Letshego mulls share buyback to shore up value
Mbongeni Mguni | Monday August 21, 2023 06:00
For a long time the star performer on the Botswana Stock Exchange’s Domestic Companies Index, Letshego’s share price dropped 10% last year and on July 4, sank to 98 thebe, its lowest level in two years.
Thus far this year, the pan-African microlender has shed 6.4 percent, with steep losses between January and June, before a strong rally from July that by Wednesday had lifted the counter to P1.17.
Letshego’s share price troubles pre-date the May 2022 axing of CEO, Andrew Okai, and revolve around top-level disputes over the pan-African expansion strategy, directors’ remuneration and alleged discord amongst the dominant shareholders.
The microlender’s board has moved to restore investor confidence, with statements of commitment by executives and more recently, the proposal for a share buyback. Typically, buybacks add shine to companies’ shares by increasing the dividends of investors who remain on the books when the share registry is trimmed down.
Last week, an Extraordinary Ordinary Meeting (EGM) approved a proposal giving the executive the right to exercise a share buyback under which up to 10% of the stated share capital could be purchased, via on-market transactions.
Should the executive committee exercise the mandate, the share buyback would follow a buyback in 2015, which helped perk up the share price in 2016. Letshego group head of investor relations, Brian Moipone, told BusinessWeek that there was no guarantee the share buyback would go ahead.
“Should the buyback resolution achieve majority support from shareholders, this does not infer that the corporate action is guaranteed to proceed, it simply avails a share buyback as an option for Letshego Group’s Executive Committee,” he said in a response provided before the EGM.
“A share buyback is a corporate action available to listed entities for various reasons, including the increase of shareholder value.
“It enables a listed entity to make an offer to existing shareholders and ultimately reduce the number of shares issued.
“Depending on what proportion of shares is bought back, a shareholders’ stake in the company and the amount they are due from future dividends could increase.”
According to documents Letshego shared with its investors, should a share buyback proceed, shareholders would be offered a maximum of five percent above the average price at which the shares traded in the five days preceding the buyback.
Moipone fended off questions about Letshego’s flagging share price, declining to comment on the factors that could be turning investors off the microlender.
“There are numerous factors that influence a company’s share price such as market conditions, market sentiment and the nature of the bourse itself,” he told BusinessWeek.“A company’s share price is independent and cannot be influenced by the issuing company, thus it would be challenging for us, the listing company, to speculate on the specific factors influencing our share price trends.”
Moipone added: “From Letshego Group’s perspective, we remain focused on the areas of our business that are under our control – namely strategic execution and the delivery of long term sustainable value to all our stakeholders.”
Besides the public challenges Letshego has endured in recent years, analysts have said the microlender’s share price is a “victim” of the general undervaluation of the local Exchange’s Domestic Companies Index.
“The Exchange is generally undervalued and many counters are trading at significant discounts,” an analyst told BusinessWeek.
“The challenge is that this exposes counters such as Letshego to takeover bids and therefore, the executive has to act to boost value for shareholders.”
BusinessWeek is informed that the departure of Letshego’s former CEO was linked to an unsolicited takeover bid by an as yet unnamed party.