FosRich rights issue delayed by SSL, offer pending this month
The rights issue planned by electrical lighting company FosRich has been held up for the three months while the company’s financial advisers try to clear a path for a particular block of owners, who acquired their shares through Stocks & Securities Limited.
With SSL now in court over fraud allegations relating to an estimated $3 billion of missing funds, the firm has lost its brokerage licence and is no longer allowed to trade on the JSE.
Consequently, the investors who hold shares in the junior market company through SSL accounts will not be able to utilise them to participate as subscribers in the current offer from FosRich Company Limited.
FosRich is seeking to raise $139 million from its crop of 5,238 stockholders through a ‘non-renounceable’ offer, meaning only current owners will be allowed to subscribe for new shares. Had it been renounceable, the unsubscribed shares might be sold to other market investors.
FosRich, a two-decade old company founded in 1993, has traded on the junior stock exchange for six years, and has been growing consistently since. The rights issue will fund its ongoing expansion projects.
When FosRich went public in 2017, the dealer that arranged its IPO and brokered the listing was SSL.
Now the broker chosen for the rights issue, Mayberry Investments Limited, said on Tuesday that about 25 per cent of FosRich shareholders hold SSL accounts, and was the cause of the delayed offer that had received approval from shareholders a year ago.
That would equate to around 1,300 people, based on FosRich’s last disclosure of the number of shareholders on register.
However, Mayberry’s head of investment banking, Senior Vice-President Dan Theoc, says a solution might have now been found.
“We believe that we’ve come up with a good solution between the JSE and FSC, and that notice will come out that will allow those approximately 1,000 shareholders the ability to participate,” Theoc said.
The solution, he said, is for shareholders who have their accounts with SSL to open accounts with another broker, since SSL has been suspended from acting as a broker on the JSE.
The record date for the rights issue was set at June 2, which means the offer will be open to owners of FosRich shares up to that point.
The shares traded midweek at $2.34, which is close to FosRich’s $2 IPO price of six years ago.
A director’s circular regarding the rights issue offer is pending.
“Within the next seven to 10 days, we expect the circular to come out, and then it will give us a 10-day notice period before we have the actual opening of the rights issue,” Theoc said at FosRich’s annual general meeting on Tuesday.
The company has grown exponentially since its listing, rising from $1 billion in sales to $3.4 billion last year, amid expansion into PVC pipe manufacturing, transformer repair, and distribution of solar products.
The company founded and principally owned by husband and wife team, CEO Cecil Foster and Chairman Marion Foster, is currently in the process of developing a super complex near its home base at Molynes Road in Kingston.