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What Oakbay's voluntary suspension means for investors

Johannesburg – Not having a sponsor on the Johannesburg Stock Exchange (JSE) led to Gupta-owned Oakbay Energy and Resources requesting a voluntary suspension of its trading activities.

But that is only one of multiple challenges the company had been facing, said an expert.

The JSE granted Oakbay a voluntary suspension on Friday, the company confirmed via SENS. This came after the JSE warned it would de-list the company earlier this month, as Oakbay did not comply with the requirements of the stock exchange. These being an audit committee chairperson, sponsor or transfer secretary.

READ: JSE suspends listing of Oakbay Resources

Oakbay’s sponsor River Group announced it would end its sponsorship on June 5. Oakbay confirmed in a statement that this was due to River Group conducting a revised assessment of association risk.

But CFA Stuart Theobald told Fin24 that not having a sponsor is not the only reason leading to the suspension. “They did not need to suspend the listing because they did not have a sponsor, they had 90 days to find a new sponsor."

“I think the company is under pressure on many different fronts and I think the de-listing was the best thing they could do,” he said. “This is a company that is facing quite a few struggles.”

In April, the JSE confirmed it was investigating share trades by the company after a monitoring process identified trades as evidence of market abuse. The JSE subsequently cancelled these trades.

READ: JSE investigates Oakbay trades

Further, the company reported a loss of greater than R1bn for the year ended February 2017, Fin24 reported.

What leads to a voluntary suspension

Theobald explained that voluntary suspensions happen for different reasons. Sometimes when price sensitive information is about to hit the market, companies may be concerned about how the information will come out and they want to ensure it comes out fairly, he said. This temporary suspension could be for a day or two.

A voluntary suspension affords a company time to take actions to try and restore themselves, he said.

The board often asks for a suspension if they know they won’t meet JSE requirements. An involuntary suspension almost never happens, said Theobald. ”When a board knows it is in violation of the rules, they do not wait for the JSE to delist them. They ask for a suspension first.”

Normally a company asks for a voluntary suspension to be lifted, but this only happens if they are confident they will meet the JSE requirements, he said. 

Makwe Masilela, director and market strategist at BP Bernstein Stockbrokers, is of the view that Oakbay’s suspension is due to the fact that it does not have a sponsor. “You need a sponsor to help you as a company navigate the rules of the JSE, because as a listed company, there are certain rules you need to follow.”

Masilela explained that listing requires a company to submit information for shareholders, as owners of the company, to have access to. “Shareholders have a right to information.”

He said voluntary suspensions often happen, because companies do not submit their financial results on time. But in the past five years it has been rare where companies were voluntarily suspended for not having a sponsor or auditor.

“We have never seen it before where people say they do not want to be your bankers or auditors.”

Impact on transparency

According to the JSE, which serves as a regulator, the transparency of information is needed to protect shareholders and investors.

Andre Visser, general manager of issuer regulation at the JSE, told Fin24 via email that even though a company is suspended, it is still required to comply with listing requirements. This includes disclosure of financial information and other price sensitive information.

Visser added that there is no time limit to the suspension. “The company will remain suspended until all instances of non-compliance have been rectified or when the original reason for the suspension is no longer applicable,” he said.

It is possible for the JSE to terminate a listing of a suspended company if it fails to take steps to have the suspension lifted, added Visser.

“This would mean ensuring that the company must take steps to ensure full compliance with the listings requirements.”

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