adminLACK of policy that compels companies to maintain listing on the local stock exchange after a foreign shareholder acquires majority stake is exacerbating the challenging situation that has seen at least 15 counters delisting from the Zimbabwe Stock Exchange in the last five years, an official has said. Most delistings have been a result of the failure to raise capital on the local bourse due to the difficult economic environment that has forced companies to seek financing in other markets.
Speaking at an Institute of Sustainable Africa meeting in Harare last week, business development executive at the ZSE, Lina Mushanguri, said while some companies delisted as a strategy to raise funds, the bourse had no authority to compel them to maintain that listing.
She said the ZSE has, however, been engaging the delisting companies to find a solution to the situation.
“When we talked to some of them, we found that it’s sometimes the intention of the shareholder to take the company off the board as a strategy to raise financing. Some companies have a policy that once they acquire a counter, it delists (from its current bourse) and lists on a certain stock exchange in their country of origin,” she said.
“We, however, have to find ways to entice them to stay in Zimbabwe but we lack a policy to actually ensure that foreign companies of a certain size maintain listing in Zimbabwe. This is done in other countries but we’re not doing it in Zimbabwe,” she said.
Over the past five years, there have been a series of delistings, which have seen the number of listed companies come down from about 78 to the current 63 counters. A significant number of the delisted firms failed to meet the minimum listing requirements, an indication of the volatile climate that has dogged the ZSE since dollarisation in 2009.
Companies that have exited the bourse include African Banking Corporation, Astra Holdings, Tractive Power, Interfresh Holdings, PG Holdings, Apex Corporation, Cairns Holdings, Celsys, Chemco Holdings, Gulliver, Interfin, Lifestyle Holdings, Phoenix Consolidated, Steelnet and financial services firm and Trust Holdings.
Astra, Dawn Properties and African Sun are set to follow suit. Delisting is done when the security no longer exists or the company is bankrupt or 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.
Delistings starve the market of investors due to the limited companies that could be invested in and investors end up shunning the market which they consider too small.
Market watchers have said there is bound to be more delistings from the ZSE going forward as some of the listing rules and requirements tend to push companies out of the market.
The market requires that 30 percent of a listed entity’s total issued share capital be in the hands of the public.
Analysts have also said companies are delisting because no one is following their rights when they seek to raise money from existing shareholders.
Apart from the listing of Proplastics last month, the ZSE has not registered any new listings in more than 5 years. — BH24
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