Outspoken Sygnia CEO Magda Wierzycka has lambasted the JSE, accusing it of “weak governance” by allowing dubious listings which have led to financial losses by investors.
From allegations of market manipulation to the listing of companies that “bear no semblance to operational reality”, the Cape-Town based executive wants the JSE to be held accountable for failing to protect investors’ interests.
Speaking by phone to Fin24 on Friday, Wierzycka questioned the listing of Gupta-owned firm Oakbay and Ayo Technology, hailed as the largest black-controlled ICT company in the country when it debuted on the JSE in December 2017 with a market cap of R14.7bn.
In a letter which Wierzycka read to the JSE annual general meeting and seen by Fin24, the businesswoman raised concern over Ayo Technology's "suspicious price transactions" which have seen its share price drop from R43 per share on the day of listing to R28.50.
The biggest loser in Ayo's share price movement has been the Government Employees Pension Fund (GEPF), which invested R4.3bn for a 29.9% stake in the company.
GEPF writes off 31% of R4.3bn investment
"This means the GEPF has lost 31% of its investment,” she said, slamming the JSE for allowing listings “where the valuation bears no semblance to the real value of underlying assets”.
“I have challenged the processes of how the JSE conducts its business…. how it appears to allow questionable companies to list,” said Wierzycka.
“Such conduct has led to massive financial losses by investors, including the people whose pensions are invested in the companies,” she added.
The valuation of Oakbay Resources and Energy also came under sharp attack by Wierzycka. The company exited the bourse in July 2017 under a cloud, having shed over 70% of its value.
The Industrial Development Corporation had bought 3.6% equity in Oakbay.
Wierzycka, who has earned a reputation for being a crusader against corruption in the private sector, turned the tables on the executive of Africa’s leading bourse, challenging it to outline its responsibilities to investors and questioning why the JSE should not be held liable for financial losses by investors.
"I will continue raising these issues because they point to weak governance on the part of the JSE," she said.
Responding to Wierzycka’s utterances, JSE director of issuer regulation John Burke maintained that investors are provided with “sufficient information to make an informed investment decision”.
“The protection of investors is of paramount importance to the JSE," he said in a statement, adding that the JSE ensures that all applicants meet minimum suitability requirements.
“There is no doubt that the recent noise around certain issuers may impact investor trust in our market and we are already looking at ways to improve corporate accountability among issuers,” he said.
In April, the JSE announced it will not be proceeding with the listing of Sagarmatha Technologies, as the entity - which is linked to Sekunjalo chairperson Iqbal Survé - failed to comply with Section 33 of the Companies Act.
According to Martyn Davies, managing director for emerging markets and Africa at Deloitte, the integrity of the JSE remains despite the allegations levelled against it.
“There is a need for good governance in companies on the JSE, and the JSE has played its role in that regard,” he said.
“It is just unfortunate that much of the wrongdoing only comes out much later,” he stated, adding that “errant companies should be punished, both by the regulator and the market”.* SUBSCRIBE FOR FREE UPDATE: Get Fin24's top morning business news and opinions in your inbox.