Two listings, two different stories. In his latest blog, Daily Maverick editor Tim Cohen explores the contrast between the Altvest and Boxer listings.
Contrasting the Altvest and Boxer listings
Recently I wrote about the lack of participation by retail investors in the upcoming listing of the Boxer supermarket chain, which will be hived off out of Pick n Pay. The IPO (Initial Public Offering), as it is inaccurately called, will only be open to “qualifying investors” - basically SA’s ten biggest investment houses.
But now for something completely different. Today the financial services group Altvest opened its bookbuild process on the retail investment platform Easy Equities, almost by definition welcoming only investment from retail investors.
Apart from this difference, there are other rather large contrasts between the listings. The Boxer listing and capital raise is going to be huge, possibly in the region of R12-billion. The Altvest listing and capital raise hopes to garner somewhere in the region of R230-million. The Boxer listing will be underwritten, the Altvest listing will not. The Altvest listing will be backed by a prospectus, the Boxer listing will not. And that last difference is pretty substantial.
These differences are very germane because if you are listing a huge company, the surer path is to tap big-time investors in an underwritten capital-raising exercise. Yet it's also ironic that these two listings should be taking place within months of each other, reflecting somewhat the changing nature of markets and who gets to access them.
My problem (aided and abetted by investment banker and markets crusader Paul Miller) with the Boxer listing is simply that a foundational principle of stock markets is that you should treat investors equally. Stock markets already have a reputational problem as havens for the rich, which of course they are. But there is no need to exacerbate this by loading the dice even more in favour of the bigger players, who by the way, are not generally speaking playing with their own money but with ours.
How is the Boxer listing doing that? Well, to be fair to our beloved “qualifying investors”, they would argue they are not treating different classes of investors differently. A bookbuild process is designed to establish a fair listing price by balancing the interests of the company and investors and when that is achieved, investors of all sizes and shapes can invest or not, as they please.
By contrast, Miller argues that the Companies Act allows exemptions from the formal IPO process when an offer is limited to banks, financial institutions and stock brokers, or rich people. And in this case, it need not be advertised, no prospectus is registered, and the pre-listing statement generally goes out on SENS well after the offer is fully subscribed. In effect, the bookrunners are doing it this way because it's simpler and cheaper. “Perversely, this approach is now the market practice rather than the exception. This kind of new listing offer is hardly an IPO – no matter how often you call it that,” he writes.
It's been happening this way for years, but there is one difference this time: the Boxer listing is a retail company, underscoring the irony that retail investors are excluded from the bookbuild process of a retail company.
The Altvest listing is on the other end of the scale so I asked Altvest CEO Warren Weathley why he was doing it this way. He said he started Altvest with a vision to address two things: The first was to make private equity and alternative investments available to the retail market. “The second problem, which goes hand in hand, was to provide a mechanism for entrepreneurs to raise money from the public without having to go through all the hassle of a listing”.
“So what effectively we do is to offer a shortcut to listing where we take on the administrative governance and legal burden”.
Given that this is the whole point of the company, listing through a retail investment platform not only makes sense but is consistent with the aims of the company. “You can't preach democratisation of investment opportunities and then hire an investment bank to sell it to five family office clients. I had to eat my own pudding here.”
Altvest is listing but also moving from the Cape Town Stock Exchange to the Johannesburg Stock Exchange as part of the process. Wheatley said the exchange was a good place for the company to cut its teeth but unfortunately, there is only one retail brokerage with a very small number of investors. Altvest needs a larger pool of investors.
And isn’t that always the case?
Reflecting on the Boxer listing, Wheatley says, “It seems ludicrous that Boxer wouldn't go to their customer base and allow them to participate. Now, 90% of their customer base won't have accounts with Investec Private Wealth, but they might just have an account with Easy Equities”. One thing Altvest has found anecdotally with its restaurant offering Bambanani is that investors actually visit the restaurant much more often once they have invested, which of course stands to reason.
So will this work? We will see, but on its first day, the investment has been muted. It still it has a way to run; it closes at the end of the month. But, says Wheatley, the group has already attracted over 100 investors, which means Altvest’s investor base has increased by 30% in a day. “Don’t forget, these are cashiers, call centre agents, plumbers, electricians, students - they are not buying half a million rands worth of shares in a batch”. One investor invested R10, he says The rhythm of retail investing is also different: lots happens on payday.
Whether or not Altvest hits its markers, I think it's significant that the company is trying, because there is more of this coming up the pike. This is the first book build that is taking place exclusively on Easy Equities - the platform has done private placements before.
Yet one of the largest and most significant trends of the twenty-first century is of course the digital revolution, which has enabled and democratised functions which were once only available to a selected few. In some ways, direct access to the stock market and investing generally is a leading indicator of that trend. It's not all great, and there have been some bizarre stock market movements driven by retail investors like the computer games store GameStop.
But one of the noteworthy characteristics of history is that it is quite difficult to go backwards. The retail investment revolution is not going away.
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