New listings on the JSE have more than compensated for private equity take-outs of major South African companies — and now there is speculation that cellular giant Vodacom might make its debut on the JSE.
At the beginning of this year private equity was the buzzword with asset managers concerned about the delisting of large companies, such as Edgars, Consol and Alexander Forbes, which would affect the number of listed companies and liquidity on the JSE.
But this year’s listing boom has more than compensated for these losses with 49 new companies’ listings so far.
The past two weeks have been the most intense with 10 new listings and between five to eight further listings expected by the first week of December. This year’s listings have brought R90-billion on to the JSE compared with 38 companies delisting worth a total value of R79-billion. If Vodafone lists Vodacom, that would bring a R150-billion company to market.
AltX, the JSE’s alternative exchange that provides smaller companies access to the equity markets, has been a big driver of the listings, accounting for 32 listings this year so far. The JSE’s main board attracted 17 sizeable listings.
Mondi listed in July for R35-billion, which more than offset the delisting of both Edgars (R27-billion) and Consol (R6-billion) earlier in the year. Another major listing was Eastern Platinum with a market cap of R12,7-billion, which compensated for the delisting of Barplats (R5,8-billion) and Alexander Forbes (R8-billion). The new listings on AltX have accounted for R13-billion of new market capitalisation on to the exchange, while the main board accounted for R77-billion.
The frantic pace of new listings in the past month has started to raise concerns in the market. Analysts talk of listing fatigue as they are unable to cope with the sheer volume of new listings and they become more discerning about which companies they will invest in as money available for new listings starts to dry up.
Some portfolio managers say that unless the company is showing real value they are not even considering them. Corporate financers say that in the past week or two it has become more difficult to raise capital, especially from the institutions that are showing signs of listing fatigue.
Companies that are still to go on their roadshow to the institutional fund managers might find the enthusiasm waning. But, on the positive side, most of the listings so far have been well oversubscribed, suggesting that there is still a fair amount of interest.
Questions are being raised as to whether this is another listing boom-bust situation as experienced in the late 1990s.
But most fund managers agree that this listing boom is being driven by a fundamental economic story, especially as the bulk have been in the construction sector and are strong cash-generative businesses directly linked to a growing economy, unlike the IT boom that was driven by Y2k fears and a great deal of hype around the internet. Many companies listing then were not even making profits.
Most individual investors would not have access to private placements, which means they will buy in the open market. With solid companies such as the banks trading at forward rates of around 12 times, you need to ask yourself whether a new listing is worth the risk and the price.