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Johannesburg - What was left of the market capitalisation of the beleaguered platinum miner Lonmin [JSE:LON] was almost wiped out on Friday morning, when the share price dropped more than 85% in response to shareholders' decision to approve a rights issue at a massive discount.
The stock closed 10% lower at R2.02 on Thursday after the result of the shareholders' meeting was announced. It opened at only 30c on Friday and stayed there for most of the morning - a drop of 85.15%. At midday the share price was 1c higher at 31c.
Shareholders were asked on Thursday to approve a rights issue of $407m to help the company refinance its debt in an effort to stay afloat. The new shares were controversially issued at only 1c per share, to force shareholders to take up many of them to keep their interest intact.
Shareholders were warned that the company’s shares could be suspended if they did not approve the offer. About 88% of them voted in favour of the rights issue to save the company, but it was clear that many were not happy about the huge discount the shares were offered at. The extent of their discontent became clear on Friday morning.
“We had no choice but to vote in favour because we will be wiped out if this doesn’t go through. But does that mean we will be with the company in the next 10 or even two years? We don’t know,” said Anthony Guildford, a Lonmin investor since 1969.
More than 17 million shares changed hands on Friday. However, the value of the transactions was barely more than R5m as the once proud mining company’s market capitalisation has been totally wiped out over the past two years by strikes, rising costs, a weak platinum price and slowing demand for the metal.
On January 28 2014, shortly before the five-month strike in the platinum industry started, Lonmin shares traded at R60.47. Now there is almost nothing left. Over the past three months alone, when it became known that the company needed cash, the share price dropped a staggering 87.13% before Friday’s massacre.
Lonmin’s troubles had no effect on the rest of the market because there is so little left of its value, but investors were mostly treading water after Thursday’s workmanlike gains.
The dollar is still trading lower against emerging market currencies and the rand strengthened to below R14.00 a dollar, the strongest level in two weeks. The unit is also supported by the South African Reserve Bank’s decision to increase interest rates by 25 basis points.
READ: SA hikes interest rates
The softer dollar is good news for commodities but the stronger rand is bad news for rand hedge shares, which earn most of their income in foreign currencies.
By midday the All-share index was 0.04% lower at 52 096 points and the Top 40 index had lost 0.06% to 46 821 points.
The Gold index, which closed 9% higher on Thursday after being 16% higher at one stage, gained another 2.68% on Friday. The Resources index was 0.83% stronger at midday. The Industrial index lost 0.15% as the big dual-listed shares were hurt by the stronger rand.
The Financial index, which is supposed to be supported by higher local interest rates, was 0.05% lower. Investors used the opportunity to take profits after financial shares gained almost 3% on Thursday. FirstRand [JSE:FSR] lost 0.44% to R48.82.
Among the big dual-listed shares, Sasol [JSE:SOL] lost 2.55% to R405.49 and SABMiller [JSE:SAB] traded 0.48% lower at R858.71. Richemont [JSE:CFR] was 0.36% softer at R107.17 and MTN [JSE:MTN] lost another 0.59% to R142.95.
Naspers [JSE:NPN] announced on Friday that its first-half profit will probably rise as much as 42%. The company said in a trading statement that core headline earnings per share for the six months to end-September would be 37% to 42% higher.
READ: Naspers expects big jump in earnings
The share price was however 0.07% lower at R 2 147.62. The stock is 43% higher this year, valuing the company at R908bn ($65bn).
In the resources sector, Anglo American [JSE:AGL] gained 2.83% to R98.78 and BHP Billiton [JSE:BIL] was 0.21% stronger at R192.35.
