Oakbay Resources’ share price ‘was heavily manipulated’ by the Guptas
THE GUPTA family inflated the share price of a company it controlled on its Johannesburg Stock Exchange debut by lending money to a Singapore firm to be used to trade the equities.
That came ahead of plans to raise funds for a uranium mine. The Guptas agreed to loan $1 million (R14.1m) from bank accounts in Dubai to Unlimited Electronics & Computers in Singapore in November 2014.
That same month, UEC transferred $928 146 to the Guptas’ Oakbay Resources and Energy and the two companies had a contract entitling UEC to 18.5 million Oakbay shares at R10 a share, according to a communication that was one of a trove of e-mails.
The 2.31 percent stake in Oakbay was worth about $13m. Oakbay employee Ronica Ragavan told UEC director Kamran Gani on November 27, 2014, a day before Oakbay listed, to instruct his brokers to sell 10 000 shares for R10.05 each and another 10 000 shares for R10.08 before December 5.
The 20 000 shares that traded on the Oakbay debut gave the company a market value of more than R8 billion.
That was more than 48 times its full-year revenue. Most Johannesburg-based mining companies have revenue that exceeds their market value.
The volume of shares traded on Oakbay’s listing day was the highest yet recorded for the stock.
It set an indicative price for future fund-raising and determined how much equity would be needed to pay off a loan from the Industrial Development Corporation (IDC).
“Trade is supposed to be an honest deal, setting an honest price,” Clinton van Logger- enberg, a director at law firm ENSafrica said. “In principal it does sound like something that should be investigated further.”
Communication between Ragavan and UEC and subsequent stock trading is another example of how the Gupta family has become involved in allegations of corruption and the biggest post-apartheid scandal in South Africa.
President Jacob Zuma, his son Duduzane, state firms and international companies including McKinsey, KPMG and SAP have been implicated in dealings with the Guptas or companies linked to them.
The Guptas have been accused of interfering with cabinet appointments and using political connections to win favourable contracts from state companies. Duduzane and the Guptas have denied wrong- doing. KPMG said some of its senior staff in South Africa, including the local head, have quit after an internal probe and it said it would give the money it made from dealing with the family to charity.
SAP has reported the conduct of some its employees to US regulators and McKinsey is reviewing its practices and will suspend work with state-owned companies in the country.
Uranium Mine
In its pre-listing statement published in November, 2014, Oakbay said that in the 12 months following the listing, it would need to raise at least R800m from investors to start production at its uranium mine and that the Guptas’ closely held investment company was willing to reduce its shareholding in the publicly traded company.
Having loaned Oakbay R250m in 2010 to help it develop its business, the IDC agreed to have its investment converted to shares at a 10 percent discount when Oakbay began trading. The IDC said UEC’s investment helped reassure it about the value of the company.
“The IDC asked for and was given an assurance that UEC was not a related party to any of the shareholders of Oakbay at the time,” it said.
Oakbay Resources delisted this year after directors resigned and its sponsor and transfer secretaries quit amid press reports about the relationship between the Guptas and Zuma.
Gani, when visited at his 5th floor offices in an industrial part of Singapore on October 19, said he did not have time to respond to questions and might comment at a later date.
Gary Naidoo, a spokesperson for the Gupta family, did not respond to e-mails or messages left on his mobile phone. Ragavan referred questions to Naidoo.
Oakbay’s audits from KPMG in South Africa helped convince Sasfin Holdings to manage its listing as its sponsor, a stock exchange requirement, a person familiar with the situation said. The e-mails show Oakbay used its bank account with Barclays Africa Group’s Absa unit to receive the money from UEC.
KPMG and Sasfin said they had found nothing concerning when they assessed Oakbay. Absa later closed Oakbay’s accounts. The IDC said it was considering its legal options because it had thought UEC was a public investor in Oakbay and not linked to the Guptas.
This year “the JSE market regulation division decided to provide details of the trading,” said JSE chief executive Nicky Newton-King, referring to a unit of the Financial Services Board, which regulates part of the financial services industry. – Bloomberg