A majority of Dipula Income Fund shareholders voted in favour of collapsing the dual A- and B-share structure into a single class of ordinary shares in Thursday’s combined shareholder meeting.
This follows the proposal pitched to shareholders earlier in 2022 for a share swap (exchange) ratio, in which Dipula will buy back and cancel all its issued A-shares shares at a swap ratio of 2.4 B-shares for every A-share in issue.
A-shares have a preferential right to dividends, with growth capped at 5% a year while B-shares are the higher-risk option as they receive the balance of the distributable income after A shareholders have been paid.
The practice of providing investors with two share options with distinct distribution rights, which is unique to the SA listed property market, was adopted nearly 20 years ago to account for investors with varying risk profiles.
“We are deeply honoured by the level of support received from our shareholders which is testament of their belief in the future of Dipula, and now the stage is set to create value,” said CEO Izak Petersen.
The company has cited the share structure as a hindrance to growth, and expects that a single class of ordinary shares is likely to result in improved tradability and liquidity as well as possible index inclusion over time.
Dipula listed on the JSE as a real estate investment trust (Reit) in August 2011 with the A- and B-share structure which appeals to investors with different risk appetites. It owns a diversified portfolio of retail, office, industrial and residential rental assets located across the country.
Petersen said there has been a disconnect between Dipula’s underlying historic performance and its share price performance, adding that the transaction offers Dipula shareholders a path to eliminate misalignment of interests between A and B shareholders. “This may lead to a rerating of our share and has the potential to place Dipula back on a growth path based on a reasonable cost of equity.”
He said Dipula is now well positioned to take advantage of many opportunities that it could not previously consider due to the wrong pricing of its share.
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