Econet Wireless Zimbabwe has published a circular to its shareholders, approved by the Zimbabwe Stock Exchange (ZSE), explaining the rationale behind its proposed move from the ZSE Main Board to an Over-the-Counter (OTC) trading platform administered by the Victoria Falls Stock Exchange (VFEX).
In the circular, Econet notes that at the time of its first cautionary announcement, the company’s market capitalisation on the ZSE stood at approximately US$500 million—less than 20% of what it considers its true market value. This assessment is based on comparative valuation metrics of other mobile telecommunications companies across Africa.
The company argues that its valuation fails to fully reflect key aspects of its business, including its ownership of tower infrastructure—unlike most African mobile operators—and the reintegration of its fintech operations. Econet also cites the lack of liquidity on the ZSE as a major factor contributing to the depressed valuation, particularly following the exit of foreign investors who were previously among the exchange’s largest participants.
According to the company, low liquidity has forced shareholders who wish to exit to sell their shares at punitively low prices, resulting in significant value erosion. As part of the proposed transition to an OTC trading system, Econet says it has developed a solution it believes will benefit all shareholders equally, regardless of the size of their shareholding or the volume of shares they wish to trade.
Under the proposed structure, Econet will migrate from the ZSE Main Board to an OTC platform administered by the VFEX. The company will remain publicly listed and continue to publish financial information. The OTC framework will allow Econet to set a minimum trading price for its shares, determined by company fundamentals. Econet will also act as a buyer of last resort at this floor price, which has been set at 50 US cents—more than double the current ZSE price and more than three times the 90-day weighted average price prior to the initial cautionary announcement.
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The company plans to convene a shareholder referendum, as required by ZSE listing rules, to consider the proposal. Shareholders will not be compelled to sell their shares. Instead, Econet is encouraging investors to remain in the company to benefit from its long-term growth prospects.
Shareholders who choose to exit will be paid the value of their shares in accordance with current exchange rules, in addition to receiving a proportionate allocation of shares in Econet InfraCo. The new infrastructure-focused entity is being spun out of Econet Wireless Zimbabwe and is expected to be listed on the VFEX at a proposed valuation of US$1 billion.
The structure will also allow shareholders to sell a portion of their holdings at the point of migration while retaining an investment in the company, providing multiple exit and value-realisation options that Econet says were previously unavailable.
Stockbrokers are also expected to benefit from the transaction, as they will continue trading on behalf of clients in both Econet—on the VFEX OTC platform—and Econet InfraCo, which will be listed on the VFEX main board. The company says this will help protect broker revenues and support the viability of the capital markets.
The VFEX itself is expected to benefit from the listing of Econet InfraCo, which would add depth to the US dollar-denominated exchange. Overall, Econet believes the proposals will strengthen Zimbabwe’s capital markets, which are regulated by the Securities and Exchange Commission, following shareholder consideration at the upcoming extraordinary general meeting (EGM).