In 2014, Special Purpose Acquisition Companies made their way to the South African market. This was after the JSE amended its listing requirements to accommodate these new investment structures. The new rules permitted cash shells to list on the bourse in order to raise the capital needed to afford the business’s future money makers.
In South Africa the vehicle is still very much in its infancy. Only eight listings were added to the bourse’s arsenal over the last few years, bringing more than R8-billion in funds to the fold. These companies traded under the sector banner of non-equity on both the mainboard and the AltX. At the start, the Public Investment Corporation was the structure’s biggest supporter, considering it an apt avenue to create more black industrialists. It still owns a significant stake in GAIA Infrastructure Capital, which invests in operating infrastructure assets in southern Africa’s energy, transportation and water and sanitation sectors.
It returned to the market in the past few years to raise capital to buy R1.7-billion in infrastructure assets. Kula-Verster says being a listed entity gives the management team a platform to potentially raise significant capital to enable them to make meaningful acquisitions, without facing some of the challenges experienced by traditional private equity ventures with specified exit restrictions.
It probably won’t return to the capital markets very soon. Its financial results for the year to March 2019 that were released in the third week of November, revealed a highly cash generative business. With a cash generation ratio of 122.8% relative to trading profit, the company was sitting on a cash pile of R611.2-million at the time of reporting. This represents 39 cents per share, relative to a closing price of 74 cents at the end of March.
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