Sasol investors in class action against execs
‘Failed to disclose material adverse facts’
SASOL shareholders have launched a class-action lawsuit against current and former executives for failing to disclose material adverse facts about the company’s business, operational and compliance policies after budget overruns at the US-based Lake Charles Chemicals Project (LCCP) hit Sasol’s share price.
New York-based law firm Pomerantz LLP said it filed the lawsuit on behalf of investors who were seeking recourse after losing significant value.
Pomerantz, which has championed investor and consumer rights for 80 years, said it was representing investors who owned Sasol shares between March 10, 2015, and January 13, 2020, and who were seeking to recover damages caused by the officers’ violations of federal securities laws.
“If you are a shareholder who purchased Sasol securities during the class period,” Pomerantz said, “you have until April 6, 2020, to ask the court to appoint you as lead plaintiff for the class.” The lawsuit was filed in the Southern District of New York.
Sasol spokesperson Matebello Motloung said that the group was aware of Pomerantz’s plans.
“We haven’t been served with a lawsuit yet. We will study it once officially received,” Motloung said.
At the centre of the class action is the reduction in expected project returns due to budget overruns during the construction of the controversial LCCP. The project’s cost ballooned from $8.1 billion (R122.47bn) in 2014 to the current estimate of between $12.6bn and $12.9bn.
It wiped billions off Sasol’s market cap, with the share price falling 14.93 percent in the US after the company told investors that the cost estimate for the LCCP had been revised to between $12.6bn and $12.9bn last year, including a contingency of $300 million.
It confirmed that the construction and operation of the LCCP was plagued by control weaknesses, delays, rising costs and technical issues, which were exacerbated by Sasol’s top-level management, who engaged in improper and unethical behaviour concerning financial reporting for the LCCP and the project’s oversight.
On Monday, Sasol reported that earnings had plummeted by 74 percent to R4.5bn in December 2019, compared with R23.25bn on the 9 percent weakness in the rand-per-barrel price of Brent crude oil, softer global chemical prices and refining margins.
The firm accuses Sasol executives of misleading investors by not disclosing that it had conducted insufficient due diligence and failed to account for multiple issues and the true cost of the project.
“All the foregoing was reasonably likely to render the LCCP significantly more expensive than disclosed and negatively impact the company’s financial results; and, as a result, the company’s public statements were materially false and misleading at all relevant times,” Pomerantz said.
The firm cited former Sasol chief executives David Constable and Bongani Nqwababa and Stephen Cornell
– who presided over the cost overruns of the LCCP until they were forced to resign last October – as well as the incumbent Fleetwood Grobler and current chief financial officer Paul Victor as defendants.
“As a result of defendants’ wrongful acts and omissions, and the precipitous decline in the market value of the company’s securities, the plaintiff and other class members have suffered significant losses and damages,” the firm said.
Sasol shares declined 1.28 percent on the JSE yesterday to close at R204.36.