An important test case for shareholder rights will play out, barring any further legal obstacles, in mid-February in Windhoek when a major shareholder in controversial Namibian investment company Trustco calls for a complete board overhaul.
The Riskowitz Value Fund (RVF), a long-time and significant shareholder in Trustco, has made an official call for a general meeting of shareholders on February 16. This comes despite Trustco aggressively throwing shade at RVF’s efforts and arguing that the calls to remove the group’s directors are unlawful.
The meeting looks set to go ahead despite uncertainty about the exact number of shares RVF can vote. In April 2024, RVF agreed to sell its shares in Trustco’s key operating subsidiary, Legal Shield Holdings (LSH), back to the group. The settlement provided for 400-million shares to be issued to RVF at 117c each. This was a considerable premium to the last traded price for Trustco of 30c (shares have been suspended on the JSE for the best part of two years). In fact, the value of RVF’s LSH share sale was R468m vs a last traded market value of R358m. In short, RVF’s already influential shareholding in Trustco would have shifted to a dominant holding.
But in mid-December — when most market watchers were on their lilos in exotic locations — Trustco unceremoniously suspended the LSH share purchase agreement with RVF. It’s worth recalling that Trustco last year hailed the transaction as value accretive and likely to allow the group to “directly benefit from anticipated post-Covid capital growth, improved liquidity and buyer demand in the Namibian property market”.
Trustco is now stressing that the LSH transaction “was structured and approved on the explicit basis that it would not result in a change in control of the company”. Consequently Trustco’s board will do a regulatory alignment review to ensure that the transaction remains “fully consistent with the no-change-in-control framework approved by the JSE and communicated and voted for by shareholders”.
Exactly how long this review will take is not clear, but it is safe to assume it will not be completed by mid-February.
It seems Trustco is playing for time. Whether that is a smart tactic remains to be seen. The group is already behind on two financial reporting deadlines and needs to present the delayed financials before it can embark on its plans to delist from the JSE (and Namibian Stock Exchange).
The longer Trustco takes to present the long-delayed financials, the more frustrated shareholders will probably shift their allegiance to the RVF camp. On the other hand, what is contained in the missing financials may also irk shareholders — with the last set of interim numbers (end February) showing a cash flow statement sans substance. The value of the group’s much-mooted diamond interests would also have been badly tarnished.
Some have questioned whether RVF is tilting at windmills in fighting to save a group whose financial status is by now a complete mystery and where the incumbent board is stacking its defence with legal loopholes.
Trustco owns tracts of land near Windhoek which, if the Namibian economy capitalises on its recent oil, gas and mineral discoveries, could become very valuable as development properties over the next decade.
It’s probably worth it for RVF to trudge the hard yards in the months ahead. But it’s going to require endurance and fortitude, not to mention a heap in legal costs.