FLOATING shares on the capital market without a credit rating may inhibit public participation due to lack of information on the risk profile of the company intending to list, Credit Rating Agency (CRA) has observed.
Commenting on the low number of subscribers to the ZCCM Investment Holding (IH) share offer CRA executive director of strategy and business development, Chishimba Yumbe said lack of clarity on the risk profile and operating environment of ZCCM-IH may have discouraged investors.
Almost 28 million Government shares in ZCCM-IH were offered for sale to Zambians, but only 0.81 percentage point shares were bought when the offer closed on November 30, 2015, with the listing company attributing the low subscription to the challenges facing the global copper mining industry.
Mr Yumbe said in an interview on Monday that credit ratings analyse all risk issues and are a vital component of market information to be included in a public offering of shares if the public is to be attracted in the offer, especially during challenging times such as the fall in the prices of base metals on the global market.
CRA is licensed by the Securities and Exchange Commission (SEC) as Zambia’s only authorised provider of credit rating services and it seeks to promote credit ratings spur investments and economic development.
“It was important to understand why the response from public investors could have been low. Investors’ interests are primarily two-fold – reward and risk. The former is often well amplified in the company prospectus through the financial projections, but the latter if not well articulated can be very difficult to decipher by potential investors.”
“One way a risk is easily communicated is through a credit rating. To arrive at a credit rating entails independent assessment of all business and financial risks, and the credit rating report provides detailed pertinent information,” he said.
Mr Yumbe, who described the low participation as unfortunate, said the current economic downturn in base metal prices does not mean future prospects are poor hence, the need to view share offers and long-term investments.
On July 30, 2015, Government offered Zambian citizens 27,961,237 shares, representing 17.4 percent of its shareholding in the mining conglomerate but Stock Brokers Zambia said only 805 applications were received and processed, representing a total of 226,064 shares.
This means the residual shares amounting to 27,735,173 representing 17.3 percent shareholding in ZCCM-IH will still be retained by Government.
Source: Daily Mail