Goodbye Ellies – former JSE darling to be liquidated

Ellies informed shareholders this morning that its business rescue practitioners have decided to place the company into liquidation.

In a SENS announcement released this afternoon, Ellies said its business rescue practitioner has concluded that there is no reasonable prospect of the company being rescued.

Therefore, an application will be made to the court for an order to discontinue the business rescue proceedings and place the company into liquidation. 

This comes after Ellies entered into voluntary business rescue proceedings on 31 January 2024 and the appointment of its business rescue practitioner on 6 February 2024.

Ellies’ share price has declined by over 99% since listing.

The company posted a R106.5 million loss for the six months that ended 31 October 2023, which was 205.2% worse than the R34.9 million loss in the prior period when it reported its latest financial results. 

Ellies was founded by Ellie Salkow in 1979 in Johannesburg with five employees, selling only television aerials.

The company expanded rapidly and opened branches in Cape Town, Durban, Port Elizabeth, Windhoek, Polokwane, Gaborone, Nelspruit, East London, and Bloemfontein.

Ellies broadened its product range in the nineties to include remote controls and various other accessories.

In 1995, the company founded Elsat with the advent of satellite TV in the South African market, which soon became a household name. 

The next decade saw it adding renewable energy products, backup power, and other products to its portfolio.

Ellies was listed on the JSE’s Alternative Exchange in 2007. It issued its maiden dividend in 2010 and moved to the JSE’s main board in 2010.

The company became a firm favourite among investors and had an all-time high price of over R9.50 per share in May 2013.

There was tremendous excitement about its involvement in providing set-top boxes in partnership with Altech EUC as part of the digital terrestrial television (DTT) roll-out.

However, as the government started to fumble the DTT migration, so did the interest in Ellies and its prospects.

The share price declined by 80% between 2013 and 2014, and the company continued to lose value as it searched for new revenue streams.

By 2019, it was trading at 10c per share, and a plan was announced to buy Bundu Power for a maximum consideration of R202.6 million in 2023. 

Bundu Power was founded in 2005 and specialises in the distribution and rental of generators and the distribution and installation of solar and ancillary products.

Ellies initially planned to raise the R202.6 million it needed to pay for Bundu Power through a rights offer of 7c per share.

However, the share price plummeted to 5c per share, well below its planned rights offer price of 7c. It meant shareholders were better off not exercising their rights.

It was time for plan B. This time, Ellies tried to buy Bundu Power for R208 million and fund it through a debt facility.

However, at the beginning of the year, Ellies revealed that its bankers had advised that they would not fund the proposed transaction.

It was no surprise then that no bank was willing to fund the transaction as Ellies’ market cap by then had plummeted to R40 million, and the company was running consistent losses. 

In the same announcement, its board decided it would be in Ellies’ best interest to commence with voluntary business rescue proceedings on the 31 of January 2024. 

Ellies’ latest half-year results also show the company is technically insolvent, with its liabilities exceeding its assets. 

This means that even if Ellies sold all of its assets at their book value, it would not be able to pay off its debts. 

The company is currently trading at 1c per share.