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FM Edition:

Welcome to the world of listed entities: that place where total strangers get to poke around in your business.

The Saltzman family, who created and developed Dis-Chem, has just discovered what it means to run a listed entity as opposed to a privately owned family company.

And right now it probably doesn’t feel like it’s entirely a good thing.

But it certainly does have its advantages. The biggest is that by listing its company the Saltzman family got to bank R2.2bn.

Against that enormous advantage is the fact that a listing comes with a public profile, which means a load of strangers get the opportunity to express opinions on your life’s work.

In the days running up to the listing those opinions were focused not on the commitment that goes into creating a thriving retail pharmacy-based business but on the bizarre decision to exclude retail investors from the private placement of a retail company.

Retail investors and private wealth managers who complained about the exclusion were directed to page one of the prelisting statement. Here it states the offer of 236.8m shares was not to the general public but to selected institutional investors and selected persons acquiring at least R1m of Dis-Chem shares. No-one was persuaded, particularly the retired Dis-Chem customer who cashed in R1m of her small portfolio but failed to make the cut-off.

"That’s boilerplate stuff designed to placate the lawyers," says retail investor Nick Krige.

It’s included in most prelisting statements for legal reasons and has never before been used to justify the exclusion of retail investors. "It’s particularly irritating for them to use that excuse given that wealth managers and retail investors were encouraged to apply for shares," adds Krige. If the Saltzman family was going to allocate the shares to preselected institutions, it should not have encouraged the retail investors, he says.

The most cynical interpretation of the decision to allocate all the shares to institutional fund managers was it was the best way to maximise the price in the post-listing trading days.

"The excluded retail investors represented pent-up demand that would ensure the price strengthened when the lucky institutions dribbled stock into the market," says one disgruntled wealth fund manager.

That is precisely what happened on Friday. Institutions that had paid R18.50 a share fed a steady stream of them into the market, getting prices of between R23.45 and R21.50.

Given the stated reasons for the offer, it’s hard not to think the decision to exclude retail investors was taken late in the day after the pre-listing documents had been published and presentations held for potential investors.

The reasons included enhancing Dis-Chem’s profile with investors, business partners and customers; diversifying the company’s shareholder base; creating a liquid market for the shares; and helping in recruiting and motivating senior management and employees.

None of these objectives was attained, but there is, of course, plenty of time to make good in the months and years ahead.

Retail investors were furious, as were the many customers who hoped to get an allocation. Market experts say the best way to create liquidity and a diverse shareholder base is to encourage retail investors.

As for the staff, has anyone chatted to a Dis-Chem pharmacist this week? These hard-working people, who play a critical role in customer loyalty, were puzzled and bitterly disappointed at their exclusion.

And then there’s the R4.4bn proceeds; the Saltzman family gets R1.6bn, other shareholders get a total of R2bn and R700m will be used to pay down debt that kicked up after the exceptionally generous dividend paid in March.

(The Saltzman family picked up R583m of that dividend, bringing its total tally to R2.2bn.)

Remarkably, given that it was such a PR mess, fees, commissions and expenses soaked up a hefty R149m. Not the sort of value for money you expect from Dis-Chem.