Following on the impact of my previous #DearDarkie letters, especially those dealing with investments, I have received a flood of inboxes from friends asking for my opinion on the new MTN Zakhele Futhi shares and whether I will be buying them or not.
Just to give you a bit of background, in 2010, MTN launched a BEE share scheme called MTN Zakhele, offering qualifying black individuals a share in the company through a discounted price of R20 per share (the main MTN group share was trading at R117 in 2010). That scheme will be coming to an end in November, giving investors a growth of over 400% growth with the price trading in the R77 region currently.
To answer all your questions, No, I will not be buying the new mtn zakhele shares, for the following reasons:
Firstly, 20% discount is too little in the equity market. Before the Nigeria scandal broke last year in November 2015, MTN shares were trading at R214, today they trade at R125, a massive fall of over 40%. Who knows what could happen tomorrow?
Secondly, the lock in period of 8 years is honestly not worth it for 20% discount. You’re better off buying the main MTN share directly from the market and managing the risk yourself.
Thirdly, raising almost R10billion through a BEE scheme just sounds too suspicious for me, for a company that recently took a knock of about $1.4billion (do the maths) due to regulatory scandals in Nigeria. Sounds like fund raising to me.
Finally, let’s face it, these kind of share schemes are not meant for the already squeezed middle class or the poor. Poor people don’t have R2000 (minimum required investment) lying around to buy shares, they are hustling for bread. And for middle class people, even if they can scratch around and come up with R2k or even R10k in a space of 1 month (12 September to 21 October 2016 which is the period in which the offer stands) that will hardly make anyone close to wealthy, after 8 years, even if we assume growth of 400% based on previous perfomance.
So this scheme, like many other so called BEE schemes, is only going to empower those who are already empowered, who can put down a R100k or R1mil even, without missing bread.
When the original Zakhele shares, or Multichoice Phuthumathi , or Sasol inzalo shares launched, their offer price was really hard to resist, but this current offer, I’m sorry but I’ll pass.
In conclusion, my dearest darkies, the short answer, NO, I will not buy MTN Zakhele Futhi shares, I’ll rather invest monthly, as little as R300 into an index tracker through a tax free investment account, after 8 years, I bet I’ll still come out tops than a fellow middle class black person who invested R10k once off into a non-diversified MTN share.
Disclaimer: Remember, I’m not a financial advisor. This is not advice. Just opinion. Please contact your financial advisor.