MTN Zakhele shareholders felt the impact of the MTN Nigeria fine scandal on Thursday, with the share taking a 26% hit before it had even begun trading on the JSE.

After the kudu horn was blown by board chair Sindi Mabaso-Koyana, MTN Zakhele became the first empowerment share scheme to list since the stock exchange’s listing requirements were altered to accommodate entities migrating from over-the-counter (OTC) trading platforms.

The shares, trading under the code MTNZBE, opened at R75,20/share, down from the last trading price of R102,30. Trading on the OTC platform was closed on 16 October. In the two weeks that followed, the value of the shares plummeted without shareholders being able to move out of their positions.

Said MTN Zakhele project manager Sydney Mhlarhi: “Shareholders could have sold them on a one-to-one basis to a friend or family but they would not have been able to trade on the OTC platform during that time.”

Only 3 000 of 102 000 MTN Zakhele shareholders have been verified and are eligible to trade on the stock exchange but, by midday, the share had fallen a further 33,5% to R50, bringing the total loss to shareholders who hadn’t registered or sold their shares to 51%.

MTN Zakhele owns 4% of MTN Group, whose share price fell by more than 22% in the week that followed news of the Nigeria fine.

Nevertheless, the MTN Zakhele listing represents a triumph over the long-lasting dilemma for share schemes trading on OTCs, which began when the Financial Services Board (FSB) issued a directive to eliminate unlicensed exchanges from South Africa’s financial markets landscape.

MTN Zakhele, and other OTC share schemes, then had three daunting options: to change their practice to fall outside the FSB’s definition of an “exchange”, apply for a stock exchange licence to be recognised as one, or list on the JSE, which at the time was not possible because of the JSE’s stringent listing requirements.

Donna Oosthuyse, director of capital markets at the JSE, said the process of changing regulations had been difficult, taking more than a year, but that smaller share schemes would now be able to benefit from the JSE’s world-class operation.

Said Oosthuyse: “The changes that were made in collaboration with MTN Zakhele and others relates to the flexibility of listing requirements, and also to embedding the concept of a verification process (that ensures trading remains compliant with the criteria of the empowerment scheme).

“We believe it’s an innovation that will attract other empowerment structures in South Africa, as well as those of companies already listed on the JSE.”

Mabaso-Koyana said trading in MTN Zakhele shares will remain restricted to eligible black people or black groups until 24 November 2016, at which point shareholders could cash in their shares, receive a settlement in MTN Group shares, or receive a combination of both that is equivalent to the value of their MTN Zakhele ordinary shares at that time.

She also said the MTN Group board was considering evaluating alternatives for a new BEE scheme that may come into effect on the expiry of the MTN Zakhele scheme.

MTN South Africa CEO Mteto Nyati said that the MTN Zakhele listing was a step in the right direction towards improving black participation on the JSE.

“We recently saw the EFF marching here (the JSE) to highlight that [there is not enough black participation]. This listing allows black people to participate and to do that using platforms that are user-friendly to them, and to make transactions that are more in line with their levels of affordability,” he said.

By the end of the day, MTN Zakhele shares had recovered somewhat, but still down 13,6% on Thursday and 36,5% compared to the last traded OTC price, closing at R65,01/share.