Transaction Capital (TC) yesterday strongly refuted market speculation and allegations of possible insider trading by its CEO, David Hurwitz, for the sales of shares in December, saying the sale was done with permission of other executives in relation to debt covenants.
This occurred after the company’s shares dived 40% on Tuesday following it issuing a pre-close update and trading statement in respect of the half-year ending March 31, 2023 detailing reduced earnings expectations and how it would aggressively have to restructure its SA Taxi business amid a tough macro-economy.
The timing of the deal looked suspect to the market in the wake of the recent announcement.
The share ended yesterday 17.37% lower at R14.60 with its market value declining to R13.4 billion after billions of rand were lost on Tuesday as investors piled out of the counter.
On December 19, Transaction Capital released a JSE Stock Exchange News Statement relating to dealing in Transaction Capital shares (share sales) by an associate (the Trust) of Hurwitz.
There had been speculation in the press and direct queries from a number of shareholders relating to the share sales in the context of the disclosures in the statement, it said.
However, TC said yesterday that the correct procedures were followed by Hurwitz in that he advised the company chairman and company secretary that the Trust was in breach of certain covenants relating to debt it held from its bankers against the TC shares owned by the Trust.
TC said Hurwitz accordingly requested permission for the Trust to sell 1 600 000 of the firm’s shares it held to reduce its debt on the basis that the Trust would retain the balance of 2 349 882 Transaction Capital shares held by it.
“In considering the matter and after consulting with some of the other Transaction Capital directors, the chairman approved the share sales after noting that the results for the year ended September 30, 2022 had been released to the market and there was no price-sensitive information or inside information of which he or the other directors consulted, were aware that should preclude permission to deal; and the TC CEO caused the Trust to effect the share sales between December 13 and 19, 2022 in accordance with the authority granted,“ TC said.
Shareholders were also advised that there had been no other sales of TC shares by Hurwitz, the Trust or any other associates of the Hurwitz since the share sales.
The definition of insider trading, and the consequences that may flow from it, are spelt out in the Financial Markets Act. The act defines “inside information” as specific or precise information which has not been made public and which is obtained or learned as an insider. If it were made public, it would be likely to have a material effect on the price or value of any security listed on a regulated market or any derivative instruments related to that security.
In South African you can be fined by the Financial Sector Conduct Authority or sent to jail for a period of time.
On Tuesday TC said its balance sheet remained in a healthy position. Its divisions were well positioned to benefit from structural opportunities in the local and global environment and were advantageously placed to benefit from accelerated digital adoption.
“After accounting for restructuring costs and increased provisions related to SA Taxi, Transaction Capital is comfortable that the balance sheet remains strong and covenant levels have not been breached,“ it said.
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