Libstar's JSE debut this morning was the biggest of the year. A dip of 8% later, one analyst says it has now officially bombed.
- Household brands distributor Libstar listed on the JSE on Wednesday – with a rather lacklustre opening.
- The listing follows a successful R3 billion capital raising mission.
- Libstar owns brands like Lancewood, Goldcrest, and Mrs Balls Chutney. It counts Woolworths, McDonald's and Unilever as some of its customers.
Consumer food maker Libstar's share price dipped nearly 8%, from an opening of R12.50 to a low of R11.51, in its trading debut on the JSE on Wednesday.
Market appetite in the company seemed adequate ahead of the listing. Libstar managed to raise R1.5 billion in a share sale ahead of Wednesday's public listing, in addition to a further R1.5 billion raised via an initial public offering (IPO) priced at R12.50 per share.
"Libstar Holdings Limited is a significant company founded only in 2005. This company is growing to be quite prominent in terms of the fast moving consumer goods sector," says Donna Nemer, the JSE's director of capital markets.
Libstar's co-founder and CEO, Andries van Rensburg, tells Business Insider SA that "today's listing on the JSE is an exciting step in the right direction and will allow us to continue investing in the company's development and growth." The revenue from our 27 business units is now heading towards R10 billion, he adds.
It counts Woolworths, McDonald's, Shoprite/Checkers, Pick 'n Pay, Bidvest, Unilever, and Spar as some of its biggest customers.
It manufactures Lancewood cheese, Mrs Balls Chutney ,and all the meat and chicken for McDonald's.
But one market commentator, Vunani Securities' Anthony Clark, called fail on the listing by the mid-morning trading session.
So by 11am ish 11.9m Libstar traded & still way below 1250c listing— Small Talk Daily (@SmallTalkDaily) May 9, 2018
This listing looks fragile & it's officially ?????? (bombed)
Libstar 1171c from a 1250c issue— Small Talk Daily (@SmallTalkDaily) May 9, 2018
I said no fireworks from this IPO & we got a damp squib
Maybe brokers & Co's learn when U raise cash USE it for 4 good reason NOT 2 pay off private equity or expensive debt
Libstar is classic failed IPO just handled badly : writing was there
It would appear that Libstar didn't leave too much upside and pretty much got the best price for the existing shareholders (Abraaj, PIC, Management).
The company is well positioned to benefit from South Africa’s improved economic and consumer outlook. Given its size, it is well positioned for continued growth and product and industry consolidation.
Libstar spent over R73 million on listing fees, which is quite chunky, given that they are only raised about R1.5 billion of new capital. Furthermore, most of the capital raising (R1.5 billion) is being earmarked to repay debt (R700 million) and fund a special dividend (R800 million) to existing shareholders.
With existing shareholders having taken a further R1.5 billion of chips off the table the overall subscription is about R3 billion, implying that there’s still a further overhang of shares from Abraaj (37% stakeholder).
That said, the company is cash flow generative, and has some nice brands and contracts, but for new shareholders it’s all about getting in at the correct entry price.
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