The year 2024 began with a glimmer of hope for South Africa's listing market, with five new companies joining local exchanges. However, the optimism soon faded as delistings outpaced new listings, reinforcing ongoing concerns about the market's longer-term health.
There was early optimism when in March Nasdaq listed Powerfleet Inc (JSE: PWR) applied for an inward dual listing on the JSE, as one half of a corporate transaction that also saw the delisting and takeover of JSE-listed Mix Telematics. The unbundling of We Buy Cars (JSE:WBC) by Transaction Capital (JSE:TCP) quickly followed in April. The unbundling was preceded by a R750m capital raising by way of a private placing.
April also saw a novel listing that attracted little attention at the time - Aquis Exchange-listed Marula Mining PLC (AQSE:MARU) applied for and received an inward dual listing on the A2X. This was the first time, to our knowledge, that a company without a primary or secondary listing on another South African exchange had been approved for an inward dual listing on the A2X, which is licensed to host only secondary listings. This raises an interesting question of the potential competitive threat to the JSE, where over 65% of the gross market capitalisation, and the majority of the trading volume, is now accounted for by the sixty or so foreign companies with secondary listings.
June then saw the listing, also by way of unbundling/demerger, of Rainbow Chicken (JSE: RBO) from parent RCL Foods (JSE:RCL) - a listing by introduction without an accompanying capital raising - and SA's first cannabis listing, Cilo Cybin Holdings (JSE:CCC), in a complex process using the rules for listing SPACs (Special Purpose Acquisition Companies).
By the 2024 half-way mark we had had the five new listings, albeit that Powerfleet was a direct substitute for Mix Telematics. This suggested that 2023, the worst year for new listings on record, may have been the nadir and things might be looking up - especially once the elections were over and the GNU had emerged as the least bad outcome. Positive noises also started emerging from the JSE itself, who started talking of having at least ten listings in their approval pipeline.
What was not as noticeable is that these new listings had been accompanied by a wave of delistings across SA's exchanges too - Mix Telematics was joined by JSE-listed Textainer Group, African Equity Empowerment Investments and CTSE-listed Thibault REIT.
In effect, for all the optimism, there had been a near zero net change in the number of listings. This was then followed in with three delistings in July - Afristrat Investment Holdings, Basil Read Holdings and Cognition Holdings.
There are also nine companies with corporate actions underway which may see them delisted before the end of 2024. JSE-listed Insimbi Industrial (JSE:ISB), Ellies Holdings (in liquidation), Grindrod Shipping (JSE:GSH), MC Mining (JSE:MCZ), Deutsche Konsum (JSE:DKR), Brikor (JSE:BIK), Bell Equipment (JSE:BEL), Sasfin Holdings (JSE:SFN) and CTSE-listed Assupol Holdings (CTSE:4AASP) have all indicated they may be heading for the door. This suggests as many as seventeen delistings across SA's exchanges, before the thirteen companies currently suspended from trade are considered - and very few suspended companies return to trading, although they can remain suspended for years, making prediction of the actual date of departure difficult.
The last 30-years has seen the number of SA listed companies decline at a simple average of 3% a year. In the last 5-years this has accelerated to 4% a year. Put differently, at the end 1994 there were 649 listed companies, there are likely to be just 280 by the end of 2024. Without a rush of new listings before the end of the year, 2024's performance looks like it will reinforce this trend.
On the capital raising front, besides We Buy Cars' raising ahead of listing, Pick n Pay (JSE:PIK) was able to repair its balance sheet through a bank-imposed rights offer; Orion Minerals (JSE:ORN) raised development capital for its Northern Cape copper assets, and several property REITS have raised money in the market.
To be clear there is nothing inherently wrong with delistings in a public market - it is a normal part of the economic life of any market - it is the accompanying low level of primary capital raising activity and the absence of new listings which should concern market watchers.
There is no doubt that there are structural issues at play in the 30-year decline in the ability of SA's public market to attract more companies than it loses. Other countries have recognised that long-term structural issues need a considered policy response. Sweden has had recent success, Canada and Australia have had strong markets for decades, and the UK is currently going through deep introspection as to how they can address the relative decline of their markets. Sadly, in SA, the market policy maker, National Treasury, seems both deaf and blind to the problem.
While the early part of 2024 showed promise, the overall trend has been one of slow decline. Investors can, however, look forward to the unbundling by Pick n Pay of Boxer later this year, and potential listings of TymeBank, African Bank, Coca Cola Bottling Africa and Fidelity Services would all be very welcome additions to any of the local exchanges. What is required, however, is a Swedish style set if reforms to address the structural impediments to the success of the listings market - and this starts with the local policy makers coming to their senses that there is in fact a problem.
