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South African billionaire Michiel le Roux has executed hedging and financing transactions worth more than 1.25 million shares in Capitec Bank due to the volatility of the market.
The 72-year-old businessman completed the collar transaction in four tranches between August and December. At the current market price, the transaction is worth R2.5 billion ($157.2 million).
Billionaires.Africa understands that the move will help protect the billionaire from downside risks in his equity holdings and avail him the opportunity to borrow funds against his stake.
The tycoon has hedged 4.1 million Capitec Bank shares in the past four years. He executed the deals through two of his investment vehicles, Limietberg Sekuriteit and Kalander.
As for the rationale behind the move, Moneyweb named the billionaire’s age and his concern over continued market volatility in South Africa.
Commenting on the transaction, the bank stated: ”Kalander will always be in the position to fully cover the liability under the financing arrangement with the hedged shares and that as with the 2018 transaction, Kalander’s intention remains to cash-settle the transaction.”
The put-strike prices for the transactions were between R1,465.84 ($92.18) and R1,741.95 ($109.52) per share, implying that any price below that mark would force the tycoon to sell off his shares.
On the other hand, the call strike price (upside) is limited to R2,660.20 ($167.26) and R2,850.24 ($179.2) per share.
Le Roux is the fifth richest man in South Africa, with a net worth of about $1.5 billion. He is the founder of Capitec Bank, one of the largest retail banks in South Africa.
He currently holds an 11.41-percent stake in the bank, translating to 13,190,043 ordinary shares.
In 2020, the billionaire was the subject of a probe for a similar hedging transaction after he sold off his shares two days before the bank released a profit warning.
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