Econet Wireless Zimbabwe risks sanctions from the ZSE after defying the bourse’s instruction not to proceed with today’s EGM of shareholders meant to approve the raising of $130 million to pay foreign obligations.
Source: Econet risks ZSE sanctions – NewsDay Zimbabwe February 3, 2017
On Wednesday, ZSE advised Econet to postpone the meeting to a later date “until certain technical issues relating to the rights issue transaction have been clarified to the satisfaction of the ZSE board”.
But a defiant Econet yesterday said the meeting would go ahead, as the ZSE board had no powers to stop the indaba. It advised shareholders to submit their proxies and attend the meeting.
“The meeting was sanctioned by the committee of the Zimbabwe Stock Exchange, which is the competent authority and that approval has not been withdrawn. The board of ZSE, chaired by the company secretary of TelOne, has no jurisdiction over this matter,” Econet said, adding that “all communication pertaining to the meeting that is not issued by the company should be ignored”.
Sources said yesterday defying the regulator would come at a cost for Econet. They say Econet should have listened to the concerns by the ZSE board.
“Econet said the meeting has been approved by a committee of ZSE. The question is: Who is more powerful the committee or the board of ZSE. If the regulator says no and you insist with the meeting, it is clear you are the one who is in charge,” a source said.
Another source added: “ZSE has powers to disown the meeting or even suspend Econet. ZSE rules say that companies have to put notices in newspapers and shareholders should get the information at the same time. Econet chose to put the notice on Twitter at 1am. Who is going to read that and are all shareholders on Twitter?”
The source said ZSE had not cancelled the meeting, but asked for a postponement for the dust to settle.
“So, if Econet want to break the rules knowingly, it shows the character of the company we are dealing with,” she said
ZSE chief executive officer, Alban Chirume referred all questions to board chairperson Caroline Sandura.
“That statement [calling for Econet to defer the meeting] was put out by the chaiperson. You should call the chairman of ZSE,” he said.
Sandura said ZSE expected Econet to meet certain conditions before the EGM adding that the committee which Econet said approved the meeting reports to the ZSE board.
“The board appointed the committee and it has to ratify the decisions of the committee because it derives its authority from the board. The statement from Econet is very provocative to say the least but the ZSE board stands by its decision that certain requirements must be met first before their EGM,” she said.
The bone of contention over the capital raise was a clause, which stated that members have to follow their rights by paying the subscription price of the shares and linked debentures in United States dollars directly outside Zimbabwe into the company’s debt service account with Afreximbank.
This riled minorities and pension funds, who said they could not pay offshore for the shares. This forced Econet to sweeten the transaction by coming up with a provision in which minorities would subscribe for the shares locally.
“Econet shall open a rights offer account with a local receiving bank into with those shareholders, as resident shareholders in the register of members of Econet Wireless Zimbabwe Limited, shall deposit the proceeds of the right offer using cash, bond notes, or electronic money in accordance with the rights offer timetable as published in the company’s circular dated January 17, 2017,” it said.
“In exchange for the amount paid by the resident shareholders into the company’s account with a local receiving bank, the underwriter shall pay the equivalent of the amount contributed by the resident shareholders and on behalf of the resident shareholders to the international receiving bank, Afreximbank in accordance with the terms of the circular.”
Econet said in the event that any resident shareholder sells their rights offer shares to non-residents, the “foreign currency, thereby, generated shall be remitted to the Reserve Bank of Zimbabwe and allocated towards the remittance of the money due to the underwriter”.
In terms of the rights offer, shareholders shall be offered, pro rata to their shareholdings, 1 082 088 944 ordinary shares plus 263 050 614 Class A shares at a subscription price of 5 cents each on the basis of about 82 ordinary shares for every 100 shares already held.