Medtech holdings will forge ahead with plans to alter their shareholding structure and change the name to Bridgefort Capital after the vote went through the Extraordinary general meeting (EGM) held on Monday the 15th of November. The plans include a consolidation of shareholding that will see shareholding divided by 253 shares and an operational structure change that will make the company a holding investment company. Between Friday the 19th and Monday, the 22nd of November shares were being converted to their new structures and pricing leaving those on the digital platforms in a bit of a quandary as to what was going on.
The beleaguered medical and cosmetics supply company proposed a change to its structure to make it an investment holding company that holds no operating units of its own but instead owning and controlling operational businesses under the Bridgefort Capital umbrella. The company has struggled to provide shareholders value after starting 2020 brightly it found its shares ebbing and flowing between 17 and 30 cents per share. This is consistent with the lacklustre performance of the business behind the shares. It has been trading under cautionary statements for the best part of the last two years owing to the plans to change the structure.
Change of structure
The change of structure is a little more complicated and the cause of the commotion experienced on Monday. The new shareholding structure introduces 4 classes of shares, A, B, C and D. The allocations of the shares depend on the number of shares that one held on the date of conversion.
For every 253.313739 shares of Medtech held shareholders will be allocated 1 Bidgefort Class A (MMDZ.ZW) share. Those holding less than 304 shares would receive no Bridgefort Class A shares, extinguishing their investment. Those holding more than 2300 Medtech shares would also receive 1 Bridgefort Class B (MMDZB.ZW) share for every 2300 shares held. Those holding more than 10000 Medtech shares will receive an additional 1 Bridgefort Class C share for every 10000 shares they hold and 1 Bridgefort Class D share. Share classes C and D will not be listed immediately although they could be listed in the future.
Whilst complicated the structure was extremely well communicated in the circular on the change of name and structure sent out by Medtech to detail the changes.
Commotion as changes were effected
Retail and small investors on the digital platforms Ctrade and ZSE direct found themselves in some confusion over what they were seeing on their screens between Friday the 19th and Monday the 22nd. On Friday those using ZSE direct reported having shares equivalent to what they expected under the new holding structure added to their holdings.
Monday the 22nd the ZSE communicated via Twitter that circuit breakers (+/- 20% change daily limit) had been lifted to allow Medtech shares to discover their new price. This is sensible as a single Medtech share was trading at 22 cents on Friday a new Bridgefort Class A share would require a new price that was not easy to calculate as the company value via market capitalisation would need to be shared amongst 4 classes of shares that were not equally held. The Price that the shares settled on at the close of trade on Monday was ZW$1.0493 (up 319.72%).
Further to the circular published on 22 October 2021 by Medtech Holdings Limited ("Medtech"), shareholders and the investing public are advised that there was a consolidation of Medtech Ordinary Shares at a ratio of 1 share for every 253.146906 shares already held.
— Zimbabwe Stock Exchange (@ZSE_ZW) November 22, 2021
The confusion emanated from two things. Firstly some shareholders were surprised as their Medtech shares completely disappeared from their portfolios. Presumably those under the 253 share threshold. The other source of confusion was what seemed to be a delayed change in the holding numbers on C-Trade. The number of shares was not changed to the new numbers but the price was showing the new price meaning investors had the appearance of massive gains. However, C-Trade confirmed they were still in the process of completing the switch and all should be well on Tuesday.
The efforts made by both Medtech and the ZSE, as well as numerous market commentators, analysts and participants over the last few weeks to explain what is to come, cannot be understated. Numerous explanations and think-pieces were written to explain what is to come. However many investors still found themself with the short end of the stick. When the consolidation is complete and the dust has settled the full impact of changes will be assessed. What we know, thanks to the circular and other material is that some shareholders will ultimately lose their investments while the shareholding of those with larger investments will be rationalised. Share consolidations are not abnormal in the world of finance however the specifics of this consolidation has left many confused.
At the time of publishing, it seems that C-Trade has now effected the change in the number of shares to post-consolidation numbers. We haven’t seen consolidation for some time on the ZSE and Bridgefort will stand as a difficult but still practical example.