Sharemax 'a house of cards'

Johannesburg - Controversial property syndication company Sharemax Investments wants to sell its investors' shares to an obscure property firm, while failing to pay dividends to backers.

Thousands of its investors – mostly pensioners – did not receive their monthly dividends on the last day of August. At the time of going to press, people had still not been paid.

"The Sharemax house of cards is imploding," said financial adviser and writer Magnus Heystek. "There's no money to pay investors."

Financial adviser and property expert Eddy Carter-Smith said he had been in contact with Sharemax directors.

"One of them called me on Friday night and confirmed that investors in two of its major development schemes will not receive their dividends," said Carter-Smith. "He was in tears and said they had received calls from pensioners threatening to commit suicide as these dividends were their only income."

Sharemax, which was recently informed by the Reserve Bank that it had collected money from investors in an illegal manner, announced this week that it wanted to sell all the properties in its investment portfolio for R5bn to listed property group Bonatla Property Holdings [JSE:BNT].

Experts said it was "very bad news" for Sharemax investors. But they agree that Sharemax had no other option.

Sharemax investors may now be issued with billions of Bonatla shares that can be traded on the JSE.

There is no guarantee that they will ever receive dividends again, and the value of their investments may plummet.

Sharemax has faced intense criticism for its financing and business model, and has even been accused of running a model of syndication that resembles a pyramid scheme.

City Press reported in July that the finding of the Reserve Bank could lead to investors losing large sums of money.

Sharemax denied the gist of the article and accused City Press of unethical reporting.

Earlier last week investors in The Villa and Zambezi Retail Park were not being paid their monthly dividends. It is the first time Sharemax has missed payment.

Building operations at The Villa were also suspended. Heystek called the proposed deal between Sharemax and Bonatla "nonsense" and said investors were going to get hurt.

Sharemax said yesterday that the proposed transaction with Bonatla was to protect investors. It trusted that the conclusion of the deal would resolve the "interim non-payment".

The envisaged takeover still has to be approved by the JSE, the Competition Commission and by at least 75.1% of investors in Sharemax syndications.

 - City Press