The closure of the Zimbabwe Stock Exchange has forced Edgars Stores Limited to extend its rights offer period by an additional three weeks.
The clothing retailer and manufacturer is currently in the market to raise capital through offering additional shares worth $66,3 million.
Edgars said it needed to raise the funds so as to, among other things, maintain the sustainable growth and profitability of the businesses going forward.
Without the money, Edgars says it will be unable to effectively compete in the market.
“The company will face significant capital expenditure constraints, high finance costs and unmet working capital.”
Plans to raise capital have, however, been affected by the closure of the ZSE with effect from June 29 this year.
“The Board wishes to advise its stakeholders that following the closure of the Zimbabwean Stock Exchange (‘ZSE’), Edgars Stores Limited ‘Edgars’ has decided to extend the Rights Offer Period by an additional three (3) weeks and resultantly the Rights Offer closure date has been revised from the original date of Friday July 17, 2020 to Friday August 7, 2020,” reads part of the statement issued by the Company.
“Additionally, stakeholders should be advised that Letters of Allocation will be tradeable once the ZSE reopens.”
The disruption to Edgar’s capital raise plans is all but one of the key activities the ZSE is missing out on following its suspension from trading.
According to the Investment Professionals Association of Zimbabwe (IPAZ), a professional body made up of Chartered Financial Analysts (CFA) Charter holders and Members of the CFA Institute domiciled in Zimbabwe and in the diaspora, suspension of the ZSE from trading will also affect pension funds.
“Pensioners rely on monthly disbursements from their pensions while insurance companies have to pay claims and benefits to their clients.
“Closing the market means that all these stakeholders cannot access their funds,” reads part of the statement issued by IPAZ.
Pension Funds and Insurance companies are arguably the largest pool of institutional investors holding assets on the ZSE.
According to the Pensions Industry Report to March 31, 2020, out of a total asset base of $29,8 billion, investments in equities made up 35,3 pensions of the industry assets.
Combined with investment property, these 2 assets classes made up 82,7 percent of the assets, due to their hedging and value preserving nature in inflationary periods.
Property is illiquid relative to shares so from a liquidity perspective, shares are the most important asset for most institutions.
Authorities have, however, justified the closure and are currently conducting investigations on activities on the ZSE.
Trading will only resume after investigations on allegations that led to suspension of trading are concluded, and this might take a week or two, according to Finance and Economic Development Minister Mthuli Ncube.
Fielding questions at a post Mid-Term Budget Review webinar, Minister Ncube said suspension of the stock exchange, since June 26, 2020, was done to make sure there’s some discipline in our private sector activities.
“We are waiting for the conclusions of the investigations led by the Financial Intelligence Unit (FIU).
“They should be able to conclude within the next week or two weeks. Then we will review that and then decide on modalities for reopening.
“It’s just a matter of going through the paces and receiving the reports once the investigation is complete.
“It should have certain recommendations and we will follow those recommendations so that we are systematic.”
Minister Ncube said as regulators they had intervened the right way and there is need to be positive about the issue.