Trust is an issue

The extreme price volatility in Trustco’s shares over the past few weeks is causing some consternation — even outrage — on social media. Trustco, readers may remember, is already subject to a market manipulation investigation by the Financial Sector Conduct Authority (FSCA) for share trades between November 2017 and February 2018. In that period Trustco’s shares lurched from around 500c to as high as 990c on news that major shareholder Riskowitz Value Fund (RVF) had bought 20% of the group’s Legal Shield subsidiary for a whopping R1.2bn.

At a stretch, RVF’S willingness to (over?) pay top dollar for Legal Shield could be cited as a catalyst for a strong run in Trustco’s shares. But the share price movements at the end of June this year are baffling and illogical – and, frankly, so suspicious in nature that it would be damn near impossible for the FSCA not to open another marketmanipulation investigation.

The key trade transpired on Friday June 29, the last trading day of that month and the day on which Trustco released pretty ordinary year-to-endmarch results. That day Trustco’s shares surged, and closed at a high of R12.

What motivated investors to chase Trustco scrip with such vigour is not clear in the financial results. Some wags on Twitter said the R12 closing price must have been enormously helpful to the quarterly performance numbers compiled for RVF clients.

Though I can’t access RVF’S portfolio, I imagine there was a sizeable markedto-market benefit to Trustco’s closingprice surge. This kind of conjecture will persist until the FSCA closes its marketmanipulation probe.

In terms of the Trustco trades there were a few trades on June 28 (when shares jumped 15%) and one on June 29 that pushed the price another 10%.

More twilight than dawn

Distribution & Warehousing Network (Dawn) appears to have passed into the twilight zone. The value destruction — and I’m not pointing fingers at new CEO Edwin Hewitt — has been frightening over the past three years.

Dawn’s latest market capitalisation of R228m is now less than the R358m of fresh capital that was raised in a rights issue last year, and less than two-thirds of the value that was attached in late 2014 to the proposed (and subsequently abandoned) specific repurchase of empowerment partner Ukhamba’s 32.25% stake.

Hewitt is hinting that turnaround traction may prove elusive in the short term with shareholders finding considerably less reassurance in the mucheroded tangible NAV of 52.9c/share.

Dawn’s latest shareholder register does not offer much hope for punters — especially noting that stoic supporter Coronation Fund Managers’ main holding has been sold down to 26.5m shares. The share register also does not offer any evidence for media reports that suggested Bidvest could be a potential rescuer for Dawn.

What is interesting, I suppose, is that the Ravazzotti Family Trust — a prime mover behind superb building supplies business Italtile — pops up as a holder of 455,000 Dawn shares. It’s probably not worth hanging too much hope on that, but in these dark days we might need a corporate fantasy.

Servest with a smile

It’s taken a bit longer than the traditional five- to seven-year private equity vesting period, but RMB Corvest has made a mint with its investment in global services company Servest.

A prominent tombstone notice last week indicated that after a vesting period of about a dozen years, RMB Corvest was party to a takeover deal that realised a £540m exit valuation for Servest. Not bad for a business that was delisted from the JSE in 2002 at a takeout value of about R175m.

Developments will no doubt cause cynical investors to carp that the best small caps are always delisted at the worst possible moment.

What motivated investors to chase Trustco scrip with such vigour is not clear in the financial results