Who’s looking out for retail investors?

South African retailer Pick n Pay recently sold a 34.4% stake in its Boxer supermarket chain to institutional investors in an initial public offering. It was good news for Pick n Pay, who raised R8.5 billion, at R54 per share; and big news for domestic equity markets, as it was South Africa’s largest IPO since 2017. But it was bad news for retail investors, who again found themselves excluded from a significant equity offering.

The situation mirrors the current challenges in South Africa’s commercial paper (CP) market, where the Prudential Authority’s proposed regulatory changes may inadvertently marginalise retail investors in the debt capital markets. This could further challenge the growth of our budding economy.

Are retail investors being ’boxed out’?

As Paul Miller pointed out in an article for the Daily Maverick, traditional market issuances like the Boxer IPO are “hurting South Africa’s public markets”. One of his biggest criticisms about this particular deal was around how it excluded the retail investor segment – which happens to be the exact market that Pick n Pay and Boxer actively service!

Meanwhile, the Prudential Authority (PA) under the South African Reserve Bank (SARB) has intensified its oversight of the CP market, introducing stricter compliance measures, including detailed disclosure requirements, pre-issuance approvals, and ongoing reporting obligations.

Enhanced regulatory scrutiny, while aiming to ensure market stability, could also increase compliance costs for issuers. This may discourage smaller enterprises from entering the CP market, thereby limiting investment opportunities for retail investors and reducing overall market dynamism. And while the proposed regulatory changes in South Africa’s CP market aim to enhance transparency and investor protection, they risk sidelining retail investors, which could negatively impact market growth and liquidity.

Capital markets that are open to all

At Mesh, we believe that if you exclude the retail component of the market, you won’t see an active secondary market, and you won’t see that wealth going into the rest of the market. That’s why our platform upholds regulatory standards while ensuring entrepreneurial businesses looking to scale can continue to attract and engage a broad and diverse investor base – including retail market participants – through both public offerings and private placements. We do this because broader, open markets drive liquidity and growth.

We are committed to fostering an inclusive financial ecosystem that empowers businesses to access a diverse investor base, including retail investors. Our platform offers a simplified financial instrument issuance process, streamlining the process of issuing various asset classes (debt, equity, funds, or other structures) and enabling businesses to raise capital directly from their chosen network of investors. We also ensure that all issuances comply with prevailing regulations, providing businesses with the confidence to engage in unlisted public offerings and significant private placements.

By facilitating public offers and private placements, we help businesses reach a wide spectrum of investors, thereby enhancing market liquidity, promoting capital market growth, and creating future-friendly markets that are open to all.