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Tapiwanashe Mangwiro

Senior Business Reporter

The Zimbabwe Stock Exchange Holdings Limited (ZSE Holdings), a newly incorporated entity, is set to make a buy-out offer to shareholders of the Zimbabwe Stock Exchange (ZSE) Limited ahead of a restructuring exercise that will see the group self-listing on its main board.

The development will significantly alter the corporate structure and governance of both entities, with shareholder approvals being sought at a forthcoming Extraordinary General Meeting (EGM) scheduled for October 8, 2024.

The directors of ZSE Limited have proposed a scheme of reconstruction, share splits, and an employee share option plan to facilitate the listing of ZSE Holdings.

According to the circular, the primary goal is to streamline operations, improve liquidity, and unlock shareholder value through the creation of a more robust corporate entity.

Once the scheme has been approved, ZSE Limited shareholders will sell their entire shareholding in ZSE Limited and the Victoria Falls Stock Exchange (VFEX), a subsidiary of ZSE Limited, to ZSE Holdings.

The ZSE is a local currency stock market while its unit VFEX trades in US dollars.

According to the consolidated circular of the scheme of reconstruction, after the transaction the shareholders of ZSE Limited will receive the entire issued ordinary shares of ZSE Holdings.

“The purpose of incorporating ZSE Holdings Limited was to create a listable holding company that would control a collapsed existing structure of ZSE Limited,” the circular notes, adding that this reorganisation will enable a smooth transfer of shareholding from ZSE Limited and VFEX to ZSE Holdings.

The operations of both the ZSE and VFEX will remain independent due to separate securities exchange licenses.

The two entities will operate under ZSE Holdings, facilitating the introduction of new products and services while maintaining regulatory compliance.

Another key transaction is the proposed increase in the authorised and issued share capital of ZSE Holdings Limited via a 1000-for-1 stock split.

The transaction is crucial to meet the minimum listing criteria of the ZSE Main Board, which requires no fewer than 10 million equity shares to be in issue.

“A 1000-for-1 stock split significantly increases the number of shares available in the market, making it easier for investors to buy and sell shares without impacting the market capitalization of ZSE Holdings.”

The stock split is also aimed at improving the liquidity of ZSE Holdings shares by lowering the price per share, thus making it more affordable to a broader range of investors.

“As more investors are able to afford the shares, demand for the stock may increase, which can sometimes lead to an increase in the stock price,” the circular elaborates, adding that this move is a clear signal from management about their confidence in the company’s growth prospects. To meet regulatory minimum spread requirements, ZSE Holdings plans to introduce 252 additional minority shareholders through a public or private placement of up to 10 000 shares.

Existing shareholders’ pre-emptive rights will be waived for this purpose.

The circular states that “The placement of shares is intended to meet the listing criteria on the ZSE Main Board, which requires a minimum number of public shareholders of at least 300 in respect of equity shares.”

ZSE Holdings also plans to introduce a Share Appreciation Rights Plan (SARP) as part of its Employee Share Option Scheme (ESOS), with up to 10 percent of unissued shares set aside for the scheme.

The scheme is aimed at aligning the company’s employees with its strategic goals while merging employee and shareholder interests.

“SARP is less dilutive to existing shareholders as participants will only get shares equivalent to the gain in value of their options between the grant date and the exercise date,” according to the circular to ZSE Limited shareholders.

The scheme is also designed to reward employees without placing significant pressure on the company’s equity base.

The directors of ZSE Limited and ZSE Holdings emphasised that the listing of ZSE Holdings was a strategic move to unlock shareholder value, improve access to capital, and strengthen the corporate governance and reporting structures of the company.

The listing will also provide ZSE Holdings with the flexibility to introduce new products and services in the securities exchange and financial services markets.

The self-listing is expected to enhance the visibility and brand strength of both ZSE Limited and ZSE Holdings, attracting new business opportunities from both the public and private sectors.

“Strengthening the Zimbabwe Stock Exchange brand through listing on the ZSE Main Board will lead to increased confidence in the ZSE Holdings’ future prospects,” the circular concludes.