Should I sell my Welkom Yizani shares? This question persists as the Naspers/Media24 Black Economic Empowerment (BEE) scheme continues to underperform.
A debate has ensued on our pages and last week one reader, named James, posted a remarkable comment. We thought it wise to repost the comment here:
It is not my place to advise you on how to proceed with your Welkom Yizani shares. I’m just writing to share my view and my position. What you do with it, is your business.
I’m a buyer of Welkom Yizani shares. Fortunately though, I was in no position to buy these shares when they were launched in 2006. Had I entered in 2006 for R10 per share, I would as well be disappointed like many initial investors. But I would not exit at the prevailing prices, R12 per share today. I would not exit because it does not make sense to do so right now but also because I would have taken a long term view. This means I would have locked these on my lower drawer.
I’m a recent buyer of these shares. I’m a buyer who has taken a long term investment view on these shares. I’ve bought many shares at prices that range between R10 and R15 per share. I’m buying to hold these until maturity date which I believe is 2018.
I believe that I will make a considerable amount of money at maturity date not from trading my place with other investors but from the liquidation of the scheme. Here is my reasoning:
This investment was given net asset value of about R25 by analysts when these shares were listed in 2013. This was primarily shaped by the amount of debt in the scheme at the time. As time goes, income generated is applied onto reducing debt which amongst other factors boosts equity value. I’m assuming that the net asset value has improved from R25 over the past two years since listing. This number will further improve into the future as the business grows and debt is retired. The net asset value of the business will be much higher than R25 when the scheme matures. And I get to my main point. Media24/Naspers will buyback the BEE shares at the end of the life of the BEE scheme. They will pay fair value. Make the maths.
Readers are advised not to see this as a substitute to a professional financial advice. The comment is posted here to capture the nuances in the Welkom Yizani Debate.