THE BOTTOM LINE
Debt (and share price) crunch at Trustco prompts odd move
CEO wants to loan his company R1bn - after raising cash by selling his shares cheaply to new investors
After touching an all time high of R13.49 at the end of August, the shares of Namibian investment company Trustco on the JSE have nearly halved in value.
The sudden deflation in Trustco’s share price appears to coincide with ongoing efforts to restructure its debt load – a development that took a most curious turn last week when an entity aligned to CEO, founder and major shareholder Quinton van Rooyen proposed making a loan to the company of up to R1bn.
What is really strange is that Van Rooyen – via Next Investments – wants to raise part of the capital sum to be loaned to Trustco by selling a portion of his shares to current shareholders and new investors.
One might argue that placing Trustco shares at 700c a share is an easier task than trying to peddle shares at a price north of R13 a share. But the bigger issue really is why even go this route to recapitalise Trustco?
Surely it would it be far simpler for Trustco to raise fresh capital to cull its debt by issuing new shares for cash? Do we assume there is not much appetite from deep pocketed institutional investors, who are conspicuous in their absence of Trustco’s share register?
One might also presume Trustco could have turned to key (and enthusiastic) shareholders in form of the US-based Riskowitz Value Fund (RVF) and Conduit Capital for fresh funding. RVF recently invested heavily in Trustco’s unlisted subsidiary Legal Shield, and Conduit was recently singing the praises of the Namibian company in commentary accompanying its latest set of financials.
It seems, judging by the crunched share price, that the market suspects Van Rooyen – who will have an option to be paid back in Trustco scrip – is a lender of last resort?