NBM Capital Markets Limited (NBM Capital), an investment advisory services of National Bank of Malawi Plc (NBM)plc leading the TNM Issue of shares for cash transaction expected to raise MK30 billion for the company, have assured shareholders especially the minority ones not to despair with the dilution effects of their shareholding against the total issued shares by the company.
NBM Capital Chief Executive Officer Benson Jere, who is the lead advisor in the transaction said in an interview yesterday that although the share transaction involves only a few of the existing shareholders of TNM plc, their financial injection will have accruing benefits that will positively impact across all shareholders over a medium – term investment horizons.
He dispelled fears of the dilution effects to other shareholders especially the minority ones as the transaction benefits extremely outweighs the impact of such dilution.
“When a company issues new shares of same classes, shareholders face dilution effects. The share dilution only reduces the percentage ownership (% shareholding) of existing shareholders against total issued shares of the company. It however does not affect the capital or market value of its shareholders. Besides, it reduces the voting rights of other shareholders in an unlikely event such as disputes when the new shares are issued to limited subscribers like is the case here.”
“However, the overall benefits of this transaction outweigh any impact of dilution. It has a clear financial objective which if supported will significantly reduce the debt burden of the company. We envisage that a successful conclusion of the transaction would inevitably improve the financial position and profitability of the company and enhance shareholders’ value and dividend payout to all shareholders.”
“Based on empirical evidence, such transactions tend to enhance confidence and reliability of the company amongst investors thereby lead to capital appreciation through upswings in the stock price in the short to medium term horizons. Therefore, the dilution effects should not be much of a concern considering potential better days to emanate from the accruing transaction advantages and benefits which outweigh its effects,” explained Jere.
Jere also highlighted that there have been similar instances in the country where listed companies have issued additional shares for cash to specific investors.
He singled out FMB Capital Holdings Plc (FMBCH) who issued 122 million shares for cash in January 2019 to Old Mutual Investment Group Limited and funds under its management.
“The company raised about MK8.54 billion in new capital for its turnaround strategy,” said Jere adding that the investing public can track the glittering performance of the Bank since then.
He said the TNM issue for cash transaction has complied with legal requirements of the Companies Act of 2013 and the Malawi Stock Exchange (MSE) Listing Requirements.
TNM Plc has called for an Extraordinary General Meeting (EGM) in Blantyre on 2nd May 2025 to seek shareholders’ approval for the issuance of new ordinary shares to specific existing shareholders drawn from its share register, namely Press Corporation plc, Old Mutal Life Assurance Company and Nico Life Assurance Company to raise MK30 billion cash to significantly pay – off the company’s debt balances and other pressing obligations.
The move has received mixed reactions with some minority shareholders expressing fears of a potential dilution which the advisors share and downplay due to outweighing benefits.
“We strongly encourage shareholders to dwell much on the advantages and financial benefits that would accrue from the successful execution of the transaction itself and ignore the modest dilution effects which are heavily outweighed. It is important to highlight that shareholders shall neither lose their shares nor the capital value of their investments.”
“In fact, all shareholders will be holding better quality shares in value after the transaction as the company’s financial position will have been strengthened and its profitability enhanced through savings from debt repayment. What changes is only the relative ownership (% shareholding) percentage, due to the issuance of new shares to selected investors which will automatically increase the total issued shares of the company,” assured Jere.
He emphasised that a successful execution of the transaction will greatly improve the financial position and profitability of TNM plc thereby enhance stock price of the company over an appropriate investment horizon.
MSE Chief Executive Officer, John Kamanga confirmed that the transaction has complied with MSE Listing Requirements and has duly been approved by the Malawi Stock Exchange.
TNM Chief Executive Officer, Michael Herbert expressed his excitement as he is looking forward to a successful execution of the transaction.
He assured all shareholders that the proceeds from the transaction if approved at the EGM shall be used to restructure the balance sheet and pay down excessively expensive debt stocks to not only strengthen the financial position of the company but also unlock share value for all shareholders.
