The share price of Vodacom’s Black Economic Empowerment (BEE) scheme YeboYethu was down by nearly 5% on Thursday – with the telecommunication giant’s scheme marking its first day of trade on the JSE.
YeboYethu shares started trading at R55.50 on the JSE’s BEE board and ended the day at R53, giving the scheme a market capitalisation of R762 million.
The move of YeboYethu from an over-the-counter (OTC) trading platform, follows a Financial Services Board (FSB) directive which planned to put a stop to unlicensed exchanges – extending to OTC platforms.
Since the issue of the directive in 2014, the FSB granted several BEE schemes extensions to find alternative trading platforms.
The directive also saw Vodacom’s rival MTN scramble for an alternative trading platform for its MTN Zakhele BEE scheme. Zakhele was the first scheme to list on the JSE’s BEE board in November 2015.
Being on the JSE enables Vodacom to track the identity of its 1.4 million shareholders, to ensure that they are in line with its empowerment mandate of previously-disadvantaged individuals.
BEE share deals are often complicated in their structure and have limited liquidity, however, the move to the JSE might boost the liquidity of YeboYethu shares.
When the scheme commenced in 2008, black investors were invited to subscribe for YeboYethu shares at R25/share. Vodacom said the scheme was valued at R7.5 billion – making it “the largest empowerment scheme” in SA’s telecommunications industry at the time.
YeboYethu’s only asset is its 3.44% stake in Vodacom South Africa (which excludes the company’s sub-Saharan Africa operations) and not the JSE-listed entity Vodacom Group. The deal was limited to SA operations as Vodacom’s parent company Vodafone Group didn’t want to dilute its investments in the rest of the group.
YeboYethu has debt commitments, as the scheme was 74% debt funded when it launched, which is now up to about 78%. Market watchers recently warned that due to YeboYethu’s debt commitments, it might take longer for value to emerge in the scheme. Although it has a dividend yield of less than 2%, the scheme’s yield might be more attractive once the debt is settled.
For now, it appears that investors will have to be patient to be rewarded from a yield perspective. YeboYethu will expire in 2018 and its debt will have to be repaid, as the scheme might be wound up.
In July, MTN gave shareholders three options for the Zakhele scheme when it expires in November. Zakhele has a 4% shareholding in MTN.
The first option will be for investors to accept a cash settlement that will be equivalent to the prevailing MTN Zakhele share price; the second option allows investors to choose a combination of MTN Group shares and cash, or re-invest into a new BEE scheme that MTN might launch as part of the third option.
Whichever option shareholders fancy, there is a big payout ahead. Supporting this is that black investors subscribed for Zakhele shares at R20/share six years ago, which are now valued at R69/share at the time of writing.
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