IMANI Centre for Policy and Education has recommended that the Agyapa deal be canceled if its initial public offering (IPO) is not valued at $2.5 billion.
The policy think tank in statement released on August 27, 2020 highlighted a few reasons why the deal is “unconscionable” and a devaluation of Ghana’s gold resources.
According to the statement, the Agyapa deal is wholly unwarranted if an offer price cannot yield $2.5 billion. It however, suggested an alternative government could consider as the centre holds that the best place to gain the full value of Ghana’s gold is on the private markets.
“Our recommendation in this respect is therefore that unless the offer price can yield an IPO valuation of $2.5 billion, the exercise is wholly unwarranted. We would, in fact, counsel an alternative strategy of assigning 25% of the country’s royalty streams to a vehicle if it could raise $1 billion on a reputable exchange purely to pursue geoeconomic maneuvering and investment diversification objectives. Our sense however is that the best valuation is likely to be obtained in the private markets.”
The government has indicated that it sees the Agyapa deal as a means to raise both short-term and long-term capital but for the short-term, it will through proceeds from an upcoming IPO scheduled for December 31, 2020 complete a listing on the London Stock Exchange (LSE) main market.
IMANI however, finds this move problematic as it emphasized in its statement that “far more conventional entities have in the past taken as long as 12 months to complete listing on the LSE Main Market” and it would be more appropriate if the process is extended to April 2021.
The government of Ghana disclosed that it is yet to begin the IPO process but the policy think tank holds that unless government has “surreptitiously filed for a listing,” the timeline of four months is a “strange arrangement”.
“The timeline of 4 months to IPO is problematic, unless the Government has surreptitiously filed for listing. To ensure favorable pricing of the offered securities, the timeline for listing any MIIF SPV on any international exchange should be extended to at least April 2021…the 31st December timeline in the government’s current plans is thus problematic if indeed it is true that the listing process has not already commenced and was awaiting clearance from Parliament.”
Meanwhile, it suggests that if government wants to earn in the short-term, government can sell some percentage to royalty stream companies as private market is the place to realize full value.
“…if the point is to raise short-term money: the convoluted path of going through an IPO is completely unnecessary. The government can sell a smaller percentage of future revenues over a defined time-period to any one of a hundred royalty streams companies at a discounted rate. Private market transactions in this respect, as we have already indicated, are cheaper, quicker, and more likely to yield a better valuation in the current context.”
This, they believe would afford government of Ghana more time to pursue the longer-term strategic goal of diversifying the investment options available to it by setting up an overseas vehicle to pursue royalty streaming assets in other markets as it has expressed an interest in doing.
IMANI maintains that the two scenarios are completely unrelated.
“To repeat for emphasis: the two goals of short-term fund-raising and longerterm investment diversification are completely separate and, quite frankly, unrelated.”