Regulator scrutinises wild stock swings on JSE

Jan 11 2018 16:26
Renee Bonorchis, Neo Khanyile and Loni Prinsloo

Cape Town - South African regulators are scrutinising trades prompted by speculation that Viceroy Research will release a negative report about one of the country’s stocks, which caused some shares to crash more than 20%.

The Financial Services Board (FSB) is working with the Johannesburg Stock Exchange (JSE) to review trading activity and determine whether a formal probe is warranted, Tembisa Marele, a spokesperson for the Pretoria-based FSB said in an emailed response to questions.

The FSB’s mandate includes probing insider trading, price manipulation and false reporting.

Shares of some of SA’s largest real estate investment trusts fell by a record on Thursday as talk swirled that one of them will be targeted in Viceroy’s next research report.

Aspen Pharmacare, Africa’s biggest pharmaceutical company, plunged on January 9 amid rumours it is in Viceroy’s sights. The stock has since recovered all those losses after Aspen CEO Stephen Saad came out in defence of his company, saying its earnings are transparent.

Little known about Viceroy

Very little is known about Viceroy (which refers to itself as a US-based short-seller) or the people behind it, who describe themselves on their website as “a group of individuals who see the world differently".

Viceroy gained attention in SA after releasing a report detailing some of Steinhoff International's woes soon after the retailer said it was investigating accounting irregularities that caused most of its value to be wiped out.

Viceroy advises caution

“Viceroy encourages people not to speculate on the identity of any companies we are researching and we advise caution in trading on gossip,” the company said in a statement, issued from a Gmail account.

“Viceroy complies with the laws and does not release research or discuss our focus prior to publication.”

Plugging the market

The 21-member FTSE/JSE Africa Listed Property index plunged the most since December 2015 before paring losses to trade 2.1% down by 14:00 on Thursday.

Resilient REIT plummeted by a record 22% before trading 3.3% lower. Greenbay Properties, Fortress REIT and Nepi Rockcastle Plc all recovered from declines of as much as 20%.

“Nobody knows who Viceroy is,” said David Shapiro, deputy chair of Sasfin Wealth in Johannesburg.

“They’re an anonymous bunch of people. They may be absolutely 100% right. On the other hand they could be 100% wrong.”

Traders are taking advantage of the rumours “and plugging the market without really applying common sense”, he said. The real estate counters “are overvalued, but so is our market. We’ve got a hothouse of debt. Everyone is now panicking”.

‘Wrong side’

Steinhoff has lost more than 80% of its value since the owner of France’s Conforama, Mattress Firm in the US and Pep in SA announced on December 5 that there were anomalies with its numbers.

“The market is going through each company with a fine-tooth comb at the moment,” said Petri Redelinghuys, founder of Johannesburg-based stockbroker Herenya Capital Advisors.

“Following the Steinhoff collapse no one wants to be caught on the wrong side of that. It’s actually insane what’s going on with a company that can fall as much as 20% and then recover within three or four hours.”

Following the stock’s initial steep decline, Fortress said on Thursday it anticipates increasing its interim dividend for each B share by as much as 15.5%.

“Trading in the current financial year has been consistent with the prospects previously communicated to shareholders,” the property company said.

A representative for Resilient said its stock was moving on market speculation of the possible Viceroy report, adding that the real estate investment trust hasn’t been contacted by the research firm.

Calls to Greenbay’s offices weren’t immediately answered. Nepi chief financial officer Mirela Covasa said the company is looking into why its shares are declining.

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fsb  |  aspen  |  steinhoff  |  equities  |  reits  |  jse  |  markets


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