TNM plc has unveiled plans to raise capital through issuance of new shares for cash totalling K30 billion targeting three main shareholders in a move that has drawn mixed reactions from stakeholders.
In a notice of the extraordinary general meeting (EGM) to be held on May 2 this year, TNM plc company secretary Chisomo Governor indicated that the firm intends to issue 1.5 billion new shares valued at K30 billion to Press Corporation plc, Old Mutual Life Assurance Company Limited and Nico Life Insurance Company Limited.
The notice further says Press Corporation plc, which has 43.72 percent stake in TNM, will be allocated 794.7 million shares while Old Mutual Life Assurance Company Limited with 23.57 percent stake will be allocated 483.2 million shares and Nico Life Insurance Company Limited, with 8.16 percent stake, will be allocated 172.4 million shares.
Reads the notice in part: “It is further resolved that any of above -mentioned subscribers may take up additional shares, but the total number of shares taken under this issue shall not exceed 1 500 750 375.”
RMalawi Stock Exchange (MSE) chief executive officer John Robson Kamanga said on Monday that the approach is provided as an option by MSE when a company needs to raise capital at a short notice.
“Rights issue could take time for the company to reach the market and raise capital, but using shares for cash ensures that the company accesses the market timely and raises the funds on time,” he said.
While acknowledging that other shareholders will see their equity holding diluted, Kamanga said the dilution will be minimal because the shares to cash is controlled to a certain ratio.
Stockbrokers Malawi Limited equity investment analyst Kondwani Makwakwa said in an interview yesterday that the move allows TNM to raise capital more quickly and efficiently compared to a rights issue.
He said: “Since its targeted at specific investors, it streamlines the process and avoids the time-consuming requirements involved in offering shares to all existing shareholders.
“This strategic move helps TNM inject funds into the business faster, supporting its investment or expansion plans without delay.”
But Minority Shareholders of Listed Company secretary general Frank Harawa said yesterday that unlike raising funds through rights issue where everyone is eligible to participate, the approach means their shareholding will be diluted and it is difficult for them to stop the process.
But he said the advantage of the approach is that it will resolve TNM’s debt situation as it owes the three companies money and servicing the debt has been costly.
“This means these shareholders will buy extra shares to enable the company to settle the debts, which is a welcome development going forward, but on the other hand, this means our shareholding will be diluted,” he said.
Harawa and the stock market analysts also said the company has not come out clearly on what determined the value of the prices of these shares, highlighting that these are some of the areas they will need clarification on at the EGM.
Press Corporation plc is the leading shareholder of TNM with 43.72 percent stake followed by Old Mutual Life Assurance Company at 23.57 percent, Nico Life Insurance Company Limited at 8.16 percent and the public owns the remaining 24.55 percent.
