The upcoming JSE listing opens up a portal of institutional and retail portfolios as well.
Fledgling asset manager Altvest has finally been granted a listing on the Johannesburg Stock Exchange’s (JSE’s) AltX board under the diversified financial services sector, following its delisting from the Cape Town Stock Exchange (CTSE).
The Financial Markets Act does not allow for the transfer of listings between different licenced stock exchanges in South Africa, unlike in other jurisdictions, and the company had to issue a brand-new prospectus, which only has to be done once at first issue abroad. It is for this reason the relisting has taken so long, Altvest CEO Warren Wheatley told Citywire South Africa.
‘One of the interesting things, however, is that usually when you delist, you’ve got to make minorities a cash offer, but you can apply for dispensation from that rule,’ he said, ‘which will only be granted on the basis that you are relisting somewhere else.’
Altvest was incorporated as a public company in April 2021 and listed on the CTSE in May 2022. Altvest’s class A preference shares and class B preference shares were listed on the CTSE in September and December 2022 of that year and its class C preference shares in September 2023.
Altvest raised R321m of capital associated with the three share classes linked to three different investee companies during that time. It also made a secondary listing on A2X on 6 September 2022.
Altvest acquires stakes in private companies and also provides funding to small enterprises following a ‘rigorous due diligence and validation process’.
To fund the acquisitions, it raises the cash required to pay the seller by issuing preferred ordinary shares, that the public can buy, hold or sell on a regulated exchange (in this case, the JSE or A2X from the listing date).
The current three classes of preference shares are associated with the Umganu Lodge, adjacent to the Kruger National Park, the Bambanani Family restaurant group in Gauteng and the Altvest Credit Opportunities fund (ACOF), formerly known as Kisby.
ACOF was structured to procure funding through the issuance of the class C shares in addition to long-term debt through a listed domestic medium-term note (DMTN) programme.
The new abridged prospectus relates to the JSE listing by way of an offer for subscription of up to 1 million ordinary shares, 3.9 million class A shares, 718,901 class B shares and 39.4 million class C shares. This is subject to a minimum subscription amount of R6m in respect of the ordinary shares, of which R2.5m has been underwritten by WGW Capital.
The underwriter, which belongs to Wheatley (pictured below) himself, has agreed to buy all the shares being offered and take on the risk of selling them to the public. ‘This is the most common type of underwriting and provides the company with guaranteed capital,’ the prospectus stated.
This is subject to the JSE listing becoming wholly unconditional, with effect from the start of trade on Monday, 14 October 2024.
Preference shares
Altvest is a rather unique proposition, as it invests in local businesses and issues the different classes of preference shares linked to those businesses.
Gaia Fund Managers, which is also listed on the CTSE, does something similar, the only difference being that it allocates almost all its issued preference shares to asset manager Kruger International. Some listed private equity propositions do something similar, but rather than single share exposure, they provide a portfolio solution.
Another unique characteristic of the upcoming Altvest listing and the holding company behind it is that settlement of the capital raise will be done exclusively through Purple Capital’s EasyEquities book-build platform.
Wheatley said it is the biggest and cheapest retail broker on the market with more than 800,000 active users. ‘That is much more than the number of brokerage accounts on the JSE,’ he said, ‘so it is a natural fit to execute our ethos.
‘The difference between us and how IPOs normally work is that an investment bank would usually do a deal with a company, and they would only sell the stock to their little black book of preferred customers. And that’s one of the issues we kind of want to dismantle, which is to democratise IPOs,’ he said.
‘Many people live by the mantra that you should never invest in an IPO. Always buy after it’s listed. But the point is that everyone needs to be able to make that choice for themselves.’
Following settlement of the capital raise, shareholders are free to transfer their Altvest shares to a JSE brokerage account of their choice.
Wheatley said there are a few more acquisitions in the immediate pipeline, which will be more theme-based in nature like township businesses or a portfolio of movie products.
‘So, for example, we’ll have a portfolio that we’ll bring to the market, that will, let’s say, pool 200 township businesses into a unit trust type structure that represents the township economy,’ he said.
Wheatley said it will be structured similarly to its credit fund, which opens itself to equity and wholesale funding from debt markets. ‘We found that that structure worked very well for raising capital.’
Altvest’s Growth and Opportunities funds, which are pooled life products, are administered by Peregrine Capital and managed by 27four Investment Management.
The funds are available to institutional and other professional investors as part of portfolio construction tools (asset building blocks). These are available through various distribution channels including linked investment services providers and the independent financial adviser network.
The Growth fund adheres to the Pension Fund Act’s Regulation 28 prudential limits, which incorporates around 5% of Altvest’s assets. The rest comprise exchange-traded funds and offshore investments.
‘It’s done exceptionally well,’ Wheatley said. According to its June 2024 factsheet its annualised return since inception was 11.48% compared with its benchmark of 10.3% (CPI plus six percentage points).
The Opportunities fund is an alternatives building block that can be added to any portfolio or be accessed through an endowment or wrapper. It provides proportional exposure to all Altvest’s assets including its listed debt, or a portion of ACOF (debt or equity), Umganu, Bambanani or Altvest Capital itself. Its fact sheet for June 2024 shows no track record but indicates its benchmark at CPI plus eight percentage points.
Altvest primarily generates income through fees levied on investors and investee companies. The company also earns asset management fees from the Growth and Opportunities funds.
In addition, it has a financial advisory arm called Altvest Securities, that provides credit life insurance and disability cover among other things.
‘Often we find the people we work with have completely neglected themselves from a financial planning perspective,’ Wheatley said. ‘And so during a credit analysis or an equity analysis, we uncover all these things.
‘You uncover, for example, if they’ve been exploited by an insurance company or by a broker, and this business steps in to ‘help’ the individual financial planning needs of small business owners.
‘So, it’s an ecosystem that can support SMME’s from all perspectives, including employee benefits,’ Wheatley said.
Publication: www.citywire.com
