African Bank shares are on a tear this morning, around 20 odd percent up at their best. Sadly 20 odd percent higher means that the share price is a little over 8 Rand, a level where the company raised money not so long ago, towards the end of last year. Sanlam have said publicly that they think ABIL needs to raise between 2 to 3 billion Rand more, which might not sound like a lot, but unfortunately ABIL's market capitalisation was all of 10 billion Rand on Friday. So why is the ABIL price up so much this morning? Well, they have said (not a lot) that they have "entered into negotiations regarding the possible disposal of Ellerine Holdings Limited and its subsidiaries which, if successfully concluded, may have a material effect on the price of the Company's securities."
To whom and at what price? That would be the trickiest two questions to answer, possibly even trickier to ask. I have not heard the talk about town suggest any names, you would hardly think however that a beaten up business (they have indicated as much) would be sold for too much. Remembering that the purchase price (back in January 2008) was 9.139 billion Rand (306 263 893 ABIL shares at 31.01 ZAR) back then. The whole of ABIL is worth 10 billion odd Rand, with many more shares in issue now, 1.5 billion odd shares. I suppose being up 20 percent on the day is another 2 odd billion Rand to that! Rather than speculate, let us wait and see what transpires.