RHODES Foods may be the oldest food producer in the country, dating back to 1893, but its much-hyped listing on the JSE last week went down like an Nkandla joke in the Gupta compound.

It shouldn’t have been that way. It seems a compelling investment, given that you’ve probably eaten a Rhodes product at some stage.

Besides Bull Brand corned meat, it sells canned fruit and jam under the Rhodes and Hazeldene labels, makes ready-made meals for Woolworths, and sells Portobello-branded cheese and Ayrshire milk. And it clocked up R1.85-billion in sales in the past year.

But did Rhodes, and its sponsor, Rand Merchant Bank, overprice its shares for the initial public offering (IPO), either through misplaced bravado or greed?

Two weeks ago in a private placement, Rhodes raised R600-million by offering 50 million shares to investors at R12 each.

But when the horn rang and Rhodes started trading on the JSE last Thursday, the stock tumbled to R11.70 and closed at R11 on day one — not exactly a slaughter, but probably a lot worse than RMB would have wanted.

Traders, using the free-wheeling hyperbole of the internet age, described this debut as an “epic fail”.

“Why participate in an IPO when you can buy the share 8% cheaper on the day of listing,” said one.

Highly rated analyst Keith McLachlan said that while Rhodes “could perform well ... I can see no upside in getting into the listing at that price, given the cheaper alternatives”.

After all, stock in the other food companies — Illovo, Tongaat, Clover, Tiger Brands, AVI and Pioneer Foods — is cheaper. McLachlan said that perhaps the listing took place only because Rhodes’s private equity owner, Capitalworks, was cynically looking to sell before the market crashed.

That’s an argument rejected by Rhodes CEO Bruce Henderson, a 15-year veteran of the company.

“Look, the initial price range was between R10.50 and R13.50, and through that range it was oversubscribed several times over. So even though we could have raised the (R600-million) at a higher price, we settled on a mid-point,” he says.

Rhodes isn’t alone. There are many other companies that must have wished they had stayed at home, curled up in bed, rather than heading for the local stock exchange.

After all, stock in the other food companies — Illovo, Tongaat, Clover, Tiger Brands, AVI and Pioneer Foods — is cheaper. McLachlan said that perhaps the listing took place only because Rhodes’s private equity owner, Capitalworks, was cynically looking to sell before the market crashed.

Take Facebook, which listed in March 2012 at $38 a share. Within six months, the share price of Mark Zuckerberg’s company had plunged to $18. Bloomberg dubbed it the “biggest IPO flop of the decade”. (And Facebook, unlike Rhodes, actually gained 23c on its opening day of trade).

Perhaps the accolade of the most horrific IPO belongs to the US-based high-frequency asset trader Bats Global Markets, which listed in 2012.

Bats opened trade at $15 a share, but its stock immediately plunged to just a few cents, shorted by the company’s own high-frequency trading system.

With toe-curling embarrassment, Bats said that because of these “technical issues ... we believe withdrawing the IPO is the appropriate action”.

For Rhodes, it got worse.

Less than a week after its blushing debut, the Competition Tribunal confirmed it had slapped a R1.2-million fine on the group for colluding with rival Langeberg & Ashton in 2006.

The sin: fixing the prices of peaches sold to Japan, apricots and pears sold to Australia and other fruit fiddling.

Rhodes’s mammoth 234-page pre-listing statement contained just a single paragraph about the collusion. Worryingly, in this paragraph Rhodes justifies it by saying it took “legal advice” that exports “fell outside the jurisdiction” of the Competition Act.

This week, Henderson said: “There are a lot of questions over whether the Competition Commission has jurisdiction over exports, it is a grey area.”

Really? Does this suggest Rhodes’s top brass think it is fine to fix prices? Or that a culture of collusion may have developed in the hazy comfort of being a private unlisted company?

“No, it’s absolutely not part of our culture,” Henderson said. “We took legal opinion, and they got it wrong.”

Let’s hope so, otherwise Rhodes’s rocky ride onto the JSE could get a touch more bumpy.

Still, Henderson can take heart from what happened to Facebook.

Two years later, Facebook’s share price has quadrupled from its $18 low to $77 — but only because Zuckerberg’s focus changed to mobile ads.

Henderson doesn’t see the listing price as a big issue. “Investors went through the prelisting statement, and made their own call,” he says.

Which simply reinforces a fact that anyone who has ever paid rates to the city council knows all too well, but many investors lose sight of: there is no necessary correlation between the price you pay and the value you get.

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