Local investors have an appetite for buying shares in ICT companies; however, the sector currently makes up less than a percent of the JSE's total market capitalisation.
Head of Sasfin Corporate Finance, Noah Greenhill, says investors want a basket from which to choose, which also includes smaller companies that are growing. He says firms are “missing a trick”, because being listed allows them to grow.
Currently, there are about 400 companies listed on the bourse, but the ICT sector makes up 0.3% of the total market capitalisation, notes Greenhill.
Several ICT companies recently left the bourse, such as Vox Telecom, which delisted on 20 April in a bid to focus on its strategy without being encumbered by listing requirements.
Other plans
Vox said in July last year that it had received a R499 million buyout bid from a consortium composed of the Lereko Metier Capital Growth Fund and Investec Bank.
Dynamic Technology Holdings' (DTH's) shares traded for the last time in September 2010, after the court approved a buyout bid. The move followed a R30 million buyout offer from Xantha Properties, which is largely controlled by some of DTH's management team.
DTH said the cost of maintaining a listing was not worth the expense, as its shares were not well traded, which would make it difficult to issue stock for cash to fund an acquisition.
Both Mustek and TeleMasters also considered going private, but subsequently cancelled those plans.
Companies that leave the bourse often do so because their share price is depressed, says Greenhill. However, he points out that it is impossible to go back and determine whether it would have grown more successfully had it stayed listed.
Raising money
Listing should be strategic, says Greenhill. He explains it should form part of companies' growth plans, such as the need to raise capital to invest in geographic expansion or acquisitions.
Debuting on the JSE makes it easier to raise capital and gives companies credibility, allowing them to expand more rapidly, says Greenhill.
Greenhill says there is a fear factor when companies decide whether to list. He notes that listing is often a function of other successes but there are not enough companies stepping over that line, which leads to others following.
The number of listed ICT companies is shocking, comments Greenhill. He says there are good businesses that should consider moving to the bourse.
Greenhill says the lack of listed ICT companies makes it more difficult to South Africans to diversify their investment portfolios. In addition, international firms will examine the sector and be left with the jaded view that “it's not worth playing there,” he adds.
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