Resilient investors’ long wait not over
Regulator says probe into share price manipulation, insider trading to take another six months
The regulator’s probe into allegations of share price manipulation and insider trading at the Resilient group of companies is set to continue for at least another six months, extending investor uncertainty about the true financial position of the companies in the group.
News of the investigation resulted in a huge sell-off of shares in Resilient and its related companies in 2018 and also weighed on the rest of the listed property sector, resulting in a loss of more than R120bn for investors.
On Friday, the Financial Sector Conduct Authority (FSCA) said it would need at least another six months to finalise the investigation.
The allegations being probed include that the group of companies inflated profits through interrelated party deals and inflated their share prices through market manipulation.
Two members of the group — shopping centre owner Resilient and logistics-focused property firm Fortress — have been under investigation by the FSCA since March 2018. Eastern European shopping centre landlord Nepi Rockcastle and European mall owner Lighthouse Capital, formerly known as Greenbay Properties, were added to the investigation in July.
“With regard to the possible price manipulation cases, these are substantial investigations and it is not likely to be finalised within the next six months,” said Alex Pascoe, senior manager in the FSCA investigation department’s investigation and enforcement division.
But he said that the investigations into possible insider trading were “much closer to being finalised”.
Lastly, Pascoe said, the investigations into false and misleading reporting by and about the group of companies, were the most difficult to complete.
“The false and misleading reporting investigations are complex and will thus take time to finalise, and we also need the assistance of foreign regulators,” Pascoe said.
“Once we have finalised our reports and the authority has made a decision, we will publish
the same,” Pascoe said.
Fund managers have said that the Financial Sector Conduct Authority investigation needed to be completed in order to remove the cloud of uncertainty hanging over the property sector.
A review by Shauket Fakie of Resilient’s operations cleared the group of wrongdoing, but did little to restore investor confidence. Fortress has since appointed PwC to do a similar investigation into its affairs, with a preliminary report expected at the end of February.
Garreth Elston, a portfolio manager at Reitway Global, said the authority’s update could provide a measure of relief to investors, but pressure remained on the regulator to complete its investigation.
“The market has no choice but to wait. The FSCA needs to be as thorough as possible. Whatever they eventually release, and it has been a long wait, needs to be a definitive conclusion that cannot be challenged. Only then will the noise around Resilient and the stable, leave the sector,” he said.
“Giving us a time horizon can be good and bad. It’s good in that we get some idea as to when we could get findings, but can be bad as it can be manipulated. People may short the shares in the lead-up to a deadline if they anticipate a negative resolution,” Elston said.
Alex Morar, CEO of Nepi Rockcastle, said the update was positive.
“I would have preferred to see a speedier conclusion, but I am glad to see that the issue is firmly on the FSCA’s agenda and with a time frame. I reiterate our desire for a resolution at the soonest,” he said.
Attempts to obtain comment from Resilient and Lighthouse Capital were unsuccessful.
Fortress’ CFO and CEOdesignate Steven Brown said the company had not been updated directly by the FSCA since December, when the authority said investigations were continuing.
“The public statement of the 6th of December 2018 as released by the FSCA gave an update to the public, we are not aware of any further updates.
“We remain in favour of an open, transparent and swift process,” Brown said on Friday.