JSE explains Ayo and scuppered Sagarmatha listing

Stock exchange has a wide-ranging role in protecting investors – but it’s not ‘fail proof’, PIC inquiry hears.
JSE CEO Nicky Newton-King (pictured) was part of a delegation that accompanied Andries Visser when he appeared at the PIC inquiry on Monday. Picture: Moneyweb

The Johannesburg Stock Exchange (JSE) says it had enough time to look at all the facts when it made its pre-listing assessment of the Iqbal Survé-linked companies Ayo Technology Solutions and Sagarmatha Technologies.

The companies’ interactions with the Public Investment Corporation (PIC) are currently under scrutiny by the judicial commission of inquiry into the PIC, particularly with regards to whether or not they misled investors and were overvalued.

General manager for issuer regulation at the JSE Andries Visser provided testimony on Monday regarding the processes the JSE followed in its assessment of Sagarmatha and Ayo, including the pending investigation.

Visser was accompanied by a delegation that included JSE chief executive Nicky Newton-King.

JSE looked at all ‘facts and information’

When the companies approached the bourse with their applications to list, Visser said the JSE took its time to look at all the facts and information, and only granted approval of the relevant documentation “once we were satisfied”.

Visser described the wide-ranging role the JSE plays in protecting investors amid the turmoil of corporate scandals that have struck South Africa but admitted that it’s not always “fail proof”.

We view financial information as the single most important information that investors have access to,” said Visser. “So there [are] a number of steps through our listing requirements that we impose on boards and directors to ensure it is information that can be relied upon.”

He admitted, however, that in reality “if there are issues of fraud and deception of management and auditors, I wish I could say [this] is something we are able to pick up at all times, but this is not always the case”.

Ayo investigations

Visser said the bourse is concerned about the testimony given by current and former Ayo executives that the company’s valuation had been “stretched” to get the shares to a specific price point of R43 per share. This has called into question the veracity of the content of the pre-listing statement.

Read: Ayo valuation ‘stretched’ to meet Survé’s demands

He said the JSE has ordered Ayo to provide a factual findings report on the statements that were made before the commission.

The PIC invested R4.3 billion, buying all of Ayo’s public shares when it listed in December 2017. The state asset manager, which handles over R2 trillion in government employee pension money and other state assets, is currently involved in a process to recoup the investment.

3 Laws Capital received millions the day after Ayo’s listing

In addition to the existing investigations by the JSE into Ayo, Visser revealed that the JSE is looking at a number of related party transactions. He specifically mentioned investment management company 3 Laws Capital, to which millions of PIC money had been moved a day after the company listed.

He said there is a clear related party relationship between 3 Laws and Ayo because the former is controlled by Sekunjalo Holdings, while Sekunjalo holds a 61% shareholding in African Equity Empowerment Investments (AEEI), which in turn has a 49% stake in Ayo.

We have not made a finding on whether the transactions with 3 Laws Capital were compliant with the listing requirements.”

Allegations that Ayo’s unaudited interim financials were adjusted to show inflated profits also led to the JSE instructing the company to conduct a full audit review of its interims over the last two years.

“We have had direct engagements with [directors at the time] Khalid Abdulla, Naahied Gamieldien and [Abdul] Malick Salie in which we have asked them to explain the allegations made regarding ‘massaging’ the numbers of Ayo Technology,” said Visser.

Reasons for the JSE suspending Sagarmatha’s listing

When testifying before the commission, Survé remarked that the JSE had suspended Sagarmatha’s listing mainly due to the negative media attention the company had received in the lead up to its listing.

Read: Survé eyes foreign listings for Sagarmatha

Visser said while it is fair to say that there was a lot of interest and noise that took place when the company released its interim statement, “I can categorically state that we took that decision irrespective of any noise in the market”.

He added that Newton-King had informed him that a few days before the JSE announced that the listing was invalid, former secretary-general of labour union Fedusa Dennis George had contacted her. “She simply stated that she was not involved in the matter.”

Read: Now trade unions are interfering in the business of the PIC

Visser said the decision to cancel the listing was primarily based on the fact that Sagarmatha had not disclosed “critical” information. The initial listing date for Sagarmatha of April 6, 2018, had to be moved twice, to the 11th and the 13th of the same month, before the JSE put a stop to proceedings.

He said that when the JSE approved Sagarmatha’s pre-listing statement, it was based on several conditions such as the company submitting the financials of two of its entities, raising R3 billion in capital, and that it produce reviewed provisional results.

However, on April 9 the JSE learnt that Sagarmatha and its subsidiaries Loot Online and Africa News Agency did not file their annual financials as required by the Companies Act.

Visser said the Companies and Intellectual Property Commission (CIPC) contacted the JSE and advised it of this non-compliance of the Companies Act and that “after several direct engagements with the CIPC we came to the conclusion that the company was not in compliance”.

Accordingly, the JSE decided that its decision to approve Sagarmatha’s listing was invalid.



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The JSE can do nothing. King IV is a joke and so is the integrity committee every company has. Just laughable.

Not true. The JSE ticked all the boxes on Ayo, relying on auditors and lawyers to opine on pre-listing content. And then they stopped Sagarmatha when the boxes couldn’t be ticked.

So I think they did a good job. What do you think they did wrong?

It would be useful to the readers of Moneyweb if you can construct an organogram of the companies involved here, how their shareholdings and directors are linked to Iqbal Survé’s Sekunjalo Holdings
and what percentages would be held or are held by the PIC.

It would clarify Survé’s tentacles and ambitions.

The JSE is an exchange. Its primary function is to enable trading between its members as cheaply and as fast as possible.

There are certain listing requirements that firms need to conform to, but if these boxes were ticked the JSE could do very little. It is not the JSE’s job to police the PIC.

Imagine the stink that would have errupted if the JSE disallowed a “black owned” business from listing?

The papers would have overflowed with opinion pieces of how racism is still preventing black companies from gaining access to capital, twitter would have been ablaze.

Fortunately the market was smart enough to steer well clear from this one and only the PIC invested. Another example of the market actually working and active managers earning their fees. MW is always full of comments if something goes wrong at a company about how active managers should have picked it up. For those like Patrick Cairns that holds the opinion that active managers do nothing for an improved market, do they believe a passive fund would have picked up on the fact that Ayo is not worth a fraction of its listing price?

Thanks notwarren but it seemed to me that most of the visible criticism and open of the listing which seemed to be sailing along quite nicely came from the media, particularly Tiso BS (duh). But it seemed no smoke without a stench so I guess the mangers and JSE were beavering away in the quiet background?.

End of comments.



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