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Johannesburg - Once a darling of investors, micro-lender African Dawn Capital has battled to arrest the slide in its share price for the past two months.
Since the start of August, African Dawn has given up 38% of its worth, slipping from 160c to around 100c on Tuesday. For a share which is highly liquid, this is a significant move considering the JSE financial and industrial 30-index rose 4% over the same period.
Six months ago African Dawn was talking about the prospects of a listing on the main-board of the JSE after three years of triple figure growth. Now the group is trying to avoid the liquidation of a significant subsidiary that may threaten its existence.
Earlier this month, the group posted an updated cautionary announcement in which the company stated it was placing an underlying subsidiary Corporate Money Managers (CMM) into curatorship. CMM is a subsidiary of Allegro - a company owned by African Dawn.
CMM is an asset management firm that specialised in money market fund management - typically an investment that should provide low risk for investors.
According to Craig Martin, operator of the share tipping website Sharetips.co.za, African Dawn CEO Marius van Tonder said if Allegro were to liquidate, the worst case effect on African Dawn would be a reduction in income of around 30% and a reduction in net asset value (NAV) of around 28%.
If that figure is accurate, that would reduce the net asset value of the company to around 121c a share from the 168c it reported in February.
Asset management firm Imara SP Reid, which previously had both African Dawn and Blue Financial Services rated as "buy", have scaled back their expectations.
"Failure to provide more detail [around the curatorship and liquidation of CMM] has understandably hit the share price hard and, pending further information, which we believe should have been forthcoming by now, the share is at best a hold," said Imara head of research Stephen Meintjes.
Market watchers will also be keeping an eye on another AltX listed micro-lender Blue Financial Services. Since the start of August the share has lost 17%, sliding from 233c to 190c.
- Fin24.com