Monday, March 4, 2024

Is Choppies going private or the share price is just too low to resist

Choppies’ founders and major shareholders, Ramachandran Ottapathu and Farouk Ismail, continue to buy more shares of the retailer which is trading at its lowest share price.

This week, Ottapathu who is also the company’s CEO, bought 1.2 million shares on the open market while Ismail snapped 1.3 million shares. The two founders have been buying back shares at the same time, igniting rumours that they want to delist the company and make it private following a corporate scandal that played itself out in public and led to over 80 percent loss in share value. 

This is the second time this year the wealthy owners bumping up their shareholding in Choppies. Last month, Ismail and Ottapathu each bought 1.85 million shares. The buying pattern was more prevalent last year, with Ismail and Ottapathu each buying 5 million shares in October 2020, and two months later,  Ottapathu bought 5,000 shares while Farouk went big and bought 4 million shares. Still in December, the founding duo snapped up 8 million shares each.  

By the end of 2020, Ottapathu was the major shareholder with 254.8 million shares, translating into 19.5 percent stake in Choppies. Ismail held 200 million shares, giving him 15.3 percent of the company. 

Despite the numerous transactions by the founders, the share price has remained stuck at 0.60 thebe since last year after it fell from 0.69 thebe which was the closing price of the stock when it was suspended from trading in November 2018 after it had lost over 75 percent of its value due to controversy surrounding the delayed financials. The current share price is lower than the retailer’s listing price of P1.25 per share when it listed on the BSE in 2012.

Farouk Ismail

Ismail and Ottapathu are increasing their shareholding at a time the retailer is making a recovery, posting the first profit in more than four years. For the six months ended December 2020, Choppies Enterprises, reported a profit of P37.7 million, a turnaround from the P139.2 million loss registered in the 2019’s half year results. The return to profitability comes after the retailer shut down some of its loss-making stores outside Botswana.

Last year Choppies was forced to shutter its businesses  in South Africa, Kenya, Tanzania and Mozambique,  following a failed expansion strategy that nearly sunk the company. The expansion weighed heavily on Choppies and caused a rift between company founders and shareholders who were troubled by the diminishing profits and dividends. 

Matters came to head in 2018 when the retailer got in trouble with regulators for failure to publish audited financial results on time after the company external auditor flagged some processes and transactions that could distort the true picture of the company’s financial health. 

The review of past records uncovered losses and in the ensuing drama, Choppies decided to quit and exit the loss-making markets. The delayed June 2018 financials  released in December 2019 stunned shareholders and market observers: a P445 million loss in 2018, and another shocking loss of P170 million for 2017 which was initially reported as a P74.6 million profit when KPMG did Choppies’ books.  The losses extended to 2019, with retailer booking in a P428 million loss, and followed with a loss of P370.6 million for the year ended June 2020.


Read this week's paper