In June Illovo outlined a share buy-back exercise aimed at reducing the number of small stockholders on the company's shareholder register.
This would be done by offering shareholders with 100 shares or less an offer of 3 072 cents per share (a considerable premium on the ruling share price). Linked to this odd-lot offer is a specific offer at the same price to Illovo shareholders holding between 100 shares to 500 shares.
At current prices anyone buying 500 Illovo shares would stand to make about R1 000 (after brokerage costs) by selling the shares in the specific offer.
There is also a 52c/share capital distribution that must be factored in.
Illovo, however, reminded the market on Friday that its offer circular - published on June 22 - stipulated that the company was entitled to refuse to implement the scheme if there was a clear case of opportunism.
The refusal clause would kick in if Illovo had reasonable grounds to believe an investor became an odd-lot holder or specific holder in order to take advantage of the offers.
But Shareholders Association chairperson David Sylvester said the conditions attached to Illovo's offer were disingenuous.
"Why have an odd-offer with a six-week waiting period? Obviously a lot of small shareholders are going to climb in. Illovo should have stipulated that the offer was only open to shareholders registered on the company's books at the date of the announcement."
Sylvester said Illovo's right to refuse shares bought by opportunistic buyers in the odd-lot offer was a rather "silly stick" to wield. "The very purpose of the offer is to get shot of small shareholdings - but refusing to buy back certain shares simply defeats the purpose of the odd-lot exercise."
Recently Illovo disclosed that at the end of March this year there were 844 shareholders - or 17% of the total number of shareholders - holding less than 100 ordinary shares each.
An additional 1 278 shareholders - or 25% of the total number of Illovo shareholders - held between 100 to 500 shares each.
Collectively, that would mean about 42% of Illovo's shareholders hold less than 500 shares. Between them, these small shareholders hold 365 719 shares, representing a mere 0.08% of Illovo's issued shares.
An Illovo spokesperson said there had been a noticeable uptick in deals involving 500 shares in recent weeks.
"We did not think this would happen, but in one day we had reports of up to 25 deals involving 500 shares."