JSE Limited shareholders have called for the bourse to review the way it conducts its business, and requested it to consider share buybacks for shareholders while listing more companies on the exchange.
Speaking at the JSE’s annual general meeting (AGM) on Tuesday, shareholder Howard Lowenthal said the JSE issuers were complaining about the red tape.
“We’ve got a big moat. We don’t need you investing our cash for us. Warren Buffett will tell you that he’s never paid a dividend at Berkshire Hathaway, and they embark on share buybacks, and so do numerous others, Lowenthal said.
“We are appealing to you to review despite all the hard work that goes on here. Quality of earnings. All of these things are vital and required regardless. But R94 on an 8% dividend yield? I can invest the money in the money market at 8%. We don’t need dividends. We need to buy the shares back… We need to improve our return,” he said.
“It’s vital and I’m appealing again to you in this forum. Ten years ago, I stood in front of (former JSE CEO) Nicky Newton-King, and I said to her we are presiding over a closing down sale of the JSE. I said we’re going to be closed by the year 2025, (and) we’re getting close. We need to do something,” he said.
Lowenthal said announcing a share buyback would be easy in an environment that the JSE finds itself in.
“You only need about 10 000 shares a day. It’s been 200 or 300 million. The JSC makes R1 million a day, it will be replenished very quickly. You don’t have debtors. You have a moat around this business,” he said.
He also called for more listings.
“I know that our market capitalisation is higher than it was when we had 800 listings. But after all, we’re on the southern tip of Africa. We need to provide a platform to raise capital. We’ve got about 80 shares that trade on this market that are liquid.
“So perhaps my question to you (is) please let’s do something to get a rerating of our JSE shares, because that’s actually the biggest stakeholder and the most important stakeholders here. Are there moves afoot to try to improve the investability of the JSE share?” he asked.
JSE non-executive chairman Phutuma Nhleko said: “I have seen situations where there is performance and there are earnings, but it’s just not reflected in the share price. Often in those situations, there are usually a multitude of reasons why that happens, sometimes it’s macro issues that are at times beyond the company (control).
“Having said that is not a cop-out, it’s to say that, to give you comfort, we are constantly trying to see what it is that we can do differently within various constraints to get that re-rating,” he said.
He said there were good and bad reasons for a buyback of shares.
“What we are doing is engaging in very active work to make an assessment of whether or not we should or we shouldn’t undertake the share buyback.
“If we had to do so, what quantum it would be? The JSE has a small balance sheet and very limited room, unlike big corporations that can afford to do very large buybacks. If things go wrong they can sustain that. The JSE doesn’t have that much latitude,” Nhleko said.
On the delisting of companies on the bourse, he said: “I came in here also alarmed at the number of delistings. Once one starts to look at what is happening on the largest stock exchanges elsewhere, one finds that the JSE is not necessarily inconsistent with the trend – as negative a trend as it is – with the other large stock exchanges. The question is what do you do about that? And we’ve done quite a lot of work internally.”
The JSE reduced its listings from 800 to 300 over the past 20 years.
Nhleko said the JSE had tried to mitigate the delistings and also made things attractive for medium-sized companies to come to the stock exchange.
The JSE Group CEO Leila Fourie said since 2020, the JSE had disqualified five directors as a result of its investigations and it had imposed financial penalties which were very constrained, within the ambit of its powers.
“In a number of instances, we’ve imposed the maximum fines. Ultimately, more needs to be done on a national-level. And we are doing everything in our power to interact with the relevant law enforcement agents and will continue to work in that regard,” she said.
Last year Business Report interviewed Paul Miller, a director at AmaranthCX, who said South Africa was on a seven-year losing streak averaging about 25 company delistings a year.
At the time he predicted in that one in 10 listed companies were anticipated to delist in 2022.
BUSINESS REPORT