Econet says stock price doesn’t reflect reality, plans to escape ZSE’s ‘distortions’

HARARE – Econet Wireless Zimbabwe, the country’s largest telecommunications company, has said that its current valuation of about US$628 million on the Zimbabwe Stock Exchange (ZSE) significantly understates the true worth of its business and infrastructure assets.

In a cautionary statement released on Thursday, the company said its share price on the ZSE is “grossly undervalued” and no longer reflects the intrinsic value of its operations, despite ongoing investment and growth.

The board warned that the pricing misalignment has eroded shareholder value and undermined the company’s competitiveness.

Econet said the depressed valuation has made it difficult to raise competitively priced capital for critical network upgrades and future technology, a challenge that several major companies have cited before shifting to the USD-denominated Victoria Falls Stock Exchange (VFEX).

Firms that have migrated argue that the ZSE’s local currency valuations often fail to capture true business value.

While Econet did not mention specific reasons for the pricing disparity, the company’s remarks amount to a direct criticism of how the ZSE is valuing listed companies in the current environment.

The telecoms giant has begun evaluating “potential corporate actions” aimed at unlocking shareholder value and improving access to capital.

“This under valuation has restricted the Company’s ability to raise competitively priced funding required to sustain further investment in critical network infrastructure and future technology upgrades.

“The misalignment of the Company’s market capitalisation and its intrinsic value has also resulted in the erosion of shareholder value as Company’s market Capitalisation does not reflect the growth in business

“In this regard, the Company has commenced the evaluation of potential corporate actions aimed at unlocking shareholder value, improving access to capital, and strengthening the Company’s long-term competitiveness (the ‘Transaction’),” the company stated.

The company said the review process could materially affect its share price and urged investors to exercise caution until further updates are provided.

The board said more information will be released once the evaluation is complete.