Analyzing Econet’s Migration and the Market Capitalisation

The Great Revaluation – Is Econet’s Market Cap in Free Fall or Just Finding the Floor.

From ZSE to VFEX and OTC

We have been noticing a fall in the market capitalisation, and we are scholarly analysing possible causes. To understand the current “free fall,” we must first look at the architectural shift. In early 2026, Econet executed a dual strategy:

1. Delisting from the ZSE: The Mobile Network Operator (MNO) business moved to an Over-the-Counter (OTC) platform.
2. Listing Econet InfraCo on the VFEX: The group’s “hard assets”, towers, fiber, and data centers were spun off into a USD-denominated listing.

The perceived “free fall” in value is primarily a symptom of currency transition. On the ZSE, valuations were often inflated by “inflation hedging” and the volatility of the local currency (ZiG). On the VFEX, stocks are priced in “Hard” US Dollars, where every cent is scrutinized for real-world yield.

Valuation Theory

Market Correction or Overvaluation?

The “Arbitrage of Perception” Theory

For years, Econet argued it was undervalued on the ZSE. At the time of the delisting announcement, its market cap was roughly US$628 million, while the company estimated its intrinsic value at over US$3 billion.

When the company listed Econet InfraCo on the VFEX, it did so by introduction. The market capitalization “dropped” because the VFEX does not trade on the “fear of inflation.” In a USD environment, the Dividend Discount Model (DDM) and Discounted Cash Flow (DCF) models become the primary drivers.

• Result: The market is not “falling”; it is “sobering up.” On the ZSE, investors bought Econet as a proxy for the US Dollar. On the VFEX, they are buying it for its cash flows.

Asset-Beta and the Infrastructure Play

Econet InfraCo is an infrastructure business. According to the Capital Asset Pricing Model (CAPM), infrastructure assets typically have a lower beta (less risk) but also lower growth expectations compared to tech-heavy MNOs.

• Market Factor: Investors who wanted the “growth story” of a mobile operator (data, 5G, fintech) found themselves holding shares in a “brick and mortar” tower company. This mismatch led to immediate sell-offs by growth-oriented funds, driving the price down.

The “Free Fall” Explained:

Five Market Factors

1. The Exit Offer Dynamics

Econet offered an exit price of US$0.50 per share (split between cash and InfraCo shares). For many minority shareholders, the US$0.17 cash component was more attractive than holding a new, illiquid USD share. This created a “liquidity rush,” where thousands of small investors dumped their new InfraCo shares to realize cash, putting massive downward pressure on the listing price.

2. The Illiquidity Discount

The VFEX is notoriously illiquid. In valuation theory, an Illiquidity Discount of 20% to 30% is often applied to assets that cannot be sold quickly. Since there are fewer buyers with ready USD than there were buyers with local ZiG, the “market clearing price” is naturally lower.

3. The End of the “ZSE Premium”

On the ZSE, heavyweights like Econet and Delta traded at a premium because they were the only “exit ramps” for institutional investors (pension funds) trapped in local currency. Once moved to a USD exchange (VFEX) or an OTC platform, that “exchange-trap premium” vanished.

4. Market Correction vs. Fundamental Value

Was it overvalued? Using a Price-to-Earnings (P/E) Ratio comparison, African MNOs typically trade at 10x to 12x earnings. In the peak ZSE days, Econet’s “implied USD” P/E was often north of 25x due to currency distortions. The current “fall” is a mathematical correction to align with regional peers like MTN or Safaricom.

5. Forced Rebalancing

The delisting from the ZSE meant Econet was removed from the ZSE All Share Index and Top 10 Index. Passive funds that track these indices were forced to sell their holdings, regardless of the company’s performance. This “forced selling” is a classic reason for price drops during a migration.

Share Price Trend Since Listing

• Pre-Delisting (ZSE – March 2026): Volatile trading as investors sought to capture the exit offer. Implied value peaked around US$0.45.
• Listing Day (VFEX – 31 March 2026): Opened at a reference price based on the independent advisor’s valuation (approx. US$0.33 per InfraCo share).
• Post-Listing (April 2026): Steady decline (the “Free Fall”) to the US$0.18 – US$0.22 range. This represents a 30-40% decline in nominal price as the “Exit Offer” sellers exited and the “Illiquidity Discount” was priced in.

Is it Too Early to Conclude?

Yes, it is premature to label the move a failure. Valuation is a long-term game.

• The Yield Argument: As Econet InfraCo begins to declare USD dividends, the market will revalue it based on Dividend Yield. If the company pays a 5-8% USD dividend, the share price will find a floor.
• The OTC Flexibility: The MNO business on the OTC platform now has a “Floor Price” mechanism. This prevents the “panic selling” that plagues public exchanges.

Our Thoughts

The move to delist from the ZSE was not about chasing a higher share price in the short term; it was about protecting value. On the ZSE, the company’s value was a “mirage” built on local currency fluctuations. On the VFEX and OTC, the value is real, even if it appears smaller.

For Lucent Consultancy clients, the lesson is clear: The “free fall” isn’t a loss of business value, but a loss of currency noise. The fundamental assets, thus the fiber, the towers, and the millions of subscribers remain. The market is simply learning how to price them in a “hard” environment.

Disclaimer.

This article is not an investment advice, but a scholarly application of Valuation Theories.