Have Ecsponent investors lost their money? Maybe not – Van Niekerk to Hogg

Ecsponent is a company that has attracted billions of rands in investments from individuals looking to generate higher income than they could get elsewhere through preference shares. But, as investment company entrepreneur and popular personal finance journalist Magnus Heystek told BizNews founder Alec Hogg in a podcast recently, they may have lost their savings. Not so fast, says Dave van Niekerk, a former shareholder in Ecsponent who sold a business, MyBucks, to the troubled company. Van Niekerk, who cofounded microlender Blue Financial Services (BFS), explains how Ecsponent might simply be facing a temporary liquidity crunch rather than heading for a firesale situation. – Jackie Cameron.Blue Financial Services, delisted from the Johannesburg Stock Exchange in 2018, and troubled Ecsponent have a few things in common, not least of all the presence of BFS founder Dave van Niekerk, who is behind a key Ecsponent investment, MyBucks..___STEADY_PAYWALL___.And, as BusinessLive columnist Marc Hasenfuss wrote in 2019: "There appear to be some parallels between BFS and MyBucks. Van Niekerk left BFS under a cloud after the company racked up losses of more than R1bn in 2009, which prompted an urgent R463m recapitalisation of the company by a private equity firm.."A struggling BFS was suspended from the JSE in 2013, and the listing was terminated last year. It seems that under Van Niekerk, MyBucks — like BFS — has found itself under mounting financial stress. MyBucks' interim results to end-December showed a net loss after tax of €4.8m (R78.2m), with the net asset value of the company negative by €2.56m (R42m)," said Hasenfuss almost a year ago..Flash forward and Ecsponent investors are worried that they might lose R2.5bn worth of savings, as respected personal finance expert Magnus Heystek, founder of Brenthurst Wealth Management underscored in an interview with BizNews editor-in-chief Alec Hogg recently. "That money, to all intents and purposes, is gone," he said of one individual's investment of R20m..Ecsponent had reputable people involved, got a JSE listing, was offering 12.5%, a substantial premium on what was on offer elsewhere, listeners to the previous BizNews podcast are told..Heystek says he knows of one person who invested R20m in the scheme. "I said don't do it. He said 'but it's 12.5% interest and it's predictable'"..After interviewing Heystek, Hogg caught up with Van Niekerk to delve into the details of what might have gone wrong at Ecsponent and, importantly whether it is possible for investors to recoup their money.."Up until a year ago, MyBucks, the company I managed and ran, a Luxembourg company listed in Frankfurt, Ecsponent was the largest shareholder. Almost a year to the day, they decided to convert the debt to equity," Van Niekerk tells Hogg..Ecsponent went through the various regulatory approvals and "did a type of rights issue where debt was converted to equity"..Van Niekerk says he hasn't had involvement with Ecsponent from an operational perspective for the last 12 months. "But until then, Ecsponent was one of largest funders, into MyBucks, earning a fairly decent interest rate. It was quite a good income earner for Ecsponent," he says.."I was involved in Ecsponent when they initially started. I had some shares in the company. In 2017 I had 4% in the company. We have always had a close relationship and even shared a building at one stage."."Today it's slightly a different situation.".Ecsponent is a listed company, says Van Niekerk. The largest shareholder is a company called Mason Alexander, which is George Manyere. He's been the largest shareholder since 2017, continues Van Niekerk..Hogg asks: "This R2bn raised, does this put your company at risk, given they can't redeem the preference shares?"."I'm not involved in MyBucks anymore. I exited MyBucks. When Ecsponent elected to do a conversion at a low price on the European stock exchange, then I exited MyBucks," responds Van Niekerk.. "MyBucks is solid because it has had all its debt converted to euro. MyBucks is currently trading at €80m, which is about R1.3bn. Ecsponent is, I stand to be corrected, about a 43% shareholder in MyBucks," he continues.."My Bucks will go on. It has five banks in Africa, 1.5bn customers. I don't think this impacts MyBucks at all, although I don't believe negative press does any listed company any good.".Hogg asks: How solid is this R1.3bn value of MyBucks?.Van Niekerk sets out a rosy picture, noting that MyBucks bought Nedbank Malawi, a Capfin in Australia, and has had "some great traction in transactions". ."The share price moved down from €5 to €1 when the conversion happened, when all shareholders converted debt to equity. I would say it's undervalued at this stage, though I'm biased," says the businessman.."Here you've got a Fintech listed in Frankfurt with five banking licences in Africa. I think the value stacks up, though I can't speak about the other assets," continues Van Niekerk.."The MyBucks asset is fairly solid and that could be translated into real value or cash for customers or clients over time. It all depends on how the situation is managed.".Hogg asks: "Surely it (Ecsponent) should be able to raise some money on the strength of that asset?".Van Niekerk agreed that this might be a possibility.."It looks like this snuck up on everyone. But now someone will offer less than it's worth because they know you are a desperate seller..Does Van Niekerk think most people have lost their money, as Magnus Heystek suggested?."I don't think the money has been lost, but there is perhaps a mismatch in terms of liquidity, where they've landed up being asset strong and liquidity weak… I'm not sure what other assets they have that are providing cashflow. It's a cashflow issue rather than an asset issue," says Van Niekerk..Hogg points out that two senior directors have left Ecsponent recently, including Richard Connellan, the former chairman for 9 years, which is "not a vote of confidence".

Have Ecsponent investors lost their money? Maybe not – Van Niekerk to Hogg

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