A Shareholder vote on the conversion of debentures to shares in Econet Wireless Zimbabwe has been pushed to 14 December 2018 after minority shareholders raised concerns over allegations of unfair practices by Strive Masiyiwa, the majority shareholder in the Zimbabwean telecom group.

Econet Wireless had passed a resolution to unbundle and separately list the FinTech unit which houses mobile money service EcoCash under Cassava on 11 December 2018.

An extraordinary general meeting of the company held on Thursday 29 November 2018 was described by shareholders and other attendees as tense.

Analysts who attended the meeting said they had been "chased away", while sources at the company said "the debenture issue is very sensitive".

ITWeb Africa has been informed that minority shareholders feel disadvantaged by Masiyiwa's investment vehicle in the company.

A shareholder who attended the EGM said: "We just voted for Cassava then the other two special resolutions were suspended to 14 December. The resolution on debentures is a really thorny issue – I don't want to speculate, but there is just negative beef around it."

In a circular to shareholders ahead of the EGM, Econet stated that it was seeking a special resolution to "convert debentures into equity" with about "1,166,906,618 debentures in issue" being "converted into ordinary" shares.

The debentures were issued in 2017 as part of efforts by Econet to raise US$130 million under a rights issue. This was after Masiyiwa underwrote the debentures following differences with the Zimbabwe Stock Exchange (ZSE), which was ultimately resolved following intervention by the Reserve Bank of Zimbabwe (RBZ).

According to the resolution reached at the EGM, the conversion was to be done "at the same discount at which shares were issued pursuant to the rights offer, on the basis of ninety three point three (93.3) new ordinary shares for every one hundred (100) debentures held, to put the debenture holders in same position they would have been in had the Company not compelled them" to take debentures in the place of shares.

Concern over modalities

Minority shareholders have corresponded with the ZSE to express their concern over the modalities for the conversion.

One such investor, New York-based Development Capital Partners, said in a letter to the ZSE (dated 27 November 2018). "We have contacted the Securities and Exchange Commission of Zimbabwe requesting a revision to the unfair terms of exchange of new shares of EWZL for existing debentures of EWZL."

It adds that Development Capital was "an owner of shares but not debentures" and was not aware of the "proposed exchange offer at the time of our share purchase" while highlighting that "the debentures were neither listed nor traded in any evident secondary" market.

According to DCP Capital, "certain investors chose not to exercise their rights and suffered dilution accordingly" as the share issuance price was set at USD$0.05 compared to the market price at the time of USD$0.30.

"This enormous discount valued the Company at a mere USD$82 million or one-sixth of its market capitalisation. Now these same shareholders are being punished again," complained Matthew Tierney, Managing Director for DCP.

The ZSE acknowledged that it had received "written communication from Econet advising that after the EGM has dealt with all the business except the proposed conversion of the debentures to equity, the Chairman of the meeting will propose to the members an adjournment of the meeting to a later date" as a measure of addressing the concerns.

Econet Wireless spokesperson Fungayi Mandiveyi said: "We are about to finish it (EGM). I will call you just now and I will give you details, but it is well. I am in a meeting."

Market analyst Godwin Mungwadzi posted a message on Twitter saying "the debenture conversion" will take (raise) his (Masiyiwa) stake to 56.3%.

"If the debentures are converted Masiyiwa's additional shares will be worth $1 billion against the cost of his debentures of $33 million," he tweeted.