Econet Wireless’s shares have continued on a free-fall trajectory amid indications of panic selling by shareholders following the firm’s proposal to get approval for a $130 million capital raising transaction in-order to settle its foreign debts.
According to stock broking firm EFE Securities, Econet opened trading at 22c per share and closed at 20 cents on Thursday, indicating a 7 cents drop from the previous week’s levels where the company traded a miserable 10% to 27 cents per share.
By Deputy Editor
According to reports, Econet Wireless failed to trade last week Friday, pointing to growing concerns among investors over the controversy shrouding the firm’s $130 million dollar offer.
Econet is seeking shareholder approval for a $130 million capital raising exercise to enable it to pay off its foreign debt. It is at the back of this proposal that shareholders have resorted to panic selling in a bid to recover their investments before a catastrophic bleak future they believe Econet holds.
As TechnoMag reported late last year, Zimbabwe is been battling acute foreign currency shortages with the year 2016 being the hardest period for most companies as RTGS balances have lost value and are unable to service offshore loans as banks continue to struggle with Nostro balances. Currently, the nostro position of the banking sector is $250m and cannot support the RTGS position of $1 billion, which requires not less that $450.
Independent financial analyst Alex Gonese was quoted in the Herald recently assuring shareholders that there was nothing wrong with Econet’s move to seek approval of the $130 million rights issue.
“It would be self defeating if shareholders were to follow their rights by depositing funds into a local bank, because those funds would still not be able to liquidate the foreign loans. If the rights issue does not solve the actual problem of paying the foreign loan then it’s not worth pursuing.
“Here Econet have put in place an effective structure to solve the problem.
“While Econet as a company might have anticipated challenges in being able to access foreign currency to service the foreign loans due to the nature of its operations it’s not necessarily true that all its local shareholders face the same challenges.
“Even if some shareholders actually face challenges in securing foreign currency surely the good of the company is more critical than the need to ensure that all shareholders are pleased. The company has an obligation to its shareholders but it also has an obligation to ensure it remains viable to its employees, customers, Government and indeed the whole country,” said Gonese.
Meanwhile, Stockbrokers Lynton Edwards recently reported that the proposed transaction leaves minority shareholders’ future with the telecoms company hanging by a thread due to the possibility they may fail to follow their rights.
The payment modalities however have an element of of risk for local investors. They are chances that those having their rights, might not have their funds approved on time and in the process, might miss on following their rights,” said Lynton Edwards.