Bob Diamond’s new African banking venture raised $325m when it listed on the stock market this week. The controversial former boss of Barclays has personally invested $16m in the cash shell, called Atlas Mara Co-Nvest.
Diamond co-founded the company with Ashish Thakkar, a 32-year-old billionaire with a wide range of business interests in Africa. Thakkar himself has invested $4m. The cash shell aims to buy a majority stake in an African bank within 12 months. If that doesn’t happen, the money will be returned to shareholders.
What the commentators said
The most likely target for Atlas “would be a small, possibly family-run, bank in sub-Saharan Africa”, said City AM. Atlas would then aim to scale up the business across several countries. And while Diamond’s name “may be mud with the public… the money men think it still sparkles”, said James Moore in The Independent.
The listing “was greeted by a deluge of money” due to excitement about Africa’s potential. The continent has a population of a billion, but only a quarter have bank accounts, and just one in 20 has a credit card.
However, warns Lex in the FT, “that potential will not be easy to realise. Established banks such as Standard Bank have seen wide fluctuations in profit. Africa is not a one-way ticket”.
There’s also the risk that shareholders who get in too early could be heavily diluted as new shares are issued in the future. Atlas could finance future deals this way, while Diamond and Thakkar will each be handsomely rewarded with further shares if a deal is done and the Atlas share price rises by at least 15%.
Investors have been burned by exotic cash shells before, noted The Daily Telegraph. Take former mining cash shell Bumi – investors who bought when that one listed have lost more than 75% of their money.
Ironically, the business was drastically restructured on the very day that Atlas listed. Given the problems created by the likes of Bumi, “it is a surprise that the London market is welcoming such vague cash shells with open arms”.
New to MoneyWeek?
Welcome, and thank you for visiting us.
If you've enjoyed what you've read so far, I've got something you'll definitely be interested in.
Every working day the MoneyWeek team sends out a hard-hitting email, 'Money Morning', giving you a rundown of the latest financial events, and revealing what you should do to maximise profits and head off losses…
And with your permission, I'd like to send you Money Morning for FREE.
To sign-up enter your email address below.
Digital Managing Editor, MoneyWeek