires market forces of demand and supply to be the dominant forces. A good market should allow anyone to exercise their strategies in a transparent way,” he said.

The market also requires that 30% of a listed entity’s total issued share capital be in the hands of the public.

In a market where values of companies on the ZSE are trading at discounts against their net asset values, more and more investors could opt out of the market.

A local analyst said the market should be wide and delisting does not reflect a healthy scenario as it starves the market of investors due to the limited companies that could be invested in.

Investors would end up shunning the market which would be perceived to be small.

For instance, when Interfresh Limited delisted from the ZSE, it wanted to raise money but the company was undervalued on the market.

“The market valuations of listed companies are too low, making it difficult to raise funds,” he said.

Astra Holdings delisted from the market this year because the shareholding structure of the company was not aligned to listing rules stipulating that at least 30% of a company’s issued shares be held by the public.

In the case of ABC, the new shareholder Atlas Mara held more than 35% of the company’s shares and was obliged to make a mandatory offer to minorities.

A market analyst said a number of companies were delisting because no one was following their rights when it raised money from existing shareholders.

“The way forward is to raise the limit of 35% to 50%. The 50% would help in instances where some shareholders would not be in need of a majority stake. This means the shareholders will still remain in the company. This means those who want 40%, 45% and 50% can still be accommodated,” he said.

Econet and Delta have shareholders who hold 35% but have not offered a mandatory offer to the minorities.

Chinamo said in all markets delisting and listing happened but in the Zimbabwean context there had not been any new listing on the ZSE.

“You cannot change the rules to accommodate all the companies,” he said.

Research and advisory firm MMC Capital said more delistings loomed this year due to the depressed economic growth and depressed financial performance.

“Indications are that Astra, African Sun, Dawn and Art are likely to follow suit during the course of the year,” MMC Capital said.

The ZSE has witnessed a drought of listing since TN joined the bourse in 2012.

“Apart from a series of unbundling activities that saw Dawn Properties, Red Star Limited, Zimbabwe Property Investments and Pearl Properties Limited being listed in the past 12 years, new listings have been as rare as snow in Zimbabwe. In September 2011, Padenga was listed by way of introduction on the ZSE,” MMC Capital said.

MMC Capital said the prevalence of delistings did not however imply the failure of a stock exchange.

“This was evidenced by an all-time high total market turnover despite the fact that it registered the most delisted companies. The total volumes traded fell from 6,80 billion in 2010 to 3,00 billion in 2013 and then rose to 3,18 billion in 2014. The decline in the total volumes traded could also be attributed to the decline in total investor participation,” MMC Capital said.

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