Tanganda finalises US$8m rights issue

SAMANTHA MADE

Tanganda Tea Company Limited is finalising plans to raise US$8m through a renounceable rights offer, allowing existing shareholders to purchase additional shares in proportion to their current holdings.

A renounceable rights offer is a capital-raising method that enables shareholders to either buy more shares or sell their rights to others. This strategy helps companies secure funding without significantly diluting ownership.

It also allows a company to raise capital from existing investors instead of taking on more debt or seeking external funding. For Tanganda, this method provides a lifeline to shore up its balance sheet while ensuring that current shareholders retain control.

For Tanganda, the success of this rights issue could be crucial in stabilizing operations, funding its stock exchange migration, and positioning itself for long-term growth.

Tanganda’s board secretary, Sharon Kodzanai, confirmed the development, stating: “…the company is currently finalising the preparation of a Circular to shareholders. The Circular contain details of the interrelated transactions and will also include a notice to convene an extraordinary general meeting (EGM) of members to consider and approve the proposed creation of a new class of shares to be known as Class A ordinary shares, which will be subsequently listed on the Victoria Falls Stock Exchange (VFEX) as a secondary listing and a  renounceable rights offer of the listed Class A ordinary shares to the existing ordinary shareholders in proportion to their shareholding in the company to raise US$8m.”

The company also revealed that part of the funds raised would support its planned migration from the Zimbabwe Stock Exchange (ZSE) to the Victoria Falls Stock Exchange (VFEX), a market that offers more stability through US dollar-denominated trading. If successful, this move could significantly impact Tanganda’s share price.

Tanganda has faced financial challenges in recent months. In its first-quarter results for the period ending December 31, 2024, the company reported a 12% drop in revenue to $5m compared to the previous year. The revenue decline was primarily due to a fall in tea production volumes, leading to a pre-tax loss of $853,917 for the quarter.

Given these financial struggles, Tanganda is urging its shareholders to exercise caution when dealing in its shares. The company’s stock performance may remain volatile as investors assess the impact of the rights issue and potential VFEX migration.

Tanganda’s decision to shift from the ZSE to VFEX aligns with a growing trend among Zimbabwean companies seeking US dollar stability. The VFEX, a subsidiary of the ZSE, offers companies access to foreign currency-denominated investments, lower transaction costs, and potential tax incentives.

If Tanganda successfully lists on VFEX, it could attract a broader investor base, including regional and international investors looking for hard currency assets.

However, the move also comes with risks, including reduced liquidity compared to the ZSE.