First published in the Daily Maverick 168 weekly newspaper.
Worrying details are beginning to emerge about the listing on the London Stock Exchange (LSE) of South African-based healthcare company Umuthi, which may go down as one of the most disastrous listings of all time.
The company began trading on the main board of the LSE on 4 March 2021 and was unilaterally suspended six days later.
Soon afterwards, the company announced a change of auditor after its initial auditor, PKF Littlejohn, expressed concern about procedural issues concerning the original prospectus.
After a new auditor, Jeffreys Henry, was appointed and a new audit conducted, trading was restored on 25 May 2021 after a supplementary prospectus was issued. But then, the company was again suspended on 10 June 2021 because the UK Financial Conduct Authority (FCA) was concerned that “some shareholders who were involved in a share exchange agreement prior to the Company’s Admission to trading, [were] not able to trade all of their shares”.
The company remains suspended, despite announcing that it would relist on 23 June. It announced on 10 August 2021 that it was still working with the FCA, to “address the operational issues regarding the shares as raised by the FCA and [had] applied every effort to facilitate an expeditious restoration”.
Meanwhile, the share price of the company has tanked. After trading at 65p shortly after listing, it’s now listed just above its listing level at 35p, the level at which it was trading when it was suspended in June. The original prospectus suggested the company could list at around £4.
To top it all, the board announced last week that the Chief Financial Officer, Pieter Grimes, had left “to pursue other business opportunities” and that he had been replaced by Phillip van Huyssteen.
It now emerges that one of the issues being investigated by the FCA concerns one of the original employees who was for a time in charge of the listing process. She apparently used her maiden name, Van Vliet, to disguise the fact that she was debarred by SA’s Financial Services Board (the predecessor of the current Financial Sector Conduct Authority or FSCA) in 2017 for five years.
Her more commonly known identity is Connie van Nieuwkerk, and she is not only prohibited from giving financial advice but was also fined R31-million by the FSCA last year for no less than six instances of manipulating audits and other acts of financial deception. She is currently fighting fraud charges in respect of these cases. The instances concern the AIM listed company African Dawn, where she was chief financial officer at the time, and was found by the FSCA to have increased earnings during the 2008/09 financial year by R23-million.
How this was achieved reads like a how-to guide to manipulating accounts. The FSCA says she reduced the company’s debt in its books to zero, manipulated goodwill at Allegro holdings, duplicated debtors at Nexus Personal Finance and increased the notional liability of the National Housing Finance Corporation. And on top of that, she is accused of issuing African Dawn shares, that were never paid for, to Watermark Securities.
When asked about the position of Van Nieuwkerk, Umuthi CEO Gert Viljoen said that when the original confidential documentation was prepared for the FCA, Van Nieuwkerk was recorded as being “the listing coordinator with a view to possibly in the future fulfil the role of CIO”.
Subsequently, however, the company appears to have put her position on hold. “There have been to this point, no RNS (Regulatory News Service) announcements or other press releases to this end and she is not listed in the Prospectus as an officer of the Company,” Viljoen said. Her position will be addressed once trading has been restored.
“The marital situation and hence surname of my [advisers] at any given point is of no concern to me, just their competence,” he said. He added that Van Nieuwkerk had not been suspended by the FSCA, “as she was never a member to begin with”, even though the FSCA is not a membership organisation. He says Van Nieuwkerk is contesting the case.
Viljoen said the claim – made by a UK market website – that the listing is a “scandalous fraud” is denied in the strongest possible terms. “The listing went through rigorous verification processes with UK-based [advisers] and was … scrutinised by the FCA before the approval of the Prospectus.”
Viljoen speculated that the source of information provided to the UK website, ShareProphets.com, was trying to destroy value in order to acquire 30 million shares at very discounted prices and then obtain control of the listing by way of a reverse takeover. ShareProphets.com is run by a well-known journalist and former fund manager and television personality Tom Winnifrith. Winnifrith was expelled from the Liberal Democratic Party in 1993 for “pandering to racism”.
Asked if there was any prospect of the company relisting, Viljoen said “we are working very hard to ensure trading commences again as soon as possible”.
Umuthi’s principal asset is Lems, a South African supplier of pharmaceuticals to medical practitioners and health centres with on-site dispensaries. In the company’s prospectus, it claimed that Lems generated revenue of £87,449 and a gross profit of £1,135 for the period ended 28 February 2019. The supplementary prospectus changed this to a revenue of £86,458 and a gross loss of £266,536. DM168
This story first appeared in our weekly Daily Maverick 168 newspaper which is available for R25 at Pick n Pay, Exclusive Books and airport bookstores. For your nearest stockist, please click here.