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Weak capital markets causing turmoil for potential new listings

The Johannesburg Stock Exchange in Sandton. JSE CEO Leila Fourie said the exchange is working on attracting new equity listings by maintaining fit-for-purpose regulations, promoting South Africa as an attractive investment destination for foreign capital. Picture, Timothy Bernard.

The Johannesburg Stock Exchange in Sandton. JSE CEO Leila Fourie said the exchange is working on attracting new equity listings by maintaining fit-for-purpose regulations, promoting South Africa as an attractive investment destination for foreign capital. Picture, Timothy Bernard.

Published Jun 27, 2022

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Southern African fast-moving consumer goods services company CA Sales Group’s (CA&S) debut on the JSE’s main board today could be a prelude to substantially more listings in the second half of this year, although much will depend on market conditions.

There were eight new listings on the JSE last year, and this year there have only been two others: the secondary listing of Southern Palladium this month and the listing in March of aReit, a hospitality and medical focused leasehold property group.

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By contrast, there were 25 delistings last year due to mergers and acquisitions, but many companies also cited the high administrative and financial burden of maintaining a listing among their reasons for delisting.

Some of the companies that have announced plans, but no dates, to list on the JSE are Barloworld’s separate listing of Avis Budget Southern Africa, Rand Merchant Investment Holdings’ plans to list short term insurer Outsurance, Brait wants to list Premier Foods, Telkom’s plan to separately list its towers business Swiftnet, African Bank, Fidelity Security, Sedibelo Resources, Coca-Cola Africa, Big-Tree Copper in the Northern Cape and the biopharm and wellness product group Cilo Cybin.

The JSE has acknowledged the issue, with, for instance JSE chairman Nonkululeko Nyembezi saying in the latest annual report they are concerned about the delisting trend and slow listings environment.

She said globally most IPOs have been technology stocks and South Africa’s operating environment appears not to be conducive to technology listings. “Significant policy reforms and a step-change in economic growth remain the most potent tools to grow the market,” she said.

However, weakening capital markets, locally and globally, the result of rising costs and interest rates, slowing growth and the war in Ukraine, have also put a break on some of the new listings this year.

On Friday morning the JSE All Share Index was trading 11.4 percent lower than what it was on December 31, 2021. On the same basis the S&P 500 was a staggering 20.3 percent lower, while the FTSE 100 index in London is down 5.3 percent on the same basis.

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Among the new listing casualties of the weak markets this year so far is Coca-Cola Africa, which had to delay its listing of Coca-Cola Beverages Africa, which would likely have by far been the biggest new listing.

It was estimated to be planning to raise up to $3 billion (R47.8bn) through listings on the JSE and in Amsterdam in April this year, but said this month the group said the decision had been delayed until 2023, and until market conditions improve.

Another potential listing this year to fall prey to weak markets has been the listing of leading branded foods group Premier. Premier, which in its last year to March 31 had a carrying value to its parent the investment group Brait of R9.3 billion, said last week that while it had completed all its preparations for a listing, it would only consider doing so once market conditions improved.

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Telkom has also delayed the listing of Swiftnet until a later date because of the weak markets - it had planned to list the company before its last year to end-March 31, 2022.

However, some new listings might still proceed this year. Barloworld confirmed an exit from its investment in Avis Budget Southern Africa was on target through a sale or unbundling this year, and if a listing was the route to be followed, this would also occur this year.

JSE CEO Leila Fourie said the exchange is working on attracting new equity listings by maintaining fit-for-purpose regulations, promoting South Africa as an attractive investment destination for foreign capital with deep and liquid markets, exploring private placements, growing and supporting SMEs, ensuring value-adding regulatory requirements, advancing the JSE’s sustainability segment and attracting inward listings.

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