JSE exodus continues

The JSE is experiencing a significant number of delistings, with many companies believing they are undervalued by the market.

This is the view of Anchor Capital CEO Peter Armitage, whose company also delisted from the JSE in 2021.

Armitage’s comments come in light of African Rainbow Capital Investments (ARC) announcing that it is considering delisting from the JSE.

This is because the company’s significant trading discount to its net asset value (NAV) shows no sign of narrowing. It said it would consider whether there is value in remaining listed on the JSE.

ARC’s latest NAV is R11.41, while the company’s share price is R5.71 as of Monday morning. This equates to a trading discount of 50%.

Armitage told 702’s The Money Show that many JSE-listed companies, particularly small and mid-cap companies, are undervalued.

“All small or midcap businesses trading below R10 billion are trading at between 20% to 60% below what we think their true value is,” he said.

“There’s a lot of companies out there that are worth a lot more than the share price, and people are prepared to back it up with real money.”

This was partly why Anchor Capital decided to delist in 2021.

“We thought our company was worth a lot more than what the market did. So we were very happy to borrow money and buy shareholders out, and it turned out to be the right thing to do,” he said.

While there are many good reasons to be listed on a stock exchange, Armitage said a company being undervalued is a big reason not to. 

This becomes particularly prevalent in South Africa, he said.

“Ultimately, if GDP growth is low and confidence levels are low, it results in low valuations, and if you can’t see the prospect of being able to raise capital at what you think is a fair value for your business, probably more than 50% of the reasons for being listed disappears,” he said.

Armitage said this is not an “African Rainbow Capital problem” but a challenge for many South African companies. Many companies have delisted from the JSE in recent years, and he believes “there’s another 10 or 20 to come”.

Over 20 companies delisted from the exchange in 2022 alone. The number of companies listed on the bourse has dropped by more than half over the past 30 years. 

In 2022, AmaranthCX rang the warning bells for a string of delistings from the JSE.

The company said South Africa had 332 listed companies across the JSE and the three challenger stock exchanges at the beginning of 2022.

AmaranthCX director Paul Miller said that during the first half of 2022, 18 companies delisted from the JSE and other exchanges.

Fourteen more companies are in the formal process of delisting or are subject to corporate action likely to result in their delisting.

There are also 16 companies suspended from trading or which have not been able to publish their financial results.

AmaranthCX’s research suggested that at least 32 companies, potentially far more, will delist from South African stock exchanges this year.