When Africa’s biggest mobile provider made a surprise announcement late on Monday afternoon that its chief financial officer had resigned during an internal investigation, the market did not have time to react.
But when it opened on Tuesday morning it made up for lost time. Shares dropped almost 3% in early trade, rallied somewhat during the day and ended 2.8% lower, at R175.
Shares for the company traded at 1.2 times its three-month average volume, according to Bloomberg.
It was clear the market was reacting to the opaqueness — and some say the timing — of MTN’s announcement about Nazir Patel, who has headed the company’s finances since 2009.
He resigned because he did not want his employment by MTN to “prejudice the company in respect of certain allegations made against him, which are subject to an ongoing investigation which had been commissioned by the company,” MTN said in a statement.
He resigned on Sunday July 21; the announcement was made more than a day later, just before 5pm. Some said the timing showed the company had something to hide.
But according to Jean Pierre Verster, an analyst at 36ONE Asset Management, the market was reacting to the uncertainty of the announcement rather than to the timing of it.
“I wouldn’t read too much into that,” he said. “I don’t think there is a perfect time to react. It’s not as if the announcement was made on a Friday just before 6pm, squeezed between two public holidays. Then we would say something was suspicious,” he said.
Rather, the markets were prob-ably reacting to the unknown. “They would rather sell on the uncertainty, because they don’t know whether it’s a financial issue or a governance issue,” said Verster.
The company moved on Tuesday to clarify that point. The allegations were of a governance nature only and “have no impact on MTN’s financial results, past or future”, said chief executive Sifiso Dabengwa in a statement.
Adding to investor concern could be the appointment of Brett Goschen as Patel’s replacement, Verster said. Goschen was chief executive of MTN’s operations in Nigeria and at the forefront of a project for aggressive capital investment in the country.
“He was driving a change there. It does leave a bit of a vacuum,” Verster said. Nevertheless, he was confident that MTN had the management depth to find a suitable replacement.
“You can never say for sure that they won’t drop the ball, but I don’t see this affecting the shares in the long term,” he said.