Paul Miller: August 2024
There was early optimism when in March Nasdaq listed Powerfleet Inc (JSE: PWR) applied for an inward dual listing on the JSE, as one half of a corporate transaction that also saw the delisting and takeover of JSE-listed Mix Telematics. The unbundling of We Buy Cars (JSE:WBC) by Transaction Capital (JSE:TCP) quickly followed in April. The unbundling was preceded by a R750m capital raising by way of a private placing.
April also saw a novel listing that attracted little attention at the time - Aquis Exchange-listed Marula Mining PLC (AQSE:MARU) applied for and received an inward dual listing on the A2X. This was the first time, to our knowledge, that a company without a primary or secondary listing on another South African exchange had been approved for an inward dual listing on the A2X, which is licensed to host only secondary listings. This raises an interesting question of the potential competitive threat to the JSE, where over 65% of the gross market capitalisation, and the majority of the trading volume, is now accounted for by the sixty or so foreign companies with secondary listings.
June then saw the listing, also by way of unbundling/demerger, of Rainbow Chicken (JSE: RBO) from parent RCL Foods (JSE:RCL) - a listing by introduction without an accompanying capital raising - and SA's first cannabis listing, Cilo Cybin Holdings (JSE:CCC), in a complex process using the rules for listing SPACs (Special Purpose Acquisition Companies).
By the 2024 half-way mark we had had the five new listings, albeit that Powerfleet was a direct substitute for Mix Telematics. This suggested that 2023, the worst year for new listings on record, may have been the nadir and things might be looking up - especially once the elections were over and the GNU had emerged as the least bad outcome. Positive noises also started emerging from the JSE itself, who started talking of having at least ten listings in their approval pipeline.
What was not as noticeable is that these new listings had been accompanied by a wave of delistings across SA's exchanges too - Mix Telematics was joined by JSE-listed Textainer Group, African Equity Empowerment Investments and CTSE-listed Thibault REIT.
In effect, for all the optimism, there had been a near zero net change in the number of listings. This was then followed in with three delistings in July - Afristrat Investment Holdings, Basil Read Holdings and Cognition Holdings.
There are also nine companies with corporate actions underway which may see them delisted before the end of 2024. JSE-listed Insimbi Industrial (JSE:ISB), Ellies Holdings (in liquidation), Grindrod Shipping (JSE:GSH), MC Mining (JSE:MCZ), Deutsche Konsum (JSE:DKR), Brikor (JSE:BIK), Bell Equipment (JSE:BEL), Sasfin Holdings (JSE:SFN) and CTSE-listed Assupol Holdings (CTSE:4AASP) have all indicated they may be heading for the door. This suggests as many as seventeen delistings across SA's exchanges, before the thirteen companies currently suspended from trade are considered - and very few suspended companies return to trading, although they can remain suspended for years, making prediction of the actual date of departure difficult.
The last 30-years has seen the number of SA listed companies decline at a simple average of 3% a year. In the last 5-years this has accelerated to 4% a year. Put differently, at the end 1994 there were 649 listed companies, there are likely to be just 280 by the end of 2024. Without a rush of new listings before the end of the year, 2024's performance looks like it will reinforce this trend.
On the capital raising front, besides We Buy Cars' raising ahead of listing, Pick n Pay (JSE:PIK) was able to repair its balance sheet through a bank-imposed rights offer; Orion Minerals (JSE:ORN) raised development capital for its Northern Cape copper assets, and several property REITS have raised money in the market.
To be clear there is nothing inherently wrong with delistings in a public market - it is a normal part of the economic life of any market - it is the accompanying low level of primary capital raising activity and the absence of new listings which should concern market watchers.
There is no doubt that there are structural issues at play in the 30-year decline in the ability of SA's public market to attract more companies than it loses. Other countries have recognised that long-term structural issues need a considered policy response. Sweden has had recent success, Canada and Australia have had strong markets for decades, and the UK is currently going through deep introspection as to how they can address the relative decline of their markets. Sadly, in SA, the market policy maker, National Treasury, seems both deaf and blind to the problem.
While the early part of 2024 showed promise, the overall trend has been one of slow decline. Investors can, however, look forward to the unbundling by Pick n Pay of Boxer later this year, and potential listings of TymeBank, African Bank, Coca Cola Bottling Africa and Fidelity Services would all be very welcome additions to any of the local exchanges. What is required, however, is a Swedish style set if reforms to address the structural impediments to the success of the listings market - and this starts with the local policy makers coming to their senses that there is in fact a problem.
Paul Miller: August 2024