Clouds of uncertainty lift for Mpact, PPC and Cashbuild, while Polish thunderstorm at Spar might just pass

A share price overhang is a cloud over a company that leaves uncertainty about what could happen. Naturally, every company faces uncertainty, so we aren’t talking about revenue variability here or even the possibility of an unforeseen event. An overhang is a challenge that we know about already that has an uncertain outcome.

At Mpact, for example, a substantial cloud has lifted. The Competition Commission has finalised its investigation into allegations of historical anti-competitive conduct between Mpact and New Era. The great news for Mpact is that the approach of cooperating with the commission and being fully transparent has led to no fine being levied against the company.

The overhang is gone for Mpact and the market doesn’t need to panic about the potential for a huge fine. Instead, the market can focus on the unfortunate drop in Heps of between 28.6% and 33.8% for the six months to June, driven by revenue pressure in the paper business.

At PPC, the cloud was far less dark. In fact, it was one of those cute fluffy white ones, admittedly one that can quickly turn stormy up on the Highveld. The disposal of Cimerwa in Rwanda earlier this year was a deal that had already closed, yet the transaction structure allowed for the deal to be reversed if approval wasn’t received from African competition regulator Comesa.

Approval has now been given, so PPC can keep the $42.5-million it received. The board will decide what to do with it, which includes the possibility of a special distribution. The cloud has disappeared.

This brings us to a thunderstorm that is still here, with some hope of it going away. Some Spar shareholders might call it a hurricane. The foray into Poland turned out to be a horrible decision, admittedly with unforeseen events such as the pandemic playing a significant role. Either way, Spar had stretched itself too thin and created a problem where it had mediocrity all over the place instead of excellence in a few places.

The losses in Poland have been very painful indeed. This is why a potential deal to sell Spar Poland is exciting for shareholders, as it would remove a large uncertainty. Spar has been negotiating for a few months, and the group said this week that negotiations are at an advanced stage. Let’s hope this weather report turns out fine.

Has Cashbuild finally bottomed?

This story first appeared in our weekly Daily Maverick 168 newspaper, which is available countrywide for R35.