Given MTN Zakhele’s aborted debut, the good news about today’s listing of Welkom Yizani – Media24’s BEE share offering – is that the platform managed relatively heavy trading (75 000 shares in 517 deals) without any glitches. The bad news is that after a bright start, selling pressure dropped the price from an early peak of R20 to a close of R12. That’s still a premium on the R10 issue price, but not much of a return for shareholders invested since 2006. As you’ll read from the transcript of today’s interview on CNBC Africa, the price slide is not unexpected. It puts the stock at a substantial discount to underlying value. Analysts reckon the shares are worth up to R25. Patient investors will doubtless be tempted to take advantage and scoop up stock in the coming days. Ashoek Adhikari explains the how’s, who’s and what’s towards the end of the interview. – AH Â Â
To watch this CNBC Power Lunch video click here
ALEC HOGG: Joining us now to see how trade’s been going is Ashoek Adhikari, General Manager of Legal and Regulatory Affairs at Media24. Thanks Ashoek, for coming through. You must be relieved…all going well so far – 305 trades – and investors are in the money.
ASHOEK ADHIKARI:  Yes Alec, thanks, I think we’re out of the starting blocks. We’re doing quite well. The trading platform is stable. The prices are matching. There is quite a bit of depth in the market. There are buyers, and seemingly, the buyers have an appetite to take quite a lot of the shares.
ALEC HOGG: Over 100 000 shareholders: who are these people primarily? Obviously, we know they’re black but are they mainly employees and suppliers?
ASHOEK ADHIKARI:  No, it’s very broad based its 107,000 shareholders across the country and if you recall, when the shares were offered, we were three times oversubscribed. We had to allocate shares to the broadest space possible, and that brings us to 107,000. There is no specific block of people. It wasn’t a case of whom you knew. More than 80 percent of people who applied were allocated shares.
ALEC HOGG:Â How many, roughly, per person?
ASHOEK ADHIKARI:  The maximum is 430 shares and it varies from there on, downwards. In order to allocate as broadly as possible, we had to peg it at 430. People who applied for much more than that, were given an option to take up shares, in Phuthuma Nathi.
ALEC HOGG:Â Did the Phuthuma Nathi or the shareholders in Welkom Yizani also partake in Phuthuma Nathi?
ASHOEK ADHIKARI:Â Â No, only the people who applied in excess of 430 were allowed to stay in and be allocated in Phuthuma Nathi.
ALEC HOGG: They’ve done a very good deal, because that’s been the more successful of the two. As far as this one is concerned…tied to Media24, which is much more of a print business than Phuthuma Nathi is which is of course on the MultiChoice… From your perspective, do you think that there are still growth opportunities?
ASHOEK ADHIKARI:  Yes Alec, absolutely. We’re in fact investing quite heavily in the future. We’ve launched an initiative in e-commerce – spree.co.za. We’re expanding quite aggressively on our internet, publishing, digital publishing, mobile, and all of the new media platforms. Media24 has an investment plan and is proceeding with it.
ALEC HOGG: Are you learning much from your parent Naspers? It has of course been spectacularly successful in its global investments.
ASHOEK ADHIKARI:  Well, the expertise is there. We can draw on the expertise. Clearly, there would be quite a bit of knowledge sharing between the Group companies.
ALEC HOGG: Shares issued at R10…they’re trading today between R16.75 where they bid and R17.00 per share, so it’s a nice uplift. But if you’ve been holding the shares for seven years I suppose you might have hoped for a little more.
ASHOEK ADHIKARI:  It’s the first day of trade Alec, and what that tells you is that there are going to be far more sellers in the market than buyers. I don’t think you can judge the price on the first day of trade. If you look at similar schemes, the first day is always about the people who have wanted to sell for the last several years coming in and taking whatever the sellers are offering. I think one has to have a view of a time on this share price and see where it goes in the next few months, maybe even the next few years.
ALEC HOGG:Â So the smart money would be sitting on the sidelines and then scooping up shares at these levels?
ASHOEK ADHIKARI:  Well, we would like our investors to stay with us for the long term. If you invest in Media24, you should invest for the longer term so that you can get the benefits of the investments that we’re currently making.
ALEC HOGG: Ashoek, there are many people who have been investing for the long term and hopefully you will be able to deliver to them in time, but what was a little bit confusing to me… On your website, you have brokers’ reports and the first one that I looked at said that they value the shares at R24.50. That’s a long way from R16.75 where it’s trading at the moment.
ASHOEK ADHIKARI:  Yes Alec, Media24 is not a listed entity and so it’s quite difficult to evaluate Media24’s value. I think that the investor valuations varied from R10 to R25, which gives you an indication that when the experts crunch the numbers they come to very different results. If you look at the market capitalisation of some of our closest competitors, you map it back to Media24 and Welcome Yizani, then the share price could be a lot higher or the valuation, certainly, could be a lot higher than the R25 and/or the R10 – it depends on your view of Media24 and what it is worth.
ALEC HOGG: You’re making quite a strong case then for the fact that the price would be artificially declined in the short term. I’m sure there are many people watching this, thinking ‘I’d like a little share of this action’. Is there any obstacle, except for the fact that you have to be black?
ASHOEK ADHIKARI:  Any member of the public can become a shareholder that qualifies as a black person in terms of the BEE legislation. As far as the valuation of the share is concerned, it is entirely up to the market. The market takes a view, and it’s a willing seller depending on what you want to pay or if you want to sell it. Nobody is forced to trade. Nobody is forced to exit, and people can stay in as long as they want.
ALEC HOGG:Â How do you ensure that only black people are buying?
ASHOEK ADHIKARI:Â Â There is a verification process, just as we verified people when they applied for the shares.
ALEC HOGG:Â How many of the shareholders have actually registered to trade in the stock?
ASHOEK ADHIKARI:Â Â As we sit today, about 7 000 shareholders are registered to trade.
ALEC HOGG: So there are many people holding the shares, who haven’t actually gone through the processes yet of being able to trade in the stock. How do you reach them?
ASHOEK ADHIKARI:  We’ve sent them leaflets, brochures etcetera. We have a call centre that’s taking up quite a lot of calls. There’s risk interest, etcetera. It may very well be that shareholders have decided that they’re going to hold onto the shares and they don’t need to register as yet.
ALEC HOGG: All right, just saying, if there’s a shareholder who’s watching this now… What is the process that they go through to get themselves into a position either to buy more shares or indeed, if they want to offload? How do they get to that point? Given that this isn’t just JSE listing – this is over the counter.
ASHOEK ADHIKARI:  Okay, they can go onto the website, which is welcomeyizani.co.za. There are two walk-in centres: one in Cape Town and one in Johannesburg. There is also a call centre, the number of which, is 0860 12 12 24. Each one of these avenues will get them to a point where they would be able to register. If they are not an existing shareholder, they would have to FICA themselves for bank purposes, to be able to receive dividends, and pay and receive monies. Existing shareholders need only register on the website. If they go to the website, all their details are already preloaded. It is a completely electronic process, and they’d be able to trade immediately once they have gone through the registration.
ALEC HOGG:Â And they would trade online.
ASHOEK ADHIKARI:Â Â They can trade online, through the call centre, and through the walk-in centre.
ALEC HOGG:Â Have those walk-in centres been busy?
ASHOEK ADHIKARI:  There’s a queue outside the Naspers Centre, which I just left shortly. It’s not a big queue, but there’s a constant stream of people coming.