No favours for minorities from the market’s big boy

Mamvura’s Market Minute
Some weeks back, Mamvura was thinking about what fired up the first real Great Stock Market Rally back in the early days of hyperinflation. The exchange rate had moved exponentially upwards in the early part of 2002 and in early August that year, the Industrials rose 15,5 percent in one week alone, powering the index through the 100 000 level.
It sounds familiar, except the index was up 132 percent on where it was a year earlier (when inflation was a familiarly similar figure) while it’s up over 300 percent at present (vs 0,8 percent).
Back in 2002, it was a research note by Continental Securities on Colcom that in part lit up this rally. CST, run by Bruce Eeson and Edwin Gumbo, pointed out that the “blended parallel” rate from its exports (the tinned ham being the most famous) would result in a massive rise in operating margins and profit.
Innscor managed to get its initial stake in Colcom by underwriting its rights issue in July 2004 when the protein producer got into trouble after interest rates went up sharply.
The full takeover has been in the offing for over a decade and, had it happened when a certain major shareholder fought against the move years back, Colcom shareholders would have benefited from the value unlocked from all the demergers, as pointed out in my column a few weeks back.
If it happened at the beginning of the year, it’s quite possible Colcom shareholders would have been offered 0,75 Innscor shares as opposed to 0,55 (and 0,45 presently) as the more liquid Innscor will rise at a faster rate than the illiquid Colcom in a bull market.
As usual, the belligerence of the big boy of the Zim market has done the minorities no favours.