Choppies Scandal Cost Shareholders over P 1 billion

Stock market analysts believe that it will take quite some time, even years for the limping retail behemoth, Choppies Enterprises Limited to recover, restore its competition and market value. However, shareholders have lost billions of Pula cumulatively in eroded value, KEABETSWE NEWEL reports

Garry Juma, the head of research at brokerage firm Motswedi Securities said it will take time for Choppies to recover from its mess. He said for blue chip stocks like Choppies, once a company gets in scandalous troubles, it usually takes time to bounce back, restore investor confidence and even perform satisfactorily. In the meantime however, he said investors look for alternative investments, which will see them shunning Choppies for a while until efforts have been made to restore its initial trustworthiness.

“It will take a lot of restructuring and changes to gain investor confidence and trust,” he said adding that unfortunately, shareholders who have lost value will take time as well before recouping their losses. Choppies share price fell by around 70 percent. It is currently valued at 69 thebe, which was its last trading price when Thapelo Tsheole, BSE CEO suspended the company, in November last year. When a share price declines, investors and share holders lose money because they would have purchased the stock at a higher price, a decline means the shares held by investors would be valued way less.

Institutional Investors are counting the losses of mass value destruction which cumulatively tipped over a billion pula mark this year, exacerbated by once off landslide plunge of the retailer’s stock price.

About seven asset managers who manage pension moneys are amongst the top 10 shareholders of the exponentially growing Choppies, using the group’s 2017 annual report as a guide.
The rampage relegated Choppies to a mere general dealer valued at P808 million down from its previous P3.1 billion worth of a blue chip in January last year when it was trading at P2.42.
Based on the most recent shareholding available which was as at 2017, institutional investors lost value of around P1.03 in the aftermath. Most, if not all of the institutional investor manages listed equities on behalf of the wealthy Botswana Public Officers Pension Fund (BPOPF) and Debswana Pensions Fund (DPF).

Allan Gray holds 154 753 735 shares of the group which translates to 11.87 percent. Allan Gray value at Choppies fell by P267, 8 million from its P374, 5 million built up in January last year. Using the 69 thebe share price value, Allan Gray shareholding is valued at a mere P106.7 million.

Elsewhere, African Alliance share proportion is valued at 10.25 which equates to 133, 614, 947 share allocation, according to Choppies annual report. The asset manager’s equity value has dropped by P231.2 million from P323, 3 million gains. It is now valued at P92, 1 million. African Alliance is the second largest institutional investor after Allan Gray.

Leading asset manager Botswana Insurance Fund Management (BIFM) has so far lost value of P117.9 million. Calculations show that BIFM’s value is down to P36, 4 million from P154, 3 million in January. BIFM owned 4.05 percent of Choppies, equating to 52 825 371 share allocation as at 2017, according to Choppies. BIFM is an asset management unit 100 percent owned by Botswana Insurance Holdings Limited (BIHL) group of companies.

Allan Gray, African Alliance and BIFM all manage BPOPF listed equities.
BPOPF has over P65 billion in assets under management split amongst asset managers.

Investec Asset Management held 2.07 of Choppies shareholding. Based on this shareholding, Investec shares in Choppies were valued at over P65.2 million in January last year. Investec lost P45 million.

Marina IV LP has lost P226.5 million of its shareholder value since January last year. Marina holds 131 291 985 shares of Choppies which amounts to 10, 07 percent. In January this year, Marina’s shareholder value was P317, 7 million but is now P90.5 million.

Standard Chartered Private Equity value fell by P73.8 million to the current P29.3 million. Standard Chartered is a wholly owned subsidiary of Standard Chartered Plc, a public company listed on stock exchanges in London, Hong Kong and India. It invests and purchases equity stakes in pursuit of Standard Chartered Bank’s private equity strategy and activities across the world. The private equity firm owns 42 608 015 shares (3.27 percent).

STANLIB Asset Management owns 35 465 717 which is about 2.72 percent. The value of these shares dropped to P34 million from P65.8 million.

Ramachandran Ottapathu, founding Chief Executive Officer (CEO) of Choppies is the single largest victim of the rampage. Otthapathu owns 19, 5 percent of the group’s equity.
In January last year, when Choppies was trading at 242 thebe per share, the value of Ram’s shares was P593.3 million. Now at 69 thebe per share, the value of his shares is just P169.1 million. He lost P424 million in value.

Ottapathu, a fellow of the Institute of Chartered Accountants of India clings onto 245 174 469 shares as the biggest single shareholder.

Farouk Ismail who is the Choppies co-founder is the second major shareholder. Ismail retains 192 329 304 shares, an equivalent of 14.75 percent, shareholder spilt shows. At the current share price, his stake is worth P132.7 million, after shedding P332.7 million since January last year when his stake was valued at P465.4 million.