Remarkably for a company that has racked up more than the average number of run-ins with the JSE, Ayo Technology Solutions seems blissfully unaware of its disclosure obligations. It’s calling this week’s Sens statement regarding its settlement with the Public Investment Corp (PIC) a “voluntary announcement”, prompted by the release of “certain confidential information” in a Daily Maverick article — seven working days after its initial terse market alert.
Making it even more remarkable is that Ayo tags the name of not one but two sponsors onto its Sens statements. How do they not know what’s required?
News that the PIC had signed a deal aimed at putting an end to years of tension with Ayo jolted the usually comatose share price into action. Ayo stock reached a 12-month high of R4.96, though volumes were even thinner than usual.
In terms of section 3.4 of the JSE listing requirements, unless information can be kept confidential for a limited period, companies must release details of any potentially price-sensitive developments “without delay”. Given the share price movement ahead of the announcement and the Daily Maverick article, the confidentiality requirement had certainly not been met.
As Andre Visser, the JSE’s GM of issuer regulation, tells the FM: “In general, where information is price sensitive and all the provisions of section 3.4 are met, a company is obliged to publish a Sens announcement. In those cases, it can never be seen or disclosed as voluntary.”
So, shortly after Ayo released its “voluntary” statement the JSE forced it to release a cautionary announcement; in it, Ayo told shareholders a “supplementary” announcement was on its way. That announcement will contain the “disclosures and approvals that would ordinarily be required” by the JSE listings requirements.
Ahead of the release of those details it does look as though the Daily Maverick article was pretty much spot-on.
Ayo is buying back 17.2-million shares from the PIC for R619m, equivalent to R35 a share. Critically, that’s just under 5% of Ayo’s shares in issue, which means the repurchase doesn’t trigger any appraisal rights.
The latest announcement also confirms FM reports that there are plans for a second share repurchase — in this case, an option for the Government Employees Pension Fund (GEPF) to sell 5% of its Ayo shares at the higher of R20 a share or the prevailing 90-day volume weighted average price after three years. The repurchase of 4.3-million shares at R20 apiece would set Ayo back R86m.
Securing any return from this second stage of the transaction obviously depends on how well Ayo does over the next three years. Unfortunately, there’s little in the company’s controversial five-year history to back the view that its share price is going to enjoy a reversal of fortune — sprinting from the current R4.78 to R20 — in the next three years. If anything, apart from an improved relationship with its second-largest shareholder, things may get a little worse.
For starters, Ayo will have R619m less cash to fund its ambitious growth plans. This is a significant consideration, given the inability of its current crop of businesses to generate cash.
And Ayo’s original plan to partner with multinationals keen to invest in the South African market is looking considerably frayed.
British Telecom (BT), which was set to be the major profit generator in the Ayo listing plan, remains intent on severing its relationship with Ayo and its controlling shareholder, African Equity Empowerment Investments (AEEI). And BT is not the first multinational seemingly unhappy to partner with AEEI. In 2020, Saab Grintek exercised its option to repurchase a 25% stake bought by AEEI in 2015.
Ayo is buying
back 17.2-million
shares from the PIC
for R619m, equivalent
to R35 a share.
Critically, that’s just
under 5% of Ayo’s
shares in issue,
which means the
repurchase doesn’t
trigger any appraisal
rights
Other potential international partners that could add the sort of ICT expertise needed to realise Ayo’s plans might be discouraged by reports from recent proceedings at the Western Cape High Court. These include that threats were levelled against witnesses called by the PIC, and that BT South Africa’s CEO had to be accompanied by a bodyguard.
It’s unclear what, if any, impact AEEI’s plans to unbundle its 49% stake in Ayo will have on the technology company’s prospects. Perhaps putting some distance between Ayo and AEEI, whose 61% controlling shareholder is Sekunjalo Investment Holdings, will help investor sentiment.
In terms of the unbundling, announced early this year, for every 2.89 shares held, AEEI shareholders will receive one Ayo share. That ratio was appropriate until mid-February, when the Ayo share price began to make some headway. With AEEI still stuck at about 100c and Ayo up at 478c, the unbundling ratio will have to be reviewed.
The unbundling circular, which was due to be released on April 3, will now be released on May 4.
Meanwhile, that settlement does not mean the greater Sekunjalo Group is now free of legal battles. Far from it. The Competition Appeal Court has just heard an appeal by three banks against a Competition Tribunal ruling, made last September, preventing them from closing Sekunjalo Group bank accounts.
And at the Supreme Court of Appeal, Nedbank is preparing an appeal against an interim interdict issued by the Equality Court that prevented the bank from closing the group’s accounts.
Then there’s the battle of the Southern African Clothing and Textile Workers’ Union (Sactwu) to get back the original R150m loan it provided to Sekunjalo Independent Media (SIM) in 2013. Sactwu is looking for the original loan plus interest, totalling more than R300m, from SIM, which was set up in 2013 to buy Independent Media from its Irish owners.
SIM argues it has no debt to the union, as the loan was converted into shares at the time of the planned listing of Sagarmatha Technologies in April 2018. That listing was blocked by the JSE.
All in all, in the wake of recent belt-tightening warnings to Independent employees, it looks as though right now the Sekunjalo Group is spending more money on lawyers than journalists.
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