Africa-Press – Malawi. Investment advisory firm NBM Capital Markets Limited (NBM Capital) has assured all TNM shareholders that they need not be concerned about dilution effects on their shareholding.
TNM is expected to hold an extraordinary general meeting (EGM) on May 2, where, among other matters, it seeks approval to convert existing shares from nominal value to no par value shares, followed by authorisation to issue 1.45 billion new shares to raise K30 billion.
NBM Capital Chief Executive Officer Benson Jere, who is the lead adviser in the transaction, said in an interview yesterday that although the share transaction involves only a few of the existing shareholders of TNM plc, the financial injection will have accruing benefits that will positively impact all shareholders over the medium term.
Jere said a successful conclusion of the transaction would inevitably improve the financial position and profitability of TNM and enhance shareholder value and dividend payout to all shareholders.
“When a company issues new shares of the same classes, shareholders face dilution effects. The share dilution only reduces the percentage ownership of existing shareholders against total issued shares of the company. It does not, however, affect the capital or market value of its shareholders.
“Based on empirical evidence, such transactions tend to enhance confidence and reliability of the company among investors and therefore lead to capital appreciation through upswings in the stock price in the short to medium term,” Jere said.
He then encouraged shareholders to focus on the advantages and financial benefits that would accrue from the successful execution of the transaction itself and to disregard the modest dilution effects.
“It is important to highlight that shareholders shall neither lose their shares nor the capital value of their investments,” Jere added.
Malawi Stock Exchange (MSE) Chief Executive Officer John Kamanga confirmed that the transaction has complied with MSE Listing Requirements and has been duly approved by the Stock Exchange.
TNM Chief Executive Officer Michael Herbert expressed excitement about the potential transaction, assuring all shareholders that the proceeds, if approved at the EGM, would be used to restructure the balance sheet and pay down expensive debt to strengthen the company’s financial position and unlock share value for all shareholders.
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