Nearly R1,5bn — that is what was wiped off the market capitalisation of technology group Pinnacle Holdings in just two trading sessions this week after news emerged that one of its directors and biggest shareholders, Takalani Tshivhase, had been arrested on charges of bribery and corruption.

In the two days following the news — which was first reported by TechCentral before the markets opened on Tuesday — the share price, which most analysts say was not trading in overvalued territory, collapsed by a stunning 43%.

Investors took fright for a number of reasons, not least because of a lack of communication from a company that clearly had no plan in place to deal with a crisis of this nature. Indeed, this may become a textbook case of how not to handle a crisis.

The lack of information flow left investors wondering whether the company had any intention of informing shareholders of the arrest, or whether its hand was forced.

Tshivhase stands accused of trying to bribe a top police official with R5m to secure a lucrative technology tender reportedly expected to be worth more than R180m. He will appear in court in late April.

He was arrested on 5 March. Pinnacle was made aware of the arrest on the same day, yet it did not make any disclosures to its shareholders until after the news had broken on Tuesday morning. Even then, it was in the form of a terse Sens statement that left many questions unanswered.

On Wednesday evening, Pinnacle finally disclosed more information, saying it had made the announcement only after Tshivhase had been formally charged. It said it was “acting on legal advice” in this regard.

For independent equities analyst Irnest Kaplan (who owns shares in Pinnacle), there are three main issues here. The first is whether Tshivhase did in fact try to bribe someone and, if he did, whether he has done so on other occasions. The second is the state of corporate governance at Pinnacle amid serious questions about whether it failed to disclose material information to shareholders in a timeous manner.

The third and biggest issue for Kaplan is what this crisis means for Pinnacle’s future prospects in light of what could be serious long-term damage to its reputation. Even if Tshivhase isn’t guilty, the impact on the company’s reputation could be long lasting, he said.

Kaplan, who was speaking to me shortly before Wednesday night’s fresh disclosures to shareholders, said Pinnacle had simply not shared enough information with the market. This had left shareholders “in the dark”, he said.

Pinnacle on Wednesday night announced that Tshivhase would take a voluntary leave of absence until the criminal proceedings have been concluded. Only then will his relationship with the company be “reviewed”. One has to wonder why this decision wasn’t taken earlier. After all, the company first became aware of arrest when it happened, giving it plenty of time to make the right decision.

To be fair to Tshivhase, he appears to have an unembellished history. As Kaplan puts it, “we’re not dealing with a guy with a shady past”. And Pinnacle is not a company that has a reputation “for doing schmoozing government deals”.

But there’s no doubt this crisis was handled very poorly. If it had been better handled, it’s unlikely nearly half its market value would have been wiped out in short order.

What hasn’t helped is that directors had been actively selling shares in the weeks after news of the arrest – including Tshivhase himself, who sold R4m worth just before the news broke. CEO Arnold Fourie, through his family trust, sold 1,2m shares, though he claims this was a “forced” sale.

As for Tshivhase’s sale of shares, Pinnacle said on Wednesday that permission to trade had been requested as far back as 27 January, when the company was in a closed period. However, permission was finally granted on 10 March, after the arrest took place. He needed the cash, the company said, to “fund a specific transaction of a personal nature”. Even if it wasn’t insider trading, the decision to approve the sale leaves a bad taste. The JSE is investigating the trades.

One hopes Pinnacle, and other listed companies, will draw lessons from this debacle.