Sagarmatha and other fairy tales

NEWS ANALYSIS

The trials and tribulations of aspirant African tech giant Sagarmatha Technologies already make for a long list, just two weeks after it announced its intention to list on the JSE.

And although its plans to list have been at least temporarily scuppered, the world, Sagarmatha says, is its oyster as the unicorn readies itself to ride on the super-galactic highway and list on the New York and Hong Kong stock exchanges.

The company, which received an incredible valuation of a projected R50‑billion in spite of its technical insolvency, has drawn criticism from many quarters in its bid to list on the local exchange.

Despite a vote of confidence in the enterprise in the form of a promised R150‑million from investment mogul Jim Rogers, reputable asset managers in South Africa doubted Sagarmatha would raise the minimum R3‑billion in private placements capital required to go ahead and list on Friday April 13.

It is described by fund managers as a collection of loss-making assets, much of which is owned by businessperson and media boss Iqbal Survé. This includes 95% of the African News Agency, 83.3% of Loot Online, 60% of IOL Property, 100% of Independent Online and 100% of Sagarmatha Enterprise Solutions. Sagarmatha will also acquire 92% of Surve’s Sekunjalo Independent Media and, with it, its 55% stake in Independent Media.

On Wednesday, the self-styled unicorn (the term for a tech start-up worth more than $1‑billion) announced that the listing would not go ahead. But it’s not for the reasons most had thought. Instead, it was because of a technical hurdle at the JSE after the company’s rudimentary failure to submit financials to the right parties at the right time.

According to the JSE, the aspirant tech giant did not lodge its financials with the Companies and Intellectual Property Commission (CIPC) at the time the pre-listing was approved by the exchange. As such, it was in contravention of the Companies Act and so did not fulfil the JSE listing requirement that states a company must be duly incorporated, or at least validly established under law.

Furthermore, the company did not comply with JSE requirements when it failed to provide the exchange with its interim financial results by Monday. Sagarmatha submitted these on Tuesday.

This is in spite of tens of millions of rands billed for by the sponsor and transaction adviser and legal advisers, as indicated in the pre-listing statement. But responsibility to lodge financials with the CIPC lies with the board and company secretary, experts say. In its Stock Exchange News Service (Sens) announcement, Sagarmatha simply says “the company notes on 11 April 2018 it received written confirmation from CIPC that it is compliant from this date with the Companies Act and its financials have been lodged with CIPC”.

But, in the press release — and not the Sens announcement — Sagarmatha says the JSE was incorrect to say the company was technically noncompliant when “the CIPC has confirmed otherwise, stating that at no stage was Sagarmatha Technologies not compliant”.

Also in the press release, the company said the JSE would not extend the listing date and has asked it to start the listing process anew. The JSE said this was not the case and referred the Mail & Guardian to the facts set out in its statement.

The CIPC said the annual financial statements were only received on Tuesday, 10 April, after it asked Sagarmatha to file these.“Correspondence sent to Sagarmatha on 11 April 2018 confirmed that there are no outstanding annual financial statements, therefore deemed to be in compliance. However, the same correspondence confirmed that CIPC will continue with the analysis of the said financial statements,” the Commission said. .

Sagarmatha expressed disappointment that the exchange would not give it any slack. But no matter: now the unicorn is thinking about taking its magical wares elsewhere. “The Sagarmatha Technologies board is now considering options that include: offers to purchase from international investors for its four largest businesses; and/or listing on the New York Stock Exchange and Hong Kong Exchange as primary; and/or a primary listing on the JSE and a secondary listing, and/or a dual listing,” the company said.

Also in the press release — and not in the Sens announcement — Sagarmatha claimed to have received capital commitments exceeding R4‑billion, therefore comfortably meeting the minimum listing requirements of the JSE. “However, due to the JSE’s withdrawal of the listing notice, Sagarmatha Technologies is legally bound not to accept these applications from its committed investors,” it said.

If the R4‑billion is to be believed, the likely investor is speculated to be the Public Investment Corporation (PIC), which manages government employee pension funds and has in the past funded Survé’s empire. In 2013, it helped Survé to acquire Independent Newspapers and, in December last year, it invested R4.3‑billion in his AYO Technology Solutions through a private placement. The PIC did not comment on whether it would put money into the venture.

But without a capital injection Independent, which runs at a loss, could be unable to pay its bills, including debt repayments of hundreds of millions of rands due to the PIC in August.

“This listing has been the most scrutinised in the history of South Africa, beginning with unprecedented interest in how multisided-platform [MSP] technology companies are valued,” Sagarmatha said in its press release, adding there was “a general lack of understanding” about MSPs in South Africa.

“Investing in cash-negative companies — Sagarmatha Technologies is no different to companies such as Uber, Amazon, Alibaba, SnapChat, FlipKart, Airbnb, DD Chang — all companies that showed substantial losses but whose values were highly valued by the capital markets in which they were listing,” the company said. “It is the very reason why Amazon is today worth $700‑billion even though its e-commerce business is still only marginally profitable after 20 years and that the top eight MSPs in the world have a combined market cap of $4‑trillion.”

This “lack of understanding” was “further fanned by a large-scale disinformation campaign driven mostly by competitor media houses against Independent Media”, the press release claimed.

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