Why the JSE won't suspend trade of Steinhoff shares - yet | Fin24
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Why the JSE won't suspend trade of Steinhoff shares - yet

Dec 15 2017 19:01
Lameez Omarjee

Johannesburg – Suspending trade of Steinhoff shares will be prejudicial to shareholders and not the company, says CEO of the JSE Nicky Newton-King.

Newton-King was speaking at a briefing about the Steinhoff fallout, alongside Finance Minister Malusi Gigaba, at the JSE on Friday. The briefing followed a meeting between Gigaba, leaders of the JSE and the manufacturing sector, the Black Business Council and representatives from the Independent Regulatory Board for Auditors.

During a question and answer session, Newton-King explained why the JSE has not suspended trade of Steinhoff shares.

Following the resignation of the international retail holding company’s CEO Markus Jooste over accounting irregularities, the share fell as much as 91% and Steinhoff lost R282bn in market value, City Press reported.

The JSE previously said in a statement that it is investigating Steinhoff to see if there has been breaches of its listing requirements, but that suspending trade would be “detrimental to the interests of investors”, Fin24 reported.

On Friday Newton-King confirmed that suspending trade won’t necessarily hurt the company. “If you suspend a company, it is not a penalty on the company. It is a penalty on the shareholders.”

Suspending trade means that a shareholder will not be able to trade. So a shareholder who wants to exit a share cannot if the trade is suspended, she explained.  “It is most prejudicial to the shareholder rather than the company. People talk of suspension as something that hurts the company,” she reiterated.

Newton-King went on to explain that suspensions are only applied in extreme cases, such as if the company is in breach of listing requirements.

The JSE would also only apply suspension if the activity on the market was not orderly or fair. “For instance if there’s extreme market manipulation affecting a fair price being established on any given moment or if there is insufficient information available. For that reason we have urged a company to issue as much information as it can.”

Another cause for suspension would be if a primary regulator suspends the share. Steinhoff’s primary listing is on the Frankfurt Stock Exchange in Germany.

The Frankfurt Stock Exchange has the same views as the JSE regarding suspension, explained Newton-King.

“There is detailed collaboration and extensive collaboration between all regulatory authorities in South Africa. The JSE and the Frankfurt Stock Exchange are on the phone regularly, every day because so much is changing every day.”

Among the changes this week include chair Christo Wiese’s decision to step down to reinforce “independent governance” in the company and to address issues of conflict of interest with him remaining on the board, according to a note to shareholders. His son, Jacob Wiese, also resigned from the board.

Steinhoff co-operating

Newton-Ling further assured that Steinhoff has been “collaborative and co-operative” with requests of information by the JSE. “Members of the public can take heart how extremely seriously everyone involved is taking it to get to an answer to provide stability and certainty.”

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