Column : Destroying shareholders’ wealth
In the current situation, it makes no difference whether the shares are owned by the government directly or by public sector institutions. The price of R155 also looks a very high price. As the following analysis would show—public sector institutions have been forced to quote a high price in their offering, close to the government price.
One of the ways to look at the efficiency of sale is to see its price-earnings ratio. If the market price was the correct index, this ratio would have been around 80. It has been sold now at a ratio of around 45, very high according to any standard, and if nothing miraculous happens in the company, the public sector financial institutions will incur a huge loss, contrary to the current public impression that the government has sold at very low prices due to fiscal distress. And the last word, it is a bad idea to transfer government risks to public sector financial institutions. It may be recalled that even blue chip companies of the government were sold in earlier disinvestments in the 1990s at ratios of 5 to 7.
However, it is welcome that the process has started, and the government has
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