Expose Viceroy’s motives
Profiteering from share price meltdown claim
CALLS for an investigation into possible market manipulation by Viceroy Research could unmask who financed its crippling and controversial report on Capitec bank.
It is believed that the reclusive three-man team who authored the report might work for a hedge fund in the US, which finances damaging market reports on a specific company and then subsequently benefits from a drop in the company’s share price.
Having gained popularity and credibility from their report into the happenings at Steinhoff International, the new report by Viceroy sparked panic earlier this week when it declared that Capitec was nothing but a “loan shark cloaked in sheep’s clothing”.
Among other things the report also alleges that the bank approves loans to defaulting customers in order to repay existing loans.
Capitec has denied the allegations and was backed up by the Reserve Bank and National Treasury which assured clients that the bank was solvent and co-operating with regulations.
National Treasury has asked the Financial Services Board (FSB) to consider investigating Viceroy.
Questions have arisen around Viceroy’s motives following suspicion that the research team belongs to a hedge fund which stood to profit from a drop in Capitec’s share price. Following the release of the report, Capitec’s shares fell by almost 25%.
Headed by a former British social worker known as Fraser Perring and two Australian nationals, Viceroy has been silent about who their investors are.
“Until two weeks ago, Viceroy operated anonymously and opaquely, and the reckless way in which it has released its report is clear proof that it is not acting in the public interest nor in the interest of financial stability in South Africa,” read a statement from National Treasury.
“Whilst the Treasury expects prudential and market conduct regulators in South Africa to consider all relevant reports in the public domain, and to act where any risks or transgressions in the law are identified, Treasury is of the view that the Viceroy report provides no basis to put any bank under curatorship.
“National Treasury has requested that the Financial Services Board, as the market regulator, working with the JSE, urgently considers whether it should initiate a market abuse investigation into the conduct of Viceroy, and to ensure that it is regulated appropriately.
“The FSB is requested to also alert relevant overseas regulators, like the Securities and Exchanges Commission in the US and the Financial Conduct Authority in the UK, to consider whether Viceroy is regulated appropriately, and to consider whether it has transgressed any of their market conduct and market abuse laws that aim to protect investors.”
In response to Treasury’s calls for investigation, Viceroy tweeted: “We welcome any lawful investigations into impropriety in our report, which is publicly sourced. In the US, Viceroy have and continue to work with regulators on numerous matters where we have identified corporate impropriety. We welcome the opportunity to similarly assist the FSB.”
Magda Wierzycka, chief executive of asset management company Sygnia Group, said Viceroy’s actions amounted to the sharing of fake news in order to profit from share price movement, actions that should be investigated.
“Viceroy is a three-man team of self-proclaimed researchers but they actually work for a hedge fund in the US, which makes money out of doing exactly what they did with Steinhoff.
“They put out a report of this nature on a company they believe is involved in some sort of fraudulent activity, the share price drops and they make their money out of the drop in the share price,” she said.
“They struck gold with Steinhoff, and riding on that reputation and on the fact that it brought them into a public domain, they published a very flimsy report on Capitec and panicked investors, causing the share price to drop.”