DEBT AND TAXIS
Share price in freefall as Transaction Capital CEO David Hurwitz abruptly axed
The troubled group just can’t seem to catch a break.
With results much worse than expected, Transaction Capital has notified shareholders that its CEO, David Hurwitz will be stepping down at the end of the year, after yet another startling trading statement.
In a terse Sens announcement after close of trade, Transaction Capital said Hurwitz will leave his position as CEO, as a director of all boards and as a member of all committees within the group, effective 31 December 2023. Hurwitz will be available to the group for the 2024 calendar year, which includes his notice period, “to ensure a smooth handover of his duties”.
Co-founder of Transaction Capital, Jonathan Jawno, will, in addition to his role as chairman of SA Taxi, take over as CEO of Transaction Capital, where his “primary focus” will be on unlocking shareholder value.
Transaction Capital’s share price has already plummeted by more than 80% over the past six months.
The group issued a second trading statement on Monday in the late afternoon, which revealed how untenable Hurwitz’s tenure had become.
In the update, the group referred to the dire profit warning it issued in March this year, when it blamed ongoing macroeconomic “challenges” affecting the minibus taxi industry, which started at the onset of the pandemic. This had prompted an aggressive restructuring of SA Taxi, a process that is still hurting Transaction Capital profits.
Worse than expected
It now says things are worse than expected, with core earnings per share and headline earnings per share to be even lower than the ranges reported in the trading statement released on Sens, on 20 March 2023.
The group says a further trading statement will be issued to provide specific guidance “once the group has reasonable certainty” regarding the ranges for the full year ending 30 September 2023.
In the operational update, it said management had made progress regarding the restructure of SA Taxi’s operations and balance sheet, which has resulted in a more stable business, but this process and related costs will affect its bottom line.
The WeBuyCars division’s FY2023 earnings are expected to be down by about 20%.
Its collections division, Nutun’s FY2023 earnings are expected to grow, but at a lower rate than expected.
The aggressive restructuring of SA Taxi, it said, has resulted in a more stable business, although loan collection rates remain below pre-Covid levels.
On 14 March, Transaction Capital’s share price crashed by more than 40% after news of the aggressive restructuring of SA Taxi division and questions arose about Hurwitz’s sale of 1.6 million shares held in his Dovie family trust’s stake in the company, worth R51-million in December last year.
At the time “The Passive Income Guy” Dave Hazelwood tweeted, “Transaction Capital CEO sells 40% of his stake in the company. Probably nothing”, followed by, “I prefer to buy when the CEO is buying, not selling”. To which independent analyst Anthony Clark commented: “#TCP [Transaction Capital is] one of my Top 3 stocks to AVOID for Q1 2023 for a number of very obvious reasons [in a] Dec 6th interview @BusinessDayTV… #TCP was [as I said] a contentious call BUT one I had confidence in. This CEO sale is just added icing on the baked cake.”
More than a week later, Hurwitz claimed in an interview with Daily Maverick that the market had overreacted to the trading update.
He said there was nothing untoward about the sale of the shares, because he had used shares as security for bank debt and had sought board approval.
“We issued results on 15 November and between the 15th and 13th of December, the share price went down from about R42 to about R33, which was almost a 25% reduction in the price. What that did is put me in breach of my funding arrangements [with my bank]…
“I was in a position where my bank was forcing me to sell. So I took the view that I should settle all of the debt and pay all the taxes, which is what I did. So I sold about R50-million worth of shares.”
The market’s not buying the turbulence at the group: the share price crashed a further 25% by 9.20am. DM