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New Utshalo has potential to boost mining IPOs, enliven public markets

Former Nedbank investment banker Paul Miller.

Former Nedbank investment banker Paul Miller.

24th November 2023

By: Martin Creamer

Creamer Media Editor

     

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JOHANNESBURG (miningweekly.com) – South Africa has a pressing need to reawaken its public markets and the new Utshalo must be complimented for setting out to do just that.

New mining capital raisings have become too few and far between, liquidity is drying up, and the delisting trend on the Johannesburg Stock Exchange (JSE) must be reversed.

Utshalo, which has the potential to end the negative trend, is a new digital investment platform that is bridging gaps for non-institutional investors by reconnecting retail investors with companies seeking to raise capital in South Africa’s public markets.

As the creation of former Nedbank investment banker Paul Miller and investor marketing company Ince, Utshalo has a plan of action to present initial public offerings (IPOs).

It will re-connect issuers and investors in the primary market, mainly for new issues of shares, where companies want to raise new money, such as takes place with new public market listings. 

This crucial new enterprise will also help holders of illiquid blocks of shares find buyers in the secondary market, but the trade will be settled off market. 

A limited number of relatively large transactions a year is Utshalo's hope, with investor members being required to have an existing stockbroking account, with, for example, an investment platform such as EasyEquities, for secondary trade.

Transactions will be settled through Strate, a long-standing component of the financial market ecosystem, using the investors’ existing stockbroking accounts.

Stockbrokers – similar to EasyEquities – trade exclusively in the secondary market where shares trade between anonymous willing buyers and willing sellers and the issuer is not involved. 

In the past, as a service to their clients, stockbrokers would participate in the primary market by soliciting participation, for example, in IPOs or accelerated bookbuilds and they were not able to charge the issuer for the service because of the obvious conflict of interest. 

In contrast, Utshalo, a licensed financial service provider, will be paid by the issuer (or seller) and will offer the service at no cost to the investor.

It is not a competitor to stockbrokers and inhabits a market niche entirely its own. In offering a complementary service that aims to encourage more market participation by retail and other non-institutional investors, it needs stockbrokers, which will continue to conduct all the secondary on-market trade.

“We also aim to simplify the process for stockbrokers by taking on a lot of the administration of these types of primary market transactions," Miller tells Mining Weekly.

Importantly, Utshalo acts only as an intermediary and does not, at any time, hold the cash of investors, nor their securities.

“There is an interesting paradox here in that the financial services sector wants to earn fees (amongst the highest in the world) by managing all retail savings at scale in collective investment schemes. However, to do so, the financial services sector needs a vibrant public market, and to have a vibrant public market, far more direct retail participation is needed than is currently the case,” Miller points out.

Utshalo provides a platform that will directly present IPOs, offers, placements and transactions, such as accelerated bookbuilds and off-market settled block trades, to non-institutional investors.

Targeted is the facilitation of a regulatory-compliant, low-friction way for investors seeking investment and trading opportunities, and for companies looking to raise capital or address the illiquidity of their stock, to transact. This, in turn, will help to foster that resurgence of the vibrancy of South Africa's public markets, which is so urgently needed.

Very insightfully, Utshalo has recognised the pressing need to recreate a direct relationship between non-institutional investors, especially retail stockbroking account holders, and companies seeking growth capital, or issuers of other listed financial products, in the South African public markets in general and the JSE in particular.

Edited by Creamer Media Reporter

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