Hendrik du Toit. Picture: FINANCIAL MAIL/TREVOR SAMSON
Hendrik du Toit. Picture: FINANCIAL MAIL/TREVOR SAMSON

Braving coronavirus-induced historic losses in equity markets,  Ninety One, Investec’s newly created asset management arm, debuted with a more than 40% plunge in shares on Monday and started its journey as an independent business.  

Shares in Ninety One, which gets its name from the year it was founded, were 22.6% lower than the bottom end of its target range in London, where it has a primary listing. The stock was at R33.70 by the close in Johannesburg, down 38.7%

The company had set a target range between 190p and 235p, valuing itself at between £1.75bn (R35.6bn) and £2.1bn.

Ninety One, which manages £121bn in assets, enters an equity market that has suffered historic losses in recent weeks as investors dump shares, currencies and commodities on concerns that the rapidly spreading coronavirus pandemic, which has walled off big players in the global economy, will trigger a long and steep downturn.  

The listing, which comes days after parent company Investec shelved plans to sell a 10% stake that would have raised £226.1m, would allow Ninety One to independently scan the globe for opportunities that will present themselves from the dislocation caused by the coronavirus, CEO Hendrik du Toit said.

“I am looking forward to moving out of transaction mode and returning my full attention to running the business. After times of huge dislocation like this in the market, we know that huge opportunities present themselves for our clients if you can help them emerge through the tough times,” said Du Toit.

The event was the culmination of 18 months of work that began with a strategic review by Investec’s board that recommended that the continued growth of its asset management division would be better served outside the complex remit of its existing banking and wealth management divisions.

“For us, this listing is a positioning statement as the two institutions — Ninety One and Investec, the specialist bank and wealth & investment manager — begin their separate courses. But the market is quite rational. We have seen huge volatility in the share prices of our peers, and this is natural because asset managers are market-sensitive businesses. If global stock markets fall, that impacts their earnings,” said Du Toit.

Investec has retained a 25% stake in the business for the short term. The bank, led by CEO Fani Titi, will be able sell shares in Ninety One only after the 180-day lock-up period. Ninety One’s management team owns 20% and the remaining 55% shareholding was distributed to Investec shareholders.

Du Toit does not expect to make any big announcements soon. “We are not looking at expanding our footprints through substantial merger & acquisition activity,” he said.

Nolwandle Mthombeni, an investment analyst at Mergence Investment Managers, said it would have been “very costly” for the company to postpone the listing considering it was being listed in both London and Johannesburg.

A sustained sell-off in equity markets would eventually hit the company’s bottom line. “As an asset manager, if the coronavirus causes the markets to keep selling off that means that earnings will keep going down. As long as the equity markets remain depressed, it means that the expectations will not be in favour because of that fact.”

thompsonw@businesslive.co.za