Karooooo’s Nasdaq listing analysed

Karooooo’s performance after listing on the Nasdaq stock exchange has been poor, raising questions about why it did not continue where Cartrack left off.

Cartrack was founded in 2001 and became a leading vehicle technology solutions group in South Africa.

In 2014, Cartrack was listed on the JSE and had an incredible run. Its share price increased from R9.50 to nearly R49 in six years.

It achieved an annualised return of 29% during its time on the JSE and was a darling among South African investors.

On the back of its success on the JSE, Cartrack decided to delist from the JSE and list on the Nasdaq to unlock value for its shareholders.

Karooooo was listed on the Nasdaq in April 2021 after delisting Cartrack from the JSE and restructuring the company where Cartrack became a wholly owned subsidiary of Karooooo.

Cartrack founder and Karooooo CEO Zak Calisto said a Nasdaq listing would increase its exposure to international growth funds investing, aiding their expansion plans.

Karooooo was well positioned to gain significant traction as 2021 was a particularly strong year for stock markets, especially tech stocks.

However, Karooooo’s share price declined by over 20% over the last two years despite a strong performance across all divisions.

Karooooo’s poor performance on the Nasdaq should not come as a surprise to investors. Historically, South African companies have not had much success in listing on the Nasdaq.

Companies like Lesaka Technologies, formerly known as Net1, and Datatec are examples of local companies that did not benefit from Nasdaq listings.

There are many reasons for poor share price performance, and part of the problem may be related to proximity to the action.

Karooooo competes with high-profile US tech giants and start-ups with big budgets for the attention of fund managers and retail investors.

It is important to receive positive exposure and become known in the market. Small companies could become lost in the Nasdaq exchange, which houses over 2,500 companies.

Another problem is liquidity. Karooooo is thinly traded, and it has lost the momentum associated with Cartrack.

Calisto told Daily Investor that they believe the low valuation is a result of the low liquidity.

“We do have plans to sort out the liquidity over time. However, we are conscious that our priority must be on growing the business,” he said.

It means that the Karooooo share price has not performed in line with its strong performance – especially when considering it is a growth stock.

Despite these challenges, Callisto remains positive about the move. He told Daily Investor that the Nasdaq listing was worth it and that the company expects to reap the benefits in the future.