Resilient battle intensifies
‘WE WERE UNINVITED AND HAD NO OPPORTUNITY TO QUIZ MANAGEMENT’
The 36One Asset Management and Resilient spat has intensified, after the property group’s operations came under scrutiny in a scathing internal report. 36One’s leaked report accused the Resilient stable (Resilient, Fortress, Greenbay and Nepi Rockcastle) of artificially inflating its distributable income (intended for dividend payments) through the inclusion of interest income earned from prime plus 2% loans to its BEE schemes.
This alleged practice, 36One said, implies Resilient group’s financial statements don’t comply with international financial reporting standards and contravene the Companies Act of 2008 and JSE listing requirements.
It added that the high premiums to net asset values that Resilient, Fortress, Greenbay and Nepi Rockcastle shares fetch were influenced by directors buying substantial volumes of shares between October 2016 and December 2017.
In rejecting the allegations, Resilient said 36One didn’t seek its response to any of the allegations before the report was circulated.
It also accused 36One of having a large short position on Resilient, implying that it might have profited from the wild sell-off in the Resilient company shares since January 11. At the time, speculation was rife that Viceroy would be targeting Resilient companies. Instead, it targeted Capitec Bank.
Despite this, the selloff in Resilient, Fortress, Greenbay and Nepi Rockcastle continued, wiping off over R100 billion in all four companies since January.
On Tuesday, 36One admitted to not engaging Resilient management when it was preparing the report because it might have compromised its freedom in the trade of Resilient shares.
36One said it was uninvited from Resilient’s results presentation in January, where it would have had the opportunity to quiz management.
“So the opportunity to question the Resilient CEO and CFO at the results presentation was denied to us. To add insult to injury Resilient now sees fit to criticise us for not engaging with them.”
The leaked report, still in a draft form prepared by 36One analysts, was never intended to be published. “It has never been our practice to publish our internal research, which is our own confidential information and upon which we make investment decisions.
“If we intended to release a report, it would have been the final version and worded differently, although the substance of the report would have been the same.”
36One said it will cooperate fully with the investigations being conducted by the regulators. The JSE might involve the Financial Services Board in its investigation if it finds wrongdoing in the trading of Resilient shares.
Resilient described 36One’s report as “innuendo” and “damaging” when it rejected the asset manager’s allegations in its Sens announcement on Friday.
On Monday, Resilient said it doesn’t determine the market price of its shares and the fund manager’s “untested allegations” of share price manipulation are not substantiated and won’t “stand up to independent scrutiny”.