AEEI tumbles on call for suspension
The market value of Sekunjalo’s JSE-listed investment vehicle African Equity Empowerment Investments (AEEI) fell by a quarter last week amid a call for the stock to be suspended.
The market value of Sekunjalo’s JSE-listed investment vehicle, African Equity Empowerment Investments (AEEI), fell by a quarter last week amid a call for the stock to be suspended.
In early February, the Sunday Times published an audio recording of a meeting in which Sekunjalo chair Iqbal Survé said he was withholding information from the Public Investment Corporation (PIC) about why a transaction between companies under his control had fallen through.
The PIC controversially invested R4.3bn in Ayo Technology Solutions in December 2017, partly on the premise that Ayo would then use R1bn of that cash to buy AEEI’s 30% stake in British Telecom’s (BT) SA business. Ayo is 49.4% owned by AEEI, which in turn is 61.5% held by Survé’s Sekunjalo.
The deal was never completed, however, as BT did not consent to it.
At the secretly recorded meeting in August 2018, Survé said that he had spoken to former PIC boss Dan Matjila about why the BT deal had collapsed but that he had not given “100% of the story”.
He had told Matjila that public scrutiny of the Ayo listing had made the deal difficult and that “I didn’t talk about the consent of BT or anything like that”.
AEEI CEO Khalid Abdulla and former Ayo CEO Kevin Hardy, who resigned soon after the meeting, were among those present. After Survé insisted that Hardy call the PIC in the same meeting, the former CEO said he was “not comfortable phoning them about this”.
Survé also said the PIC’s board and its entire investment committee had approved the Ayo listing deal. “The fact that it was after the actual investment doesn’t really matter … Legally, we are 100% okay.”
Regarding the BT deal, he said: “Whether you pay R1bn or R2bn for the BT stake in Ayo is irrelevant for the PIC right now
— for them, that’s what they bought into.”
Independent analyst Anthony Clark said the recording “reveals that many were misled”. Thanks to the R4.3bn Ayo listing and its large stake in the company, AEEI’s net asset value (NAV) surged from 260c a share in 2017 to 999c.
While AEEI had “a basket of solid investments”, including Premier Fishing, Pioneer Foods, Sygnia and BT SA, the group’s NAV now had to be revised lower, he said.
“With the reputation of management at the investment entities now in tatters and the facts laid bare that many were misled on Ayo, including the PIC seemingly, a call for a full investigation must be on the cards.
“I’d call for members of AEEI to step down, the JSE to even consider suspending AEEI, and for investors to reappraise their view on this counter as it’s now clearly damaged goods.”
AEEI’s market capitalisation fell 24% to R1.5bn last week, while Ayo’s shares dipped to R18.80, or 56% lower than their listing price of R43.
Andre Visser, GM of issuer regulation at the JSE, said the exchange had not received a formal request from fund managers to suspend trading in AEEI’s shares.
The stock is tightly held, with few major institutional investors.
If such a request was made, Visser said, the JSE would have to consider whether the company had breached its listing requirements, “or if it will further the objects of the Financial Markets Act”.
A spokesperson for BT said that while the company supported BEE, “these transactions must also satisfy the highest levels of governance in order to inspire public trust”.
“In order to come up for consideration by BT, any transaction would have to pass a number of legal hurdles.”
In November, Abdulla said in an AEEI results presentation that the BT deal was still on the cards. “It’s a process of getting shareholder approval on both sides. We’re still in the process and waiting for approvals or otherwise.”
The PIC declined to comment on whether it would sell its shares in Ayo in light of the failed BT deal. Its investment in Ayo is being investigated internally and by the commission of inquiry into the PIC.
AEEI, Ayo, Sekunjalo Investment Holdings and Survé said in a joint statement last week that the meeting in August was about “sifting fact from fiction face to face, as there were competing versions of what was happening on the ground”.
The meeting was an attempt “to get together to collectively discuss the next steps”.
“There is not a single lie that has been told to the PIC as has been suggested in the press report and the Sekunjalo Group, AEEI, Ayo and Dr Survé continue to feel aggrieved by this unfair treatment in the public domain.”
ANALYST CALLS FOR MEMBERS OF AEEI TO STEP DOWN, THE JSE TO EVEN CONSIDER SUSPENDING AEEI … IT’S NOW CLEARLY DAMAGED GOODS