The exchange says the group failed to apply the highest standard of care when disseminating price-sensitive information to the market.
MoneyWeb reports tht the Johannesburg Stock Exchange (JSE) has decided to impose a public censure on JSE-listed and currently suspended investment holding company Nutritional Holdings, after the company breached several of the exchange’s listing requirements between 2020 and 2021.
The exchange’s decision was revealed to the market on Monday 28 November 2022 via a Sens announcement.
The company – which has interests in the manufacture, marketing and distribution of staple dry foods, cannabis infusions, oil extracts and related edibles – is listed on the JSE’s alternative public equity exchange designed for small and medium-sized companies.
According to information posted on the JSE’s website, the main driver behind censures is to promote a “high standard of regulatory conduct by deterring regulated parties who have committed breaches, from committing further breaches and thereby helping to deter other parties from committing similar breaches and demonstrating generally the benefits of compliant behaviour.
“The JSE finds it unacceptable that the company failed to inform the market of price-sensitive information without delay, failed to apply the highest standard of care in disseminating information to the market, and published financial results that were not reviewed despite previous financial statements containing a qualified audit opinion.
“The provisions of the listings requirements, which impose various important obligations on listed companies in respect of the disclosure and dissemination of timely and accurate information, contributes to the integrity of the market and promotes investor confidence,” the JSE adds.
Between 2020 and 2021, the company ran into trouble with the JSE over how it had handled placing one of its subsidiaries under business rescue, a cryptocurrency initial coin offering to shareholders as well as the irregular publishing of its 2020 interim financials.
In February 2021, the company prematurely announced to the market plans to place Nutritional Foods – a subsidiary – under business rescue. According to the company’s statements, the disposal of the subsidiary was green-lighted by the Nutritional Holdings board.
But an announcement published later revealed the company as a shareholder of Nutritional Foods had no powers to single-handedly sign-off on a business rescue process without the support of the subsidiary’s board and would instead have to file an application with the high court to be able to do so.
Another event which the JSE has categorised as a breach to its listing rules relates to Nutritional Holdings’s initial offering to shareholders to buy into a cannabis cryptocurrency named Cannacrypt.
The exchange believes that the group “disseminated incorrect and misleading information to shareholders and the company did not apply the highest standard of care,” when communicating the workings of the offering, thus misleading shareholders and the market.
The third offence was linked to the group’s decision to publish unreviewed/unaudited consolidated interim results for the six months ended 31 August 2020 after having released auditor-qualified results in previous financials, breaching JSE listing requirements.
Finally, in October the group failed to keep the exchange updated on the company’s state of affairs following the suspension of its stock from the exchange in May 2021.
“For these reasons and with reference to the JSE’s findings of breach, the JSE has decided to impose a public censure on the company as a result of its failure to comply with important provisions of the listings requirements,” the exchange said.
Censure, a long time coming
Investment officer at Integral Asset Management Keith McLachlan tells Moneyweb that given the number of listing requirements that Nutritional Holdings has breached up to this point, he is surprised that it took the JSE this long to pull the trigger on the censure.
“The number of listing requirements that Nutritional Holdings isn’t breaching is shorter than the alternative. Its quite an aggressive list and one wonders why it wasn’t censured earlier but a least it is censured now.”
McLachlan goes on to says that looking back at the company’s operations in the last two years, before it was suspended by the exchange, it was already evident that the company was not investable. This he adds was also evidenced in the failure by the company to comply with “very basic” JSE rules.
When asked if the company can make it back from its suspension and subsequent censure, McLachlan says a come back could be possible, although slim.
“Never say never, but all the balance of probability is against this company ever really doing anything, [or] going anywhere. Especially since it seems to be so mismanaged with these important but basic rules being missed… I think the odds are very heavily against them,” he adds.