The challenge
Due to the South African macroeconomic challenges, market structure changes, contracting volumes and structural headwinds such as the shift from public to private capital markets, fast-tracking its growth initiatives and diversification have become key focus areas for the JSE Limited (“JSE”) to sustainably grow earnings.
Having experienced a net reduction in listings over the past decade, there has been an appeal factor away from listed markets coupled with concerns around the ability to attract reasonable valuations. This trend of shrinking listings is playing out globally and is not unique to the JSE, as companies prefer to stay private for longer, given their ability to access capital in the private capital markets, high cost of being listed and sometimes complex regulatory and compliance requirements.
In response to these challenges, the JSE decided to progress a digital private placements platform and, in parallel, to pursue acquisition opportunities that are aligned with its growth objectives. Globacap Technology Limited (“Globacap”) was identified as the right partner for both the JSE’s private capital markets strategy and its acquisition criteria.
Globacap, headquartered in the UK, is a leading global capital markets fintech company offering distributed ledger technology for private capital markets. Through its regulated private placement and capital management platform, Globacap has completed 18 placements to 600 investors across 35 countries in the last year.
The RMB solution
Most SA-based companies typically approach a global investment bank or a specialised fintech boutique to advise on such transactions, particularly given the specialist nature of the expertise required for these investments. The JSE trusted RMB’s deep financial institutions capabilities in this new and fast-growing sector and its ability to structure bespoke solutions for transactions with complicated stakeholder dynamics and regulatory considerations.
To design the optimal solution, the JSE led Globacap’s recent funding round. This allowed the JSE to set the key terms and pricing for its equity investment to achieve its strategic objectives. As a condition to the transaction, a commercial arrangement was agreed for the JSE to exclusively use Globacap’s best-in-class technology and deep private capital markets expertise to create a fully-digitised capital markets platform in South Africa and thereafter, Broader Africa.
Not only does the transaction structure create a strong alignment of interests to deliver a successful outcome for the JSE with attractive risk-adjusted economics, it provides both a solid foundation and important flexibility for the JSE to extend its commercial arrangements with Globacap into new product areas and a potential path to increasing its equity stake.
Additional benefits for the client
The investment allows the JSE to forge a closer working association with Globacap in developing the requisite skills, expertise and relationships to digitise products and services and to implement next-generation technologies. Through this collaboration, the JSE intends to replicate and adapt Globacap’s private markets and registry strategy and product offering across African markets and reducing the execution risk of expanding into new markets and products.
Through its commercial arrangement, the JSE will use Globacap’s innovative technology and expertise to progress infrastructure finance and SME private funding in Africa. The deal will help stimulate investment into those markets by narrowing the funding gap and supporting job creation and economic growth.
