Neo Khanyile
ELLIES, a local maker of television equipment, fell to the lowest level in two months after the company said that it would sell shares to investors, report a full-year loss and restructure debt.
Ellies planned to separate its two operating units to be held by separate, wholly owned subsidiaries, the company said on Monday after the close of trading on the JSE.
It will reorganise its debt with Standard Bank and raise R200 million by selling stock at R1.10 each. Yesterday, the shares retreated as much as 22 percent and were headed for the biggest one-day drop on record.
“What surprised the market was the rights issue,” Simon Fillmore, the chief executive of Independent Securities, said.
“The market had thought that the last one, which they’ve only just done a couple of months ago, was possibly sufficient enough and clearly it wasn’t.”
The company, with a market value of R453m, has been battered amid delays in South Africa’s migration from analog to digital broadcasting, a move that would bolster demand for its equipment. Ellies shares dropped 76 percent in the past year, compared with a 12 percent gain in the all share index, the benchmark gauge that the company’s stock was excluded from in December.
It traded 19 percent lower at 96c late yesterday morning, with volumes almost five times the three-month daily average. By 5pm the share closed at 99c, down 16.81 percent .
Ellies expects to post a per-share loss of more than 67c for the year to April, compared with earnings of 24.66c in the prior period.
If the move from analog to digital “does ever materialise, that’ll be significant”, Fillmore said. “At the same time, we still expected their core businesses to carry on performing.” – Bloomberg