Patrice Motsepe’s ARC considers ditching the JSE

African Rainbow Capital (ARC) Investments will continue to assess whether remaining listed on the Johannesburg Stock Exchange is worthwhile. 

This was revealed in the company’s integrated annual report for the 2024 financial year, which outlined its performance over the past twelve months. 

Billionaire Patrice Motsepe founded ARC as an investment holding company and holds large stakes in TymeBank and Rain. 

The company produced strong results for the 2024 financial year, with its intrinsic net asset value (INAV) increased by 21.5% to R18.62 billion. INAV per share increased by 8.5% to R12.38, up from R11.41 in 2023. 

Currently, ARC Investments has a diverse portfolio of listed and unlisted assets valued at R20.2 billion. 

The company’s total comprehensive income for the year was up significantly from R1.99 billion in 2023 to R2.29 billion in 2024.

Despite this strong performance, the company continues to trade at a significant discount to its INAV on the JSE. ARC is trading at R7.20 per share, a 42% discount to its INAV of R12.38. This is a narrower discount than last year when it hovered around 50%. 

In its latest integrated report, the company said it will continue to assess delisting the company. When first announced, ARC said it would focus on the issue of delisting throughout 2024. 

The company has previously said the trading discount and the low free float – the number of shares available to trade publicly – are reasons it is considering delisting. 

“The JSE listing has proven beneficial to the company, providing valuable access to capital which we have utilised on several occasions,” co-CEOs Johan van der Merwe and Johan van Zyl said in the report. 

“However, the listing has not been successful in attaining a fair market value for our portfolio. The share price’s discount to net asset value continues to weigh on our ability to raise capital and create value.” 

Van der Merwe and Van Zyl said the management team has made valiant efforts to address investor concerns, which include reducing the management fee, trimming the portfolio, validating valuations through disposals, and repositioning the portfolio. 

“Even the break-even of several of our early startup businesses, with valuations now on par with industry-accepted valuation metrics, has not been successful in narrowing the discount.” 

The co-CEOs also bemoaned the lack of liquidity in ARC’s shares, partly due to the company’s shareholding structure. 

Currently, almost 80% of the shares are held internally between ARC and related parties, with a further 10% held by the PIC as a strategic shareholder. 

“While we continue to explore avenues to address the NAV discount and unlock shareholder value, it is clear that the current listing structure presents challenges in achieving a fair market valuation for our portfolio.”

TymeBank going global for listing opportunity 

TymeBank, one of ARC’s largest investments, is considering listing on various stock exchanges within the next five years. 

However, while its options include the JSE, TymeBank is circumspect as to whether the local market will provide it with adequate liquidity and funding to grow internationally. 

It favours a listing in New York, either on the NYSE or the Nasdaq, alongside a secondary listing on the JSE for its South African shareholders. 

Former CEO Coen Jonker said the company is looking to raise $150 million (R2.79 billion) from its listing.

The bank has garnered support from renowned investors, including Chinese tech giant Tencent, British International Investment, and the Ethos AI Fund.

It launched in February 2019 with a value proposition based on three pillars – simplicity, transparency, and affordability.

It closely follows Capitec’s strategy of simplicity and transparency, which helped it to become South Africa’s largest bank by clients.

The strategy also worked well for TymeBank, which signed up three million South African customers within the first two years. It now has over nine million clients in its home market. 

Tyme Global grew its customer base to 3.6 million within 18 months of launching GOtyme in the Philippines and plans to mimic this growth in other international markets. 

ARC committed R169 million in 2024 to fund TymeBank’s expansion efforts and maintain its stake in the company.