No rul­ing yet in Re­silient scan­dal

Listed prop­erty set to suf­fer un­til FSCA con­cludes in­ves­ti­ga­tion

Business Day - - FRONT PAGE - Alis­tair An­der­son Prop­erty Writer an­der­[email protected]­nesslive.co.za

One year after the big­gest scan­dal to hit listed prop­erty be­gan un­fold­ing, fund man­agers and other in­vestors are des­per­ate for the Fi­nan­cial Sec­tor Con­duct Au­thor­ity (FSCA) to con­clude its lon­gawaited in­ves­ti­ga­tion. An­a­lysts say that the listed prop­erty sec­tor will not ex­pe­ri­ence any mean­ing­ful im­prove­ment in its for­tunes un­til the FSCA re­leases find­ings of its in­ves­ti­ga­tion into the al­le­ga­tions of share price ma­nip­u­la­tion that have plagued the Re­silient stable since Jan­uary 2018.

One year after the big­gest scan­dal to hit listed prop­erty be­gan un­fold­ing, fund man­agers and other in­vestors are des­per­ate for the Fi­nan­cial Sec­tor Con­duct Au­thor­ity (FSCA) to con­clude its long-awaited in­ves­ti­ga­tion.

An­a­lysts say that the listed prop­erty sec­tor will not ex­pe­ri­ence any mean­ing­ful im­prove­ment in its for­tunes un­til the FSCA re­leases find­ings on its in­ves­ti­ga­tion into the al­le­ga­tions of share price ma­nip­u­la­tion that have plagued the Re­silient stable since Jan­uary 2018.

Ian An­der­son, chief in­vest­ment of­fi­cer at Bridge Fund Man­agers, said while the FSCA was be­ing cau­tious as it was not the first time the group was un­der in­ves­ti­ga­tion or al­le­ga­tions had been lev­elled at the com­pa­nies within it, the in­vest­ment com­mu­nity was be­com­ing des­per­ate. Fund man­agers wanted a con­clu­sion to the al­le­ga­tions around the stable. “While it’s frus­trat­ing for in­vestors, I’d rather the FSCA and JSE do their jobs prop­erly and turn over every stone in their in­ves­ti­ga­tion and make the judg­ment in the end, and one the mar­ket can trust given the time taken to reach that judg­ment,” he said.

Gar­reth El­ston, port­fo­lio man­ager at Reit­way Global, said: “I’m sure that the en­tire in­vest­ment com­mu­nity re­mains hope­ful that its in­ves­ti­ga­tion will be re­solved as soon as pos­si­ble. A year of mar­ket uncer­tainty is a very long time.” The JSE can sus­pend com­pa­nies for not meet­ing its list­ing re­quire­ments but the FSCA has the ul­ti­mate au­thor­ity on the con­duct of com­pa­nies listed in SA.

Rid­waan Loonat, an an­a­lyst at Ned­bank CIB, said the FSCA was deal­ing with a num­ber of other cases.

“The tim­ing de­lay was ex­pected given the num­ber of cases and the com­plex­ity of some of them that the FSCA cur­rently have opened [in­clud­ing] Capitec, Stein­hoff and Re­silient. Un­for­tu­nately while these in­ves­ti­ga­tions are on­go­ing, uncer­tainty will weigh on share prices,” he said.

The Re­silient stable in­cludes Re­silient, Fortress, Nepi Rock­cas­tle and Light­house Cap­i­tal, pre­vi­ously Green­bay Prop­er­ties. The FSCA be­gan in­ves­ti­gat­ing events around Re­silient and Fortress in March. The other stable mem­bers were added later.

The FSCA’s in­ves­ti­ga­tion is twofold: it is study­ing pos­si­ble in­sider trad­ing and price ma­nip­u­la­tion in its shares; and false and mis­lead­ing re­port­ing by and on the Re­silient stable. At­tempts to reach the FSCA on Thurs­day were un­suc­cess­ful.

The leader of the direc­torate of the mar­ket abuse in­ves­ti­ga­tion team at the FSCA, Alex Pas­coe, in De­cem­ber re­ferred Busi­ness Day to a re­port re­leased ear­lier that month which said the probe was con­tin­u­ing. In Jan­uary 2018 there was a large sell-off in stocks of the four com­pa­nies, fol­lowed by a num­ber of re­ports ac­cus­ing their man­age­ments of in­flat­ing share prices through re­lated party deals and other ma­nip­u­la­tion tech­niques. Re­silient and Fortress fell 7.32% and 11.22% re­spec­tively on Jan­uary 10 2018 and then con­tin­ued to fall for the rest of the month. The other two sta­ble­mates also saw their prices drop.

The al­le­ga­tions per­sisted and a group of short sell­ers ag­gres­sively shorted the stable’s shares, with up to R120bn lost at one point. The sell-off has stopped, but the com­pa­nies’ re­cov­ery has not gained much mo­men­tum.

Re­silient’s share ended 2018 down 58.3%, while Fortress lost 66.5%, Nepi Rock­cas­tle 43.5% and Light­house Cap­i­tal 46%.

IAN AN­DER­SON

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