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THE MAINSTREAM MEDIA paid scant attention to a deal earlier this month that saw Wooltru – one of the JSE’s oldest cash shells – initiate a reverse listing transaction with the PBT Group. The reversing of PBT’s technology assets into Wooltru is hardly a headline-grabbing transaction.
Far more significant, in Finweek’s opinion, is the structural deal that accompanied the transaction. Wooltru, which operated as a cash shell for almost a decade, will issue 5,15bn new shares in exchange for the new operating assets. However, a proposed reorganisation of Wooltru’s share capital will see its ordinary shares and “N” ordinary shares being converted into one class of ordinary shares.
Wooltru’s high-voting “ords” have traditionally traded at a slight premium to the low-voting N-shares. While there’s no economic difference between the ords and the N-shares, there was a time when the price difference was justified, because Wooltru’s control structure could have appealed to a family-controlled company or black empowerment entity (where retention of voting control might be a central issue).
However, the JSE wouldn’t give Wooltru’s reverse listing transaction the green light until it agreed to dismantle the high/low voting share structure. As part of its listings regulations, the JSE no longer allows artificial control structures: although it could be argued Wooltru’s structure – which harks back to its days as a retail holding company – was already in place.
Currently, there are only a handful of listed companies holding high/low voting share structures: African and Overseas, Rex Trueform, Sabvest and Brimstone Investments.
But the reorganisation of Wooltru’s share capital does answer the niggling question of whether a “high-voting” share really does justify trading at a premium to N-shares. Wooltru has proposed holders of ordinary shares be offered new bonus ordinary shares in the ratio of 10 new bonus shares for every 100 ordinary shares held. The argument is the bonus share issue would compensate ordinary shareholders for giving up their superior voting rights.
Of course, N-share holders may be a little miffed – and might well cite the relevant JSE regulations that render high/low voting structures redundant. Then again, many investors may have bought Wooltru ords in the hope the higher voting shares would have fetched a premium in a transaction that hinged on a person or entity retaining voting control.
At current prices this transaction is worth R1,4m in the hands of Wooltru ordinary shareholders. Not much on paper, but fairly significant considering Wooltru’s market capitalisation of R35m.
Far more significant, in Finweek’s opinion, is the structural deal that accompanied the transaction. Wooltru, which operated as a cash shell for almost a decade, will issue 5,15bn new shares in exchange for the new operating assets. However, a proposed reorganisation of Wooltru’s share capital will see its ordinary shares and “N” ordinary shares being converted into one class of ordinary shares.
Wooltru’s high-voting “ords” have traditionally traded at a slight premium to the low-voting N-shares. While there’s no economic difference between the ords and the N-shares, there was a time when the price difference was justified, because Wooltru’s control structure could have appealed to a family-controlled company or black empowerment entity (where retention of voting control might be a central issue).
However, the JSE wouldn’t give Wooltru’s reverse listing transaction the green light until it agreed to dismantle the high/low voting share structure. As part of its listings regulations, the JSE no longer allows artificial control structures: although it could be argued Wooltru’s structure – which harks back to its days as a retail holding company – was already in place.
Currently, there are only a handful of listed companies holding high/low voting share structures: African and Overseas, Rex Trueform, Sabvest and Brimstone Investments.
But the reorganisation of Wooltru’s share capital does answer the niggling question of whether a “high-voting” share really does justify trading at a premium to N-shares. Wooltru has proposed holders of ordinary shares be offered new bonus ordinary shares in the ratio of 10 new bonus shares for every 100 ordinary shares held. The argument is the bonus share issue would compensate ordinary shareholders for giving up their superior voting rights.
Of course, N-share holders may be a little miffed – and might well cite the relevant JSE regulations that render high/low voting structures redundant. Then again, many investors may have bought Wooltru ords in the hope the higher voting shares would have fetched a premium in a transaction that hinged on a person or entity retaining voting control.
At current prices this transaction is worth R1,4m in the hands of Wooltru ordinary shareholders. Not much on paper, but fairly significant considering Wooltru’s market capitalisation of R35m.
