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Johannesburg - It has been a long time since there has been such a bloodbath on the JSE as on Wednesday morning when a sell-off in the shares of African Bank Investments (Abil) became a stampede of unseen proportions.
And the rush to the door has also impacted on the rest of the market with all the major indices down except the gold index.
The financial index was impacted the most and lost 1.07% while the Abil [JSE:ABL] share price dropped by a massive 59.58% to only R2.78.
By midday on Wednesday the All-share index was 0.83% weaker at 50 921 points, while the Top 40 index lost 0.78% tot 45 752 points. The industrial index was 0.78% lower.
But all the attention Wednesday morning was on Abil after the company announced that Leon Kirkinis, the group CEO, managing director of African Bank and one of the founders, has resigned with immediate effect after 23 years in the business.
The company also warned that it expects a headline loss of R6.4bn for this year from a loss of R365m the previous year.
It was remarkable how badly investors wanted to get rid of the share. A total of 43 9 million shares were sold by midday in no fewer that 4 877 different deals.
The total number of shares sold is ten times more than any other share (with the exception of Newgold) and the number of deals are twenty times more than any other share.
The result on the share price was devastating and by midday it traded at R2.78 compared to R6.88 on Tuesday, a loss of R4.10 or 59.59%.
As recent as October last year the share traded on a 52 week high of R19.10 and it had traded at just under R40 per share in the past.
Besides the news of the expected massive loss and the resignation of Kirkinis, investors were upset by the prospect of yet another round of restructuring at Abil.
The board told shareholders in its Sens statement that it was looking to pursue a “good bank” strategy.
It said it is satisfied that there is a core "good" advances book and a sustainable demand for unsecured credit at the appropriate level of risk to generate the commensurate returns for shareholders.
However, a section of the advances book has been identified, which would not generate the appropriate returns and the intention is to ring-fence this part of the book.
Abil is exploring various options to isolate African Bank from the impact of the “bad” book, which is also expected to have a direct positive impact on Moody’s rating of African Bank, the company said in the statement.
Lowered gross domestic product growth expectations, increasing inflation, and loss of customer income through strike action and increased unemployment at 25.5% for the quarter ended June 2014 are blamed for the sharp rise in bad debts.
In the meantime investors continued their love affair with Telkom [JSE:TKG] after the company said it would continue with its cost cutting restructuring.
The share price was 1.64% higher on another 53 week high of R54.53 and is now 155% higher than a year ago.
Naspers [JSE:NPN], which closed at an all time high of R1 400 on Tuesday, strengthened Wednesday morning even further and reached R1 409.79 before profit taking started. By midday the share was 1.29% weaker on R1 380.54.
- Fin24
