VENTURES AFRICA – In a move to woo more small Zimbabwean investors to partake in the stock market, Econet Wireless plans to embark on a share split, the country’s biggest telecommunications firm has said.
A stock split is a corporate action in which a company’s existing shares are divided into multiple shares. Although the number of shares outstanding increases by a specific multiple, the total money value of the shares remains the same compared to pre-split amounts.
Zimbabwe’s biggest telecommunications firm said it planned to split its shares in a 10 for one share split aimed at boosting the number of listed shares.
Foreign ownership in the company has risen from 10 percent at its listing in 1998, to more than 30 percent.
Strive Masiyiwa, the founder of Econet, said the company still had thousands of small investors.
But he was concerned that smaller investors no longer dominated share activity. “He has personally pushed for the change,” the company said in a statement.
When Econet listed, most of its shareholders were small investors who owned as little as 100 shares, but as the price rose, they have been gradually squeezed out by foreign investors and fund managers.
A circular on the share split has been published by the company and with the support of Masiyiwa’s holding company Econet Wireless Global, which has majority shareholding, it is most likely that the share split notion would sail through.
A stock split is usually done by companies that have seen their share price increase to levels that are either too high or are beyond the price levels of similar firms in their sector.
The motive is to make shares affordable to small investors without changing the underlying value, Econet said in a statement. The listed firm, which has subscriber base of more than 8 million, says the move was reached after a study by the company, which showed that its shares were now too expensive, resulting in only foreign investors buying them.
Meanwhile, Econet Wireless has reportedly made a call for “urgent reform” of the share trading system of the Zimbabwe Stock Exchange (ZSE), saying the current system is “subject to abuse and perpetuates an elitist old boys club”.
“It is time for the Zimbabwe Stock Exchange to become more accessible to ordinary people, and a proper vehicle for mobilising capital for companies,” the company said in a statement.
Econet said it was willing to extend a “no strings attached loan” to the ZSE to acquire an electronic trading platform that allows immediate and transparent settlement, as in other countries such as South Africa and Kenya.