……. As the retailer migrates to VFEX tomorrow

BUSINESS REPORTER

Edgars Stores Limited will list on the Victoria Falls Stock Exchange (VFEX) tomorrow, becoming the first clothing retailer to list on the United States dollar-denominated stock exchange, which was established four years ago.

The latest development comes after Edgars delisted from the Zimbabwe Stock Exchange (ZSE) on Thursday last week.

Shareholders overwhelmingly approved this move during an extraordinary general meeting held on March 25, 2024.

Trading of Edgars shares is expected to resume on the VFEX on April 8, 2024, pending final approval from the Securities and Exchange Commission of Zimbabwe (SECZIM).

The decision to delist from the ZSE and list on the VFEX will presents Edgars with a multitude of strategic advantages, including  enhanced accessibility to much-needed US dollar capital, the ability to raise funds in foreign currency,  broadens Edgars’ investor base significantly and the mandatory United States dollar reporting on the VFEX is expected to reduce risk perception for Edgars, potentially leading to more favourable terms for alternative financing avenues.

In addition, the move to VFEX offers Edgars a chance to optimise its trading efficiency. The exchange boasts significantly lower trading costs compared to the ZSE. This translates to a direct benefit for shareholders, who can retain more value when selling their shares.

Lower trading costs, coupled with the reduced risk perception arising from USD pricing and the possibility of foreign currency dividends, are expected to stimulate trading activity in Edgars shares, fostering greater liquidity.

For foreign shareholders, the switch to VFEX presents a welcome relief. Unlike the ZSE, which is limited by the local currency and plagued by foreign currency shortages, the VFEX allows for the unrestricted repatriation of dividends and proceeds from share sales. This eliminates a significant hurdle for foreign investors and opens doors for broader international participation in Edgars’ future.

The VFEX does not stop at just improved access to capital and streamlined trading. It also offers a package of tax incentives designed to attract investors.

Foreign shareholders can benefit from a reduced withholding tax on dividends, while enjoying complete exemption from capital gains tax on share disposal. This translates to a more attractive return on investment compared to the ZSE.

According to the management, Edgars’ migration to the VFEX also promises greater stability and a clearer picture of the company’s true value.

The exchange mandates USD valuation, providing both existing and potential shareholders with a more transparent and accurate understanding of Edgars’ financial health.

This USD valuation acts as a hedge against the volatility of the Zimbabwe dollar (ZWL), minimising valuation fluctuations and protecting the company’s intrinsic value. This not only offers increased investor security compared to the ZSE but also serves as a mechanism to preserve Edgars’ long-term financial well-being.

Furthermore, adherence to stricter governance and reporting standards on the VFEX is expected to contribute to enhanced overall management practices and improved company performance.