Old Mutual ZSE suspension leaves 30 000 shareholders out in the cold

OMZ, PPC and Seed Co International were all suspended from trading on the Zimbabwe Stock Exchange (ZSE) on June 28, 2020 owing to the fungibility of their shares which are listed on other external exchanges.

BY TATIRA ZWINOIRA OLD Mutual Zimbabwe (OMZ) group chief executive officer, Samuel Matsekete has revealed that more than 30 000 shareholders have been affected by the suspension of its listed shares, with the group only participating on the main bourse through investing for clients.

OMZ, PPC and Seed Co International were all suspended from trading on the Zimbabwe Stock Exchange (ZSE) on June 28, 2020 owing to the fungibility of their shares which are listed on other external exchanges.

The suspension was due to the authorities fearing that the external share prices were being used to gauge the true value of the depreciating Zimbabwe dollar as opposed to the central bank’s-controlled comparative.

However, based on the current exchange rate of US$1:$460,77 and that on June 26, 2020 of US$1:$57,35, the suspension means OMZ shares saw a near 88% loss in market capitalisation or $38,16 billion (US$82,82 million) to date.

In an interview last week, Matsekete said Old Mutual Limited, was still suspended from the ZSE and that meant it was not trading on the local bourse even though it is trading on other exchanges where it is listed.

“Discussions have been continuing with the authorities to explore ways that the more than 30 000 shareholders in that share, on the Zimbabwe registers, can start to trade. So, those discussions are still underway with the authorities and we are confident that a solution will be agreed soon. So, on that particular one, nothing has changed,” Matsekete said.

According to the OMZ’s financial report for the year ended December 31, 2021 the company had $117,85 billion and $15,7 billion invested in listed and unlisted companies, respectively.

The investments were up from $48,05 billion and $8,24 billion in listed and unlisted firms, respectively, from the 2020 comparative period.

“You can talk about equities in terms of listed and unlisted,” Matsekete said.

“So, because of the opportunities to participate in assets that you can understand and are listed, the liquidity conditions that will also be available to say that you can trade in and can trade out, listed equities will always be a significant part of the assets we will continue to invest in.”

Matsekete said despite the suspension of their share price, shareholders could still use the firm’s external listings to gauge what the value of the local shares would be today.

“Perhaps the inconvenience between us as Old Mutual, the authorities, the regulators and everyone involved is that we need to think about whether the longer we take, is there inconvenience perhaps among people who would have wanted to take positions to buy and sell?” Matsekete said.

In that regard, the suspension of OMZ shares led to shareholders not benefitting from the over 700% gain the ZSE’s market capitalisation has experienced since the company’s suspension.

“Everyone involved is acutely aware of the need to remove that inconvenience. We do know that some people are not in a hurry to trade because it is also an asset that preserves value,” Matsekete said.

“But, you always want to make sure that everyone wants to hold shares to be able to trade and that they are not losing any opportunity to do so. That’s the bit that we are really engaging around with authorities.”

He said the discussions with the authorities had now been taken over by the firm’s holding company who are eager to find a resolution to the suspension.

In its 2021 financial report, OML noted how it continued monitoring the economic situation in Zimbabwe and that the currency depreciation was weighing down on its books as it revealed it wasn’t getting any dividends.

“Until such time as we are able to access capital by way of dividends from the business in Zimbabwe, we will manage it on a ring-fenced basis and exclude its results from AHE (Adjusted Headline Earnings),” OML said.

“The lack of ability to access capital by way of dividends is exacerbated by the volatility that a hyperinflationary economy and the reporting thereof introduce. This adjustment has been applied from 1 January 2019.”

OMZ is a subsidiary of the South African financial services firm, Old Mutual Limited (OML) and as such has its primary listing on the Johannesburg Stock Exchange.

The parent company also has a standard listing on the London Stock Exchange, in the United Kingdom, and secondary listings on the Malawi and Namibian Stock Exchanges.