COMPANY COMMENT: Phantom share scheme is back to haunt retailer
Shoprite is obliged to buy Whitey Basson out at what has proved to be the share’s highest price in more than five years
In the week or so since former Shoprite CEO Whitey Basson notified the company that he was exercising his put option at R211.01, the share price of Africa’s largest retailer has dropped about 7%.This means if Basson wanted to offload 8.7-million of his 9.1-million Shoprite shares now, he would get about R1.7bn for them and not the R1.8bn he stands to get when the company executes a specific repurchase. That’s assuming he could sell them all without putting pressure on the share price. Because of a little-known term in an employment agreement dating back to 2003, Basson is protected from any weakness in the share price. The company is obliged to buy him out at what has proved to be the share’s highest price in more than five years. The corollary, of course, is that he won’t benefit from any strengthening either. Shoprite’s proposed buy-back is just another reason to ban share repurchases completely or at the very least treat them with great circumspection and tight regulations. It is...
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