Richemont’s plans to terminate its South African Depository Receipt (DR) programme and list its A shares and A Warrants as a secondary inward listing on the JSE, has received the green light, but not without hefty costs to shareholders, an analyst has cautioned.
The luxury goods company said in a Sens announcement on Wednesday it has received approval from the South African Reserve Bank, opening the way to implement its plan to secondary list its local A shares and A warrants on the local bourse, in addition to the company’s main SIX Swiss Exchange listing.
Richemont said the last day to trade in DR and A warrant receipts will be 18 April. The secondary listing of the A shares and A warrants is expected to go live on 19 April.
The company said holders of A warrant receipts will receive one A warrant for each 10 A warrant receipts held, or a cash payment.
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Speaking to Moneyweb, Casparus Treurnicht, portfolio manager and research manager at Gryphon Asset Management, says the biggest impact will be on index-focused investors who will be affected by a shift in the weighting of their indices.
He says Richemont’s weight in the JSE Top 40 Index will decrease from around 20% to the region of around 3.5%.
“Mostly index funds will have to rebalance. I’m sure there are also a lot of active funds that would also like to rebalance and not be so active,” says Treurnicht.
“It’s actually not a good thing, in a way, because now you’re selling a whole lot of shares and you need to buy every other single share in the index. So there are a lot of costs involved.”
Investors will be faced with shareholder taxes for all the stocks they will be forced to buy in order to rebalance, he says.
“For example, if you only hold 3% of Richemont, you were significantly underweight, but now you will be almost equal weight after the change.
“But if you were 20% in Richemont in an active fund, you were actually equal weight, but now you’re significantly overweight, so now you’ll have to go and sell those shares in the market.”
Read: Richemont shareholders reject activist Bluebell’s demands
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