BUSINESS MAVERICK
Ayo warns shareholders that PIC case could materially affect share price
More than five years later, the Public Investment Corporation is still trying to recover a R4.3-billion investment in Ayo Technology, alleging due process was not followed and Ayo apparently misrepresented key information. The case began in the Western Cape High Court on Tuesday.
The Public Investment Corporation (PIC) is looking for the transaction to be declared unlawful and set aside. Ayo has advised shareholders that the legal proceedings may have a material effect on its share price. Over the past year, shareholders have taken a 13.29% hit, with the share pricing falling from R4.44 on 9 March 2022 to close at R3.60 on Monday, 7 March 2023.
The case relates to a PIC investment in a private placement in Ayo’s initial public offering (IPO) in December 2017, on behalf of PIC’s biggest client, the Government Employees Pension Fund (GEPF). The transaction involving the purchase of Ayo shares at R43 each, resulted in the GEPF acquiring a 29% shareholding in Ayo. The GEPF is the country’s largest retirement fund with assets of more than R1-trillion, and its members are almost 1.3 million government employees across the country.
According to court documents lodged in 2019, Ayo Technology – represented by Iqbal Survé, Khalid Abdulla, Abdul Salie and Nomvuyo Dube – had approached the PIC with this potential investment. The PIC was represented by former chief executive Daniel Matjila, Victor Seanie, Fidelis Madavo and Lebogang Molebatsi. Matjila and Molebatsi signed two irrevocable subscription applications in December 2017.
However, the PIC is contending that Ayo had misrepresented facts. The information presented by Ayo included:
- That a 30% shareholding in BT Communication Service, owned by African Equity Empowerment Investments (AEEI), would be transferred to Ayo on listing;
- That some clients of BT would move over to Ayo, and conclude further contracts with Ayo; and
- A revenue forecast of R7.7-billion and a profit-before-tax forecast of R1.5-million for the 2019 financial year.
However, the PIC says the acquisition of BT’s shareholding had not been confirmed; BT had not confirmed that it would be transferring its clients; BT had not consented to its financial information being included in the pre-listing statements; and the revenue and profit forecasts were unrealistic.
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Ayo has been mired in controversy since its listing. In August 2020, the JSE slapped the company with a R6.5-million fine for publishing a “number of sets of incorrect, false and misleading financial results as a result of its failure to comply with International Financial Reporting Standards and listing requirements”. The company also posted several material misstatements in its 2018 interim results. In February 2022, the JSE took action against two former non-executive directors, Mbuso Khoza and Telang Ntsasa, disqualifying them from serving on the board of any listed company for the next five years. Khoza and Ntsasa were both members of Ayo Technology Solutions’ audit and risk committee and failed to fulfil their oversight roles in relation to the 2018 interim results, which contained several material errors. In November 2022, two former directors (Salie and Naheed Gamaldien) were fined R250,000 each for engaging in business practices that went against JSE listing rules.
Read in Daily Maverick:
“Iqbal vs the banks — behind Survé’s conspiracy theories”
Former chief financial officer at the PIC, Matshepo More, was suspended in 2019 and dismissed in 2021 for, among other things, signing a memo approving the R4.3-billion transaction before the committee could sign off on it. However, in September 2022, the Commission for Conciliation, Mediation and Arbitration ordered that More be reinstated.
The PIC said on Tuesday night that the court is the appropriate forum to assess the evidence and adjudicate on this matter. “The PIC has an obligation and responsibility to ensure that appropriate action is undertaken to protect the value of assets under its management, for the benefit of its clients. Out of respect for court proceedings, the PIC will avoid providing running commentary on the unfolding legal proceedings,” it said.
Despite all the drama, the GEPF seems to have faith in the new PIC board announced in November 2021, and awarded the PIC a mandate to manage unlisted investments on its behalf in May 2022.
In South Africa, the PIC will consider unleashing investments worth up to R500-million per company. In the rest of Africa, it will deploy investments of between R316-million and R632-million. BM/DM
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the greater impact on the company is that the directors continued paying insane dividends while the company is neither solvent nor liquid in the face of the PIC claim. It has barely any own profit but paid what now amounts to 30% dividends out of the PIC cash. The only consolation is that the directors under those circumstances face unlimited joint and several personal liability for making those dividend payments.
VIVA ANC VIVA , VIVA cadre deployment VIVA BBBEE! Just feel sorry for the GEPF members who lost a large part of their retirement money, and Iqbal and his cronies continue to live the high life. No shame!