MICROLENDER African Dawn Capital last week
finally released its annual report for the year ended-February, but it
did little to pacify irate shareholders.
They are now demanding the company lift the voluntary suspension of its shares. Trading in the stock was halted in May.
Its report failed adequately to explain operations or what it intended to do with the proceeds of its R21.8m rights issue.
"The financials are, quite frankly, frustratingly difficult to interpret," said Mike Mclaren, a partner at Webber Wentzel and one of Afdawn’s shareholders.
In an attempt to hold the company to account, some shareholders have reported it to the JSE for misusing the Stock Exchange News Service (Sens).
"I have reported the problems to the JSE; they have not responded," said shareholder and former executive chairman Mac van der Merwe.
"I can imagine that shareholders who supported the rights issue might feel aggrieved," said 36One Asset Management analyst Jean Pierre Verster.
The company’s shares remain suspended on the AltX months after it applied for suspension pending the investigation of error involving debtors impairments in its accounts, which delayed the publishing of its annual financial statements.
The error resulted in the restatement of the 2013 and 2014 results, reducing the company’s net asset value (NAV) and triggering NAV-linked debts to subsidiary Knife Capital, which it bought in a share swap last year in a bid to transform into an investment holding company.
This resulted in an extra R2.1m owed to Knife Capital in addition to a prior R1.46m NAV liability that became due soon after Afdawn bought the company and Afdawn’s asset value fell below 10c a share.
Mr Verster said the restatements meant the shares issued to Knife Capital’s sellers were "worth less".
"That is why the deal needed to be restructured; it was necessary because Afdawn shares are worth significantly less than the price they were issued at," Mr Verster said.
"The fact that the rights issue was only partly supported just exacerbated the situation by not injecting sufficient capital into Afdawn to do more deals.
"It will be interesting to see if aggrieved parties think there is a basis for further investigation into the apparent prior-period error," he said.
Afdawn also owes another R2m to Knife Capital for failing to raise the R50m it initially aimed for in the rights issue.
According to the annual report, Knife Capital has waived debts related to the share issue in return for Afdawn relinquishing claims to any "carried interest" earned by Knife Capital, which the subsidiary will pay to its three directors.
Afdawn did not disclose the value of the carried interest, instead referring to "annexure C of the transaction agreement".
A previous Sens announcement said this would be half of the interest arising from the sale of assets Knife Capital managed on behalf of a third party.
Afdawn said it was in talks with a potential investor about selling a large chunk of its microloans business.
They are now demanding the company lift the voluntary suspension of its shares. Trading in the stock was halted in May.
Its report failed adequately to explain operations or what it intended to do with the proceeds of its R21.8m rights issue.
"The financials are, quite frankly, frustratingly difficult to interpret," said Mike Mclaren, a partner at Webber Wentzel and one of Afdawn’s shareholders.
In an attempt to hold the company to account, some shareholders have reported it to the JSE for misusing the Stock Exchange News Service (Sens).
"I have reported the problems to the JSE; they have not responded," said shareholder and former executive chairman Mac van der Merwe.
"I can imagine that shareholders who supported the rights issue might feel aggrieved," said 36One Asset Management analyst Jean Pierre Verster.
The company’s shares remain suspended on the AltX months after it applied for suspension pending the investigation of error involving debtors impairments in its accounts, which delayed the publishing of its annual financial statements.
The error resulted in the restatement of the 2013 and 2014 results, reducing the company’s net asset value (NAV) and triggering NAV-linked debts to subsidiary Knife Capital, which it bought in a share swap last year in a bid to transform into an investment holding company.
This resulted in an extra R2.1m owed to Knife Capital in addition to a prior R1.46m NAV liability that became due soon after Afdawn bought the company and Afdawn’s asset value fell below 10c a share.
Mr Verster said the restatements meant the shares issued to Knife Capital’s sellers were "worth less".
"That is why the deal needed to be restructured; it was necessary because Afdawn shares are worth significantly less than the price they were issued at," Mr Verster said.
"The fact that the rights issue was only partly supported just exacerbated the situation by not injecting sufficient capital into Afdawn to do more deals.
"It will be interesting to see if aggrieved parties think there is a basis for further investigation into the apparent prior-period error," he said.
Afdawn also owes another R2m to Knife Capital for failing to raise the R50m it initially aimed for in the rights issue.
According to the annual report, Knife Capital has waived debts related to the share issue in return for Afdawn relinquishing claims to any "carried interest" earned by Knife Capital, which the subsidiary will pay to its three directors.
Afdawn did not disclose the value of the carried interest, instead referring to "annexure C of the transaction agreement".
A previous Sens announcement said this would be half of the interest arising from the sale of assets Knife Capital managed on behalf of a third party.
Afdawn said it was in talks with a potential investor about selling a large chunk of its microloans business.
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