The price of Vodacom’s B-BBEE shares, YeboYethu, has crashed back to its 2016 listing levels in what may be seen as a buying opportunity for new investors.
The JSE listed YeboYethu shares were trading around the R50.00 mark on Friday down from a high of about R125.00 recorded in June.The share was quoted at R123.50 on August 31. That means it dropped by about 60% in about 20 days. Its a scary movement but there may be no reason to panic.
The sharp decline comes shortly after the Vodacom/YeboYethu B-BBEE arrangement was rewinded. The 10 years old YeboYethu transaction which saw Vodacom South Africa sell at a discounted price a stake to black South Africans has matured. Vodacom opted to rewind the deal, giving it another 10 years to run currently valued around R17.5 billion.
The rewind came with a huge cash payout to Yebo Yethu investors. It is this factor which largely explains the recent sharp drop in the share price. Many investors who have stayed in for 10 years cashed out after the receiving the large dividend pay. That would have caused a significant rise in the supply of the share with many investors rushing to exit. Supply would have exceeded demand. And as the demand/supply principle goes, when a commodity’s supply exceeds demand its price drops. And so did YeboYethu shares.
That means the drop is more of a technical nature and less of a fundamental reflection on either YeboYethu’s or Vodacom’s financial prospects. In fact Yebo Yethu’s prospects have been boosted by the rewinding of the deal. That means the Yebo Yethu shares may be cheap at current levels.
In rewinding the deal, Vodacom refinanced, consolidated and upgraded Yebo Yethu’s exposure from the South African level to group level. That means YeboYethu now holds JSE listed Vodacom shares making the exposure more liquid. The upgrade also means that Yebo Yethu’s exposure is now international as it now includes Vodacom’s non South African operations.
Speaking to the ewind of the deal, Vodacom Group CEO Shameel Joosub, had this to say: “It was crucial for us to retain our empowerment shareholding but at the same time, go one step further. Our intention was always to move our BEE investors from being shareholders in Vodacom South Africa to a shareholding at the Group level thereby giving them exposure to the broader local and international markets in which Vodacom Group trades.
And YeboYethu chairperson Zarina Bassa said “These are exciting times for YeboYethu shareholders as we continue to invest in the next 10 years. The board is unanimously supportive of the transaction as it creates immediate value now for the more than 82 800 black investors through the cash dividend and, importantly, an opportunity to reinvest on favourable terms in the Vodacom Group.”
This means that Yebo Yethu’s prospects are now more closely related to those of Vodacom Group. Those who go in with a long term view may be handsomely rewarded, depending on how Vodacom performs over he next 10 years. And yes, there are no guarantees in this game. – firstname.lastname@example.org