Investment company Brait is the latest in a growing list of under-valued South African companies that have seen shareholders step in to reverse the fortunes of a company that once flew high. Grand Parade, Murray & Roberts, Altron, Taste, Cell-C... Sometimes the intervention is successful, others less so.
Over a period of about 20 years between 1991 and 2011, private equity company Brait delivered an internal rate of return above 30% -- very healthy by most investment standards. In 2011 the company changed strategy, shifting from an unlisted private equity company to a listed investment holding entity.
The theory was that it was easier to raise capital as a listed entity; and without the pressure to exit the investment within five years, investors could be patient and enjoy the upside over the longer term.
That theory applies when all is going well. When it's not going well, and when high levels of debt are involved, few investors are truly patient, least of all the shareholders in a listed company.
It all went swimmingly at first. Investments were made in Pepkor and Premier Foods; Brait was an investors' darling and by 2016 the share peaked at R170.00. Since then the downhill...