EOH blames 'forced sale' of shares for massive price plunge

Cape Town - As the eyes of SA investors were fixed on Stellenbosch-headquartered global retailer Steinhoff this week, the share price of another JSE-listed firm was in free fall. 

The stock of EOH, an information and communications technology services provider, dropped from R69.51 on Thursday morning to just R30.95 on Friday morning, a fall of 55%. 

The price recovered somewhat during trade on Friday, and shot up to R60.78 as of 11:00 on Monday, just 12% below its opening price on Thursday. 

On Monday, in a stock exchange news service announcement, EOH said the high volumes of shares traded on Thursday and the price drop were caused by “the forced sale of shares by financial institutions against equity financed transactions to various individual shareholders, including two EOH directors”. 

The group also announced that it had appointed lawyers Edward Nathan Sonnenbergs to conduct a “full fact-finding review of the commercial activities” of the three companies Grid Control Technologies, Forensic Data Analysts and Investigative Software Solutions. 

EOH previously said that it had cut ties wit the three groups on October 31 this year, after acquiring them in November 2015. 

As Fin24 previously reported the three groups are tied to businessman Keith Keating.

Last week, the Independent Police Investigative Directorate raided seven properties linked to Keating and former acting police boss Lieutentant General Khomotso Phahlane.

“In keeping with the Group’s zero tolerance commitment, it will act against any identified wrongdoing or misconduct involving any individual or entity,” said EOH. 

‘Forced sale’

EOH said that the "forced sale" of shares by two of its directors, and other shareholders, caused the company' share price to fall. 

“EOH confirms that the directors affected did not voluntarily sell their shares” it stated. 

The forced sale essentially means that shareholders had done something like take out loans or borrow money and put down EOH shares as surety. 

EOH said that the financial institutions, who were not named, had them made what economists term “margin calls” and demand for further cash to be paid back. 

This automatically triggered the sale of EOH shares, said EOH.  

The two directors involved were Jehan Mackay and John King. 

Over four days, between Tuesday 5 December and Friday 8 December some 2.5 million EOH shares were sold by Tactical Software Systems (TSS) for a total of R127m. 

Mackay is a trustee and beneficiary of a family trust which owns 100% of TSS, said EOH.

Meanwhile King sold 294 321 shares over three days between December 6 and December 8 for a total of R16.2m

EOH did not go into detail about why the margin calls were made. 

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