Mantengu irked by JSE’s response to share-rigging claims
● Mantengu Mining says it has taken the “unpopular stance” of overriding the JSE when it flagged the manipulation of its share price to the market last week to raise awareness of its concerns.
Previously known as Mine Restoration, the junior miner owns Langpan, a chrome and platinum group metals (PGM) operation 17km from Thabazimbi in Limpopo. Last week Mantengu urged caution when trading its shares because the price was being manipulated and value eroded.
It said it reported the matter to the bourse but was not satisfied with the response, and therefore went public to warn of possible insider trading.
The Financial Sector Conduct Authority (FSCA) has confirmed it is investigating possible manipulation of Mantengu’s share price.
CEO Mike Miller told Business Times in an interview that Mantengu’s share price has been manipulated over the past seven months and as a result, its value has been eroded about 85% after the shares hit a high of R3 in late June. They have since lost as much as 90% of their value, until a week ago when the company published a statement warning of the manipulation.
“The market cap was approximately R70m when Mantengu reported its manipulating concerns. The point was how do you trade at R70m yet the business has R200m invested in assets in an operation where the JSE approved valuation is R857m. Impossible”.
Miller said the mining industry is immensely competitive and Mantengu has started to punch above its weight, which he said could be driving the manipulation.
“We have big ambitions, and when you have big ambitions, you naturally end up competing heavily against parties. If you look at where money in the mining sector is spent, it is right at the top. In blue-chip mining companies, that is where all the money goes, whether it is debt or equity.”
Miller said there is a significant opportunity in small to large-scale mining, and Mantengu has identified and is pursuing several opportunities. While the company has not closed deals yet, it has a clear growth plan, aiming to invest in small to large operations in the mining sector as a starting point.
That could be the reason the company’s share price is under attack, he added.
“Our speculation is that they are looking to artificially erode our market cap, to undermine our acquisition and growth plans. I think because there is a new player in town who is bringing foreign funding ... you do not need to go through the local credit committees and banking circles, or development finance institutions circles. I think that naturally creates some angst.”
Last week Mantengu told the investment community it had been made aware by interested parties, on condition of anonymity, that a consortium of shareholders was collaborating to manipulate the share price using nefarious means to drive it down and erode the company’s value.
Miller said it picked up irregular trading of the shares. “There were a number of trades that defy any form of commercial or financial logic. This has had the impact of dropping our market capitalisation every single day. Over a period of time, we saw an artificial erosion of our market cap. That is why it took us time to pick it up, it was only when we brought in our legal team, our advisers, and auditors that we could clearly see a pattern emerging.”
He said the company referred the matter
to the JSE and the FSCA for investigation. However, the JSE said it needed more time to investigate the claim, which Miller and his colleagues objected to.
“Their view is that it was premature, and the JSE needs to be given time and space to do its investigation. We fundamentally disagree. What happens to a shareholder value between now and six or 12 weeks’ time, when we have not armed the shareholder with information? We have to allow them to trade with the knowledge that we have now made public to say trade carefully.”
Shaun Davies, director for market regulation at the JSE, confirmed that Mantengu reported the alleged manipulation of its share price to both the bourse and the FSCA. Investigations into potential market manipulation are conducted by the FSCA, but the JSE would assist the regulator in its investigation, if required, he said.
“Occasionally, listed companies report concerns regarding trading in their securities to the JSE or the FSCA. Therefore, the reporting of alleged price manipulation by Mantengu is not a unique case. The JSE will provide assistance to the FSCA in its investigation into the alleged price manipulation reported by Mantengu.”
Miller said the FSCA had confirmed that their preliminary investigation supported a prima facie case of insider trading and share price manipulation.
Gerhard van Deventer, divisional executive for enforcement at the FSCA, confirmed receiving a complaint relating to a possible contravention of section 80 of the Financial Markets Act, section 19 of 2012 in terms of prohibited trading practices or “price manipulation” from Mantengu Mining.
“Based on the complaint, the FSCA has decided to investigate the matter. This should not be interpreted as a comment on the merits of the complaint.
“By registering an investigation, the FSCA is not expressing a view regarding the possibility that a contravention has occurred. The purpose of the investigation is to establish whether there was a breach of the law,” Van Deventer said.
From time to time companies report concerns of share price manipulation, he said. “While most of our cases are initiated as a result of the sophisticated surveillance system of the exchange, it is not uncommon for the enforcement division of the FSCA to receive complaints and tip-offs.”