{"id":5143,"date":"2018-04-27T10:12:22","date_gmt":"2018-04-27T10:12:22","guid":{"rendered":"https:\/\/amabhungane.org\/amabhungane\/?post_type=stories&p=5143"},"modified":"2024-09-21T19:16:17","modified_gmt":"2024-09-21T19:16:17","slug":"did-ayo-mislead-investors","status":"publish","type":"post","link":"https:\/\/further.co.za\/amabwp\/did-ayo-mislead-investors\/","title":{"rendered":"Did Ayo mislead investors?"},"content":{"rendered":"

Last Monday, Ayo Technology Solutions issued a Stock Exchange News Service (SENS) announcement in response to amaBhungane’s article published over the weekend, Surv\u00e9’s listing ship<\/a>.<\/p>\n

The company, in which Independent Media owner Dr Iqbal Surv\u00e9 holds a large indirect stake, complained about \u201cdefamatory, false and inaccurate information\u201d. It listed 14 points of complaint.<\/p>\n

Ayo stated, among other things, that its private placement of shares ahead of listing on the Johannesburg Stock Exchange (JSE) was oversubscribed by R1-billion. It had sought to raise R4.3-billion, but claims to have received commitments of R5.3-billion.<\/p>\n

Ayo noted: \u201cThe company elected not to take the rest of the commitments as our acquisition strategy did not require these funds. The suggestion [by amaBhungane] that ‘no one else but the PIC bought these shares’ is therefore grossly misleading.\u201d<\/p>\n

The PIC subscribed to the entire parcel of shares on offer at R43 per share (totaling R4.3-billion) \u2013 a decision and a price that amaBhungane questioned in the original article.<\/p>\n

But Ayo’s complaints alerted amaBhungane to contradictions around the timing of the private placement.<\/p>\n

Now further scrutiny suggests Ayo told investors it had the PIC investment in the bag even before the PIC had taken such a decision.<\/p>\n

Investigative journalism takes time and money. Help us do more. Be an amaB Supporter.<\/a>\u00a0<\/span><\/p>\n

AmaBhungane has had sight of a range of documents confirming that the PIC held a \u201cspecial portfolio management committee\u201d meeting on Wednesday, 20 December 2017, at 13:30.<\/p>\n

According to the minutes this meeting was to request the committee to \u201capprove the waiving of the due diligence approval process\u201d and \u201capprove for the PIC to participate in Ayo Technology Solutions Limited’s private share placement ahead of its planned listing on the JSE on 21 December 2017\u201d.<\/p>\n

But two days before the PIC meeting, on 18 December 2017, Ayo issued a SENS announcement boasting:<\/p>\n

\u201cAyo Technology received irrevocable commitments from invited investors to subscribe for shares in Ayo Technology to the value of R5.3-billion, well in excess of the R4.3-billion sought to be raised in terms of the private placement. The amount sought to be raised in the private placement will not be increased and successful invited investors will be advised of their allocations today, 18 December 2017.\u201d<\/p>\n

So while the PIC had not yet made a decision to invest, Ayo claimed \u201cirrevocable commitments\u201d of R5.3-billion. Such undertakings are legally enforceable.<\/p>\n

We put it to Ayo chief executive Kevin Hardy that if the amount claimed on 18 December included the R4.3-billion requested from the PIC, it may amount to a serious misrepresentation as on the face of it the PIC had not yet decided to invest.<\/p>\n

The other interpretation, equally serious, was that someone at the PIC had already delivered an \u201cirrevocable commitment\u201d to Ayo before the PIC committee had even considered the matter.<\/p>\n

We asked both Ayo and the PIC to explain which of these two possibilities was correct, or to provide an alternative explanation.<\/p>\n

The PIC did not respond.<\/p>\n

Ayo\u2019s Hardy responded: \u201cI again refer you to our SENS announcement which addresses the fact that we have followed and complied with all JSE regulatory processes which have informed all of our announcements.\u201d<\/p>\n

We replied to Hardy, saying: \u201cWith due respect, you have not answered the question.
\nDid you have an irrevocable commitment from the PIC on December 18? Yes or no?\u201d<\/p>\n

He did not respond.<\/p>\n

We asked the JSE whether this was something they would investigate.<\/p>\n

Andre Visser, the JSE’s manager for issuer regulation, replied: \u201cThe JSE has taken note of this and will engage the company and its sponsor to get the facts before deciding what action is required.\u201d<\/p>\n

Our statement that \u201cno one else but the PIC bought these shares\u201d appears to be factually correct, but was it misleading? That depends on whether there was ever a serious intention to attract other investors.<\/p>\n

According to the Ayo prelisting statement, the private placement opened on 13 December and closed on 15 December.<\/p>\n

In an internal PIC memo seen by amaBhungane, dated 14 December, the PIC was clearly under the impression that it had been asked to commit to taking up the entire private placement.<\/p>\n

The memo states: \u201cAyo has requested PIC to invest about R4.3bn for 99.8m shares at R43 per share. This amounts to 29.0% of Ayo (and 100% of the IPO).\u201d<\/p>\n

An IPO is an \u201cinitial public offering\u201d, a term which the PIC used to refer to the private placement.<\/p>\n

Often when share issues are oversubscribed, they will be issued in pro-rata proportion to all subscribers meaning everyone gets slightly less than they asked for.<\/p>\n

But Ayo said in its recent SENS release: \u201cThe share allocations took cognisance of the need to enhance or at least maintain, AYO\u2019s black empowerment credentials, which is crucial in terms of AYO\u2019s market positioning against its competitors.\u201d<\/p>\n

It is not clear how they could assess this on 18 December, when the PIC, which qualifies as an empowerment investor, had not made a formal decision.<\/p>\n

It also suggests there were no black investors among the R1-billion worth of claimed extra subscription.<\/p>\n

Ayo also pointed out that it had listed on 21 December 2017 and not on 8 January 2018 as we reported.<\/p>\n

We apologise for the error. Our date was erroneously based on an online article from Business Report<\/a><\/em><\/span>.<\/p>\n

But the fact that the listing actually went ahead on 21 December makes the situation worse, because the PIC investment committee only sat on the afternoon of 20 December, the day before the listing, meaning it evidently made its decision under great pressure.<\/p>\n

This also means that it is extremely unlikely that any of the conditions set by the committee were met before the PIC acquired the shares.<\/p>\n

These included that:<\/p>\n