Sagarmatha Technologies has decided to list its portfolio of media and technology assets on the Johannesburg Stock Exchange (JSE). The media and technology group has a minimum subscription of R3 billion and public shareholders must hold at least 20% of the company which will be valued just below R50 billion if the listing is successful. Now, the portfolio of businesses that are in this group are quite interesting; Independent Online, African News Agency, Loot and IOL online classified businesses etc. But why does the group need to list? There is misconception among businessmen and investors that listing is what will bring prosperity to a group. As a result most businesses in South Africa lack the innovation required to raise funding outside of listing on the JSE.
It is unbelievable how many companies are willing to go into the lion’s den of JSE investors that are so conservative that they will never see a technically insolvent concept as a viable investment. We all know that successful listings on the JSE typically consist of profitable companies with ridiculous projections, because once you got a profit you can say whatever you like about how good it will be next year.
Sagarmatha seems to need the listing more than the potential investors it would like to take on board. Now that is a concern. If you want to list on the JSE, you must show investors you have nothing to prove. If you want a speculative listing, go on the NASDAQ or NYSE where they have a record of listing companies still in accumulated loss cycles (Amazon, Snapchat and Facebook).
JSE investors are not good at making good speculative bets mainly due to not bothering to gain the experience. Some don’t even know that some of their investments have been speculative. Good examples, Naspers (Tencent didn’t start as a technology darling) and Steinhoff (has been buying dead furniture retailers such as JD Group for years). Given the current status of the South African investor community, the Private Equity arena has the best opportunity to build a strong portfolio of speculative investments that can be offloaded in the JSE once properly de-risked.