NBM Capital Markets Limited, the investment advisory arm of National Bank of Malawi Plc, has assured TNM shareholders that the MK30 billion shares-for-cash transaction will yield significant benefits, outweighing concerns over dilution effects on existing shareholders’ stakes.
TNM Plc has called for an Extraordinary General Meeting (EGM) in Blantyre on May 2, 2025, to seek shareholders’ approval for issuing new ordinary shares to specific existing shareholders, including Press Corporation plc, Old Mutual Life Assurance Company, and Nico Life Assurance Company, aiming to raise MK30 billion to settle the company’s debt balances and other pressing obligations.
The move has received mixed reactions, with some minority shareholders expressing concerns over potential dilution, which advisors downplay, citing the transaction’s more significant benefits.
According to Benson Jere, Chief Executive Officer of NBM Capital, the financial injection from the transaction will positively impact all shareholders in the medium term. “When a company issues new shares of the same class, shareholders face dilution effects. However, the overall benefits of this transaction outweigh any impact of dilution,” Jere said.
He said the transaction aims to significantly reduce TNM’s debt burden, improve its financial position and profitability, and enhance shareholders’ value and dividend payout. Jere emphasized that the dilution effects should not be a major concern, considering the potential benefits and advantages of the transaction.
“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,” added Jere. “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.”
Jere also highlighted that there have been similar instances in the country where listed companies have issued additional shares for cash to specific investors, singling 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,” explained Jere.
Malawi Stock Exchange (MSE) Chief Executive Officer John Kamanga confirmed that the transaction has complied with MSE Listing Requirements and has been duly approved by the Stock Exchange.
Meanwhile, TNM Chief Executive Officer Michael Herbert welcomed the development, saying the proceeds would be used to restructure the company’s balance sheet and pay off costly debts, thereby enhancing its financial standing and share value for all investors.
