Stockbrokers have raised concerns about the lack of transparency surrounding news that telecommunications company GO’s majority shareholder, Emirates International Telecommunications, is selling its stake.
The announcement on Thursday caught many by surprise and caused GO’s share price to slide 10 per cent on Friday.
The Dubai-based EIT, a subsidiary of the State-owned Dubai Holdings, gave no indication of such a move at GO’s extraordinary general meeting held on Wednesday, during which shareholders approved the creation of a new company to absorb GO’s property assets.
EIT holds 60 per cent of GO shares with the rest being held by individual shareholders.
Paul Bonello, managing director of Finco Group, a financial services firm, said it was extremely unlikely the development concerning EIT happened overnight.
“The circumstances surrounding EIT’s announcement lead me to form the impression that they already have some form of agreement or understanding with a potential buyer in which case the curt announcement lacks transparency,” Mr Bonello said.
Industry sources have told The Sunday Times of Malta that EIT has had various companies showing interest in their GO shareholding since 2013 when Dubai Holdings initiated a strategic review to pull out of telecommunications companies.
The sources have ruled out Chinese technology company Huawei as a potential buyer, adding three top European telecom companies have shown interest. Two other companies from North America and Asia were also interested in the prospect of buying EIT’s shares.
Speculation that EIT already had a buyer lined up was fuelled by the announcement itself which spoke of an intention to dispose of its shareholding “in the short term”. When contacted, nobody from the company or GO was in a position to give further details but sources said the sale was likely to happen by the end of the year.
However, according to Jesmond Mizzi, managing director of Jesmond Mizzi Financial Advisers, the one-line announcement is unacceptable.
“If EIT are talking to potential investors I would expect them to make a company announcement but as yet we have no indication whether they have a potential buyer lined up or whether they are even talking to potential buyers,” Mr Mizzi said.
He attributed the slide in GO’s share price to the uncertainty created by the sudden announcement that may have “let down” shareholders.
Although the volume of trades amounting to almost 42,000 was not significant, some shareholders who were sitting on a profit may have panicked and decided to cash in rather than wait for the transition to happen, he added.
“Shareholders should not panic because GO is a solid company with good returns and I do not think EIT would simply throw away their shareholding,” he said.
His view was shared by Mr Bonello. “The bulk transaction, because that is what it is likely to be, could result in a higher share price eventually but the announcement caused uncertainty and that pushed some to sell.”
The sudden move also seems to have surprised officials at EIT’s sister company Tecom Investments, which is the principal shareholder in Smart City Malta. GO chairman Deepak Padmanabhan also serves as director at Smart City Malta.
Sources said EIT and Tecom operated independently of each other despite both forming part of Dubai Holdings’s portfolio. “The news they were selling their stake in GO surprised officials at Smart City Malta,” the sources said.
GO share price
GO plc’s share price on the Malta Stock Exchange closed at €3.15 on Friday, registering a drop of 10 per cent across 23 deals totalling 41,861 shares.
kurt.sansone@timesofmalta.com