Allegations of insider trading could sour Nissan manufacturer’s delisting from the JSE, writes Max Gebhardt
The stormy relations between Automakers and investors entered a new phase this week with accusations that it botched its delisting announcement – opening the door to massive insider trading and heralding an embarrassing official investigation.
The share price of the group, which manufactures Fiat and Nissan cars, bolted last Thursday amid talk that its main shareholder, Sankorp, was about to strike a deal with a foreign partner.
Fingers have been pointed at the Johannesburg Stock Exchange (JSE) for failing to agree to a request by Automakers to delist the share.
However, sources close to the JSE say Automakers only contacted the exchange after the share’s abnormal moves – lunchtime on Thursday. By then two million shares had traded and the price had motored from R2 to R2,80. In the previous 12 months, an average of 190 000 shares a day had been traded.
JSE officials said that in any case it would not have been appropriate to freeze the share. According to JSE rules such a request can only be granted in very particular circumstances including where there are “two levels of information in the market, or if the situation cannot be remedied by an immediate announcement …”
On the exchange’s advice, Automakers that afternoon released a strongly worded statement which, unusually, urged dealers not to trade the counter.
The following Monday the group announced the company would be delisting the share ahead of bringing on board an international player – almost certainly Nissan Japan as Fiat has denied it wants to return to South Africa.
It said the move would be accompanied by a huge payout for minority shareholders – 411c a share for
66,6-million shares, giving Sankorp an 87% stake in the group. There is speculation Sankorp will sell this stake to the foreign partner, in line with its drive to cut investments in operations outside its core financial services business to no more than 15%. Sankorp boss Marinus Daling has made clear his dissatisfaction with the performance of Automakers.
The Securities Regulation Panel (SRP) told the Mail & Guardian it would be “irresponsible” not to to investigate. SRP officials declined further comment, but unconfirmed reports suggest the probe focuses on a family member of a senior Automakers executive, who allegedly tipped off friends.
Automakers chair John Newbury said he could not comment on those rumours or on why the JSE had not suspended the share.
The company’s share was one of the exchange’s worst performers last year, plummeting as low as 214c last August after starting life at 565c.
Despite this dismal performance and the decision to embark on a major retrenchment programme at its Pretoria plant last October, it emerged last year the group had poured millions of rands into three exclusive holiday resorts, including a retreat at exclusive Leopard Creek golfing resort in Mpumalanga.
The company has been hit by a number of external factors, including the rand’s collapse which has kicked up import costs, and increased competition.
Armed with notoriously flaccid legislation, the SRP has yet to see one insider trading case prosecuted despite the JSE’s widespread reputation for being a hotbed of leaked information.
The South African Police Service recently announced that an investigation into insider trading by former Malbak executive chair Grant Thomas was unlikely to lead to any prosecution.
However, incoming JSE president Russell Loubser vowed this week to crack down on insider trading with “draconian legislation”.
SRP executive director Richard Connellan said the task group chaired by business guru and former judge Mervyn King had agreed on the principles for new legislation on insider trading. They planned to open up a civil line of attack against insider trading.
In a recent United States survey of
1 700 company executives, 42% admitted that if equipped with material inside information they would purchase shares themselves; 14% would tell a friend; and 56% would do nothing.