ECONET Wireless Zimbabwe Limited’s (EWZL) saw a 32,4% dip to its share price to $1,6531 as of the end of yesterday’s trading as the market re-evaluated the company due to it unbundling its financial technology segment.
At the end of Monday’s trading, the EWZL share price was $2,4455.
“This is just a repricing of what shareholders feel the value of Econet really is because now in terms of trading, as it does not include Cassava,” a stock market analyst who did not want to be named said.
In a circular dated November 8, 2018, EWZL announced it was demerging its financial technology segment into subsidiary Cassava Smartech Zimbabwe Limited (CSZL) that is expected to be listed on the main bourse on December 11, 2018. Part of the demerger included an offer to EWZL shareholders to get a dividend in specie (distribution of shares) for CSZL shares with Monday being last day.
“The last day to buy EWZL shares to own CSZL was Monday … what this means is Econet shareholders as of Monday would be offered CSZL shares on a pro rata basis with the existing shares,” the stock market analyst said.
As a result, the share price of EWZL declined as shareholders factored in that CSZL takes away 39% of the revenue from the EWZL, thus lowering its value, according to the financial statements of EWZL.
As at the end of yesterday’s trading, Econet’s market capitalisation dropped to $4,23 billion from Monday’s market cap of $6,33 billion following the dividend in specie.
The drop in the share price of EWZL accounted for 92,62% of the $2,21 billion lost in the overall market capitalisation of the Zimbabwe Stock Exchange that stood at $16,81 billion at the end of yesterday’s trading from $19,02 billion on Monday. The authorised share capital of Cassava will comprise 4,2 billion ordinary shares with a nominal value of $0,001 each and the issued share capital will comprise 3 679 300 707 ordinary shares with a nominal value of $0,001.
Last week, Econet said ZSE had agreed, subject to the fulfilment of the listing requirements, to the listing of the entire issued ordinary share capital of CSZL comprising the 3 679 300 707 ordinary shares of a nominal value of $0,001 per share. However, the proposed demerger will also be subject to shareholders’ approval being granted at the extraordinary general meeting to be held next Thursday.
Econet stated in the circular demerging its financial technology business was to unlock the value of the smart technology business.