The JSE has fined the Iqbal Survé-linked Ayo Technology Solutions R1.5-million and publicly censured the company over material breaches of the listings requirements.
It’s not the first time Ayo has found itself on the wrong side of a JSE investigation – and it may not be the last, with the bourse saying on Thursday that a probe into the “conduct of individuals that presided at the company during the periods in question and who were bound by the listings requirements is ongoing”.
The JSE’s latest decision against Ayo relates to various transactions and agreements between 2017 and 2019 with related parties, including Ayo’s holding company, Survé’s African Equity Empowerment Investment Holdings (AEEI).
“These transactions did not comply with the peremptory requirements for transactions with related parties stipulated in section 10 of the listings requirements,” the JSE said in a statement issued on its stock exchange news service (Sens) on Thursday.
“The listings requirements contain stringent regulations governing transactions and agreements with related parties to provide safeguards against parties that may take advantage of their positions as a related party or exert undue influence for their own benefit,” it explained.
Ayo received a R4.3-billion investment at the time of its listing in December 2017 from the Public Investment Corp (PIC) – which invests pension money on behalf of South Africa’s civil servants – in a deal that was seen as grossly overvaluing the business. The PIC investment meant it attached an implied valuation to Ayo of R14.8-billion. Today, Ayo’s market has fallen to just R825-million, or 5% of the PIC’s valuation of just five years ago.
The PIC has previously alleged that its investment decision was based on misleading claims made by Ayo about the company’s financial prospects and because of meddling by former PIC head Dan Matjila.
PMAs
The day after its listing on the JSE, on 22 December 2017, Ayo entered into the first of three performance management agreements (PMAs) with an asset manager called 3 Laws, in terms of which 3 Laws would manage funds invested for and on behalf of Ayo to diversify the tech company’s treasury risk function, the JSE explained in its statement on Thursday.
“At the time of entering into the PMAs, the majority shareholder in 3 Laws was Sekunjalo Investment Holdings, which held 85%. [Survé-controlled] Sekunjalo Investment held 61% of AEEI, which in turn held 49% of Ayo. Therefore, 3 Laws was a related party to Ayo in terms of paragraph 10.1 of the JSE listings requirements.”
Under the PMAs, Ayo paid:
- R70-million to 3 Laws on 22 December 2017 (repaid on 22 February 2019);
- A further R400-million to 3 Laws on 5 March 2018 (repaid on 20 August 2018); and
- Another R400-million to 3 Laws on 29 November 2018 (repaid on 22 February 2019).
“The facts indicated that the funds were not invested by Ayo with 3 Laws in accordance with the terms and provisions of the PMAs and that the transfer of funds to 3 Laws therefore constituted related-party transactions in terms of the listings requirements,” the JSE said.
According to the JSE investigation:
- All funds were transferred by Ayo directly into 3 Laws’ accounts held with Nedbank and Standard Bank and not paid into a separate, segregated banking account in the name of Ayo, in conflict with the express provisions of the PMAs.
- R70-million was invested with 3 Laws in terms of the first PMA on 22 December 2017, of which R35-million was deposited into 3 Laws’ bank account and a further R35-million into the bank account of Sekunjalo Capital, on 3 Laws’ instruction.
- Ayo’s bank records show that on 31 August 2018, an amount of R400-million previously transferred to 3 Laws in terms of the second PMA was returned into Ayo’s bank account and referenced as “3 Laws Capital”. However, it was not returned to Ayo by 3 Laws but by a different entity.
- 3 Laws returned an amount of R470-million to Ayo on 22 February 2019 in terms of the first and third PMAs in two separate payments. On the same day that 3 Laws returned the R470-million to 3 Laws, 3 Laws received payments of R35-million from Africa News Agency (ANA) and R30-million from SGB Securities. The total of R470-million returned by 3 Laws to Ayo included the money received from ANA and SGB Securities on the same day, further confirming that there was no segregation of funds or accounts for purposes of Ayo’s investment. This was also a direct result of Ayo paying the funds directly into 3 Laws current bank account.
This is not the first time that Ayo has had a run-in with the JSE. Earlier this year, for example, the bourse censured two former directors of the company, Mbuso Khoza and Telang Ntsasa, for failing to comply with important provisions of the listings requirements and for failing to fulfil their duties and responsibilities as directors.
The public censure followed a decision by the JSE in 2020 to fine Ayo R6.5-million for publishing “false and misleading” financial results shortly after its December 2017 listing.
Last month, Ayo announced that it had doubled its gross dividend to 60c/share despite reporting a full-year loss that widened to R266-million. It gave no reason for the 100% increase, though thanks to Sekunjalo and AEEI’s holdings in Ayo, Survé and his companies stood to receive a healthy dividend from the ailing company, Bloomberg News reported on 30 November. – © 2022 NewsCentral Media