Adapt IT shares tumble as CEO’s reputation is questioned
ADAPT IT’S share price fell by more than 13 percent on the JSE yesterday after media reports about its chief executive - Sbu Shabalala - emerged which have dented his reputation.
Shabalala has been cited in the weekend media as having allegedly hired armed thugs to beat the partner of his estranged wife.
Adapt IT said it had granted Shabalala leave of absence, at his request, for three months with effect from May 10, 2021 to attend to personal matters.
Tiffany Dunsdon, chief commercial officer, would assume the role of interim CEO for the next three months.
Adapt IT, the provider of specialised software and digitally-led business solutions, yesterday also announced the extension of its fulfilment date for its acquisition by the Volaris Group to May 14. This comes after the fulfilment date, which was first set for April 30, was extended to May 7 and further extended to May 14.
Peter Takaendesa, the head of equities at Mergence Investment Managers, said the further delay was unlikely to be the key reason for the share price decline, as such delays were not unusual for acquisition transactions of this nature.
“The delay is only by a few days to May 14 and in fact it is possible they may ask for a further delay as there are many conditions to be fulfilled,” Takaendesa said.
“It is important to remember that the share price has been trading above the Volaris offer of R6.50 a share and that may be one of the reasons for the share price reaction.
“There have also been negative recent media articles on the Adapt IT chief executive and some market participants may be speculating that may be the reason for further delays,” Takaendesa added.
Adapt IT’s share price rocketed when the Canadian company entered the fray last month for its acquisition by offering 650 cents a share, beating an earlier tabled offer by the Huge Group of 552c tabled in January.
However, its shares declined to a day-low of R6.15, down from Friday’s closing price of R7.08.
Adapt IT chairperson Craig Chambers advised the shareholders not to act on the offer and said its independent board would make its opinion and make recommendations.
Takaendesa said Adapt IT had not specified which conditions had caused the delay this time, but the previous delay indicated that the independent expert was still in the process of finalising its opinions relating to the offer and the independent board required time to apply itself rigorously to evaluating the merits of the offers.
“We believe Volaris is unlikely to have changed its views on the transaction over such a short period of time and we know that they have received significant irrevocable support from Adapt IT shareholders on their offer.
“Obviously if the allegations levelled against the chief executive are genuine then that may delay the transaction further as he is the driving force behind the company’s growth,” Takaendesa said.