Georgia Capital begins share buyback following country’s protests

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Georgia's protests led Georgia Capital's share price to drop around 30 per cent in May.
Georgia's protests led Georgia Capital's share price to drop around 30 per cent in May.

A UK-listed investment trust that owns around five per cent of Georgia’s economy has begun a share buyback programme for around 20 per cent of its capital after instability in the country has sent its shares cratering.

Shares in Georgia Capital have plunged 30 per cent since the start of May, leading it to pitch plans today to use at least 300m Georgian Lari (£86.2m) to repurchase its shares. The authorisation will last until 2026.

The trust has two main holdings, a portfolio of private equity assets in the country and stock in the London-listed Bank of Georgia, the latter of which has fallen 23 per cent since the start of May.

Protests have been unfolding in the country after the Georgian parliament passed the country’s foreign agents law, which will see NGOs and independent media receiving 20 per cent of their funding from abroad required to register as an “agent of foreign influence” with the Georgian Justice Ministry.

Groups will have to meet what Human Rights Watch described as “onerous reporting requirements and inspections”, with other groups having said the foreign agent tag is designed to make it easier for the government to discredit its opponents.

At the end of last month, the Business Association of Georgia said in a statement that it was worried “political processes unfolding in the country” may threaten “a stable and predictable business environment”.

The EU said the bill could harm Georgia’s chance at membership, while the White House said it would “reassess” its relationship with the country following the bill’s passing.

Georgia Capital said that today, it would begin a 70m Georgian Lari (£20m) programme to buy back shares as part of the wider plan.

The investment trust explained the programmes would be funded from expected cash inflows, as the trust’s free cash flow jumped from -$10m (£7.8m) to $48m (£37.8m) last year.

“This reflects robust organic dividend inflows, well-managed operating expenses and reduced interest expense in line with the significant reduction in borrowings,” the trust said.

This has led to an improvement in the trust’s Net Capital Commitment ratio, which recent decreased below its target level of 15 per cent, ahead of the target of the end of next year.

Since the trust demerged from BGEO Group in 2018, it has repurchased and cancelled 7.9m shares, worth £68.7m.

“These buybacks have not only provided significant accretion to the net asset value per share and enhanced share liquidity but have also underscored the Board’s confidence in the underlying valuation of GCAP’s portfolio,” the trust added.