While investors on the JSE ended 2013 in festive mood due to a remarkable market rally, the tragedy of a mass of black investors who planted their money in Nasper’s Welkom Yizani BBBEE investment scheme for seven years continued.
Welkom Yizani investors have been in foul mood with some calling for government intervention while others seem to be exploring legal action.
The Welkom Yizani shares were trading at R10.09 per share this morning which is 9c above the entry price paid by investors in 2006. The Welkom Yizani shares opened for limited trading on an over the counter (OTC) platform on the 9th of December 2013 and settled around the R10.00 per share mark. This has crushed hopes of multitudes who were hoping to cash in after waiting seven years for pay day.
When pay day came some investors sold below the entry price of R10.00. Many Welkom Yizani investors are crying foul as they were expecting a much better sell price of a paper sold to them as a R50 per share security.
When the scheme was established in 2006, the company said the Welkom Yizani shares sold to the black public under the guise of BBBEE were valued around R50 per share. Naspers loaned Welkom Yizani investors to the tune of R40 per share via a preference share structure. The scheme bought into Naspers’ print and South African biased operation Media24.
The idea was that the loan would be repaid through dividend flow from Media24 and enough value would be created to live considerable net value for Welkom Yizani investors. The scheme did produce some dividend over the years, which was largely applied to servicing the loan and in 2009 Naspers wrote off a portion of its loan to the scheme and extended the term of the scheme by a further two years.
As such the scheme may be in the money on paper with estimations placing net asset value around the R24.00 per share mark. This is largely meaningless for investors who are selling at R10 per share.
Voices from the Welkom Yizani investor base would suggest that these investors had a black Christmas. Many comments left on this platform, ujuh.co.za, suggest financial distress to this effect:
“I am very disappointed with these shares. My husband is retired at sixty six years and I am unemployed and was depending on this investment to help us out.”
Another voice said “I was hoping to pay my child registration fees for the university (in 2014). What now?”
At establishment in 2006 the Welkom Yizani scheme attracted 107 000 investors.
Responding to the outcry, Lurica Klink, Welkom Yizani Company Secretary, put the blame on market dynamics and mainly the poor liquidity of the scheme. Commenting two weeks after Welkom Yizani trading was launched Klink told Tech Financials that it was too early to draw any conclusions about the scheme performance.
“Due to the high number of applications for shares in 2006 when the Welkom Yizani scheme launched, the general rule was to allocate a maximum of 430 shares per participant who entered the scheme. The majority of shareholders hold less than this and on average shareholders hold less than 150 shares. This necessarily contributes to the illiquidity of Welkom Yizani shares in the market currently. The laws of supply and demand dictate that this would suppress the share price,” explained Klink.
Klink added that the current Welkom Yizani price reflects the state of the market – at present there are more sellers than buyers.
Fury from affected investors continues to flow in. One reader left the following comment. “When I invested in 2006, I was expecting a lot from this BBBEE initiative. Instead Media24 benefited from the scheme at my expense. I can’t take it lying down. I’m in support of those who are suggesting Thuli Madonsela (the Public Protector) to probe this unfair treatment by Welkom Yizani”.