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Shoprite ‘should be delisted’

Sep 29, 2016

A Zambian advocate, Lewis Mosho, is demanding the suspension of Shoprite Holdings from the JSE over alleged breaches of rules and regulations.

               

In a letter dated September 22 to JSE CEO Nicky Newton-King, through Nyachowe Attorneys, Mosho says Shoprite was dishonest to its advisers, its Zambian shareholders, to the JSE and the Lusaka Stock Exchange (LuSE).

The letter says Shoprite concealed material facts from prospective investors when it published its prospectus prior to its secondary listing on the LuSE. Mosho claims the JSE knew about the falsehoods and should have suspended trading in Shoprite shares.

Shoprite is Africa’s biggest food retailer in Africa, with 1 825 corporate (Shoprite-owned) and 363 franchise outlets in 15 countries across Africa and the Indian Ocean islands. Its revenue for last year was R10.7bn and its market capitalisation is R109bn. The letter said if the JSE does not take action within 30 days, Mosho will seek a court order compelling the bourse to suspend Shoprite. Mosho is acting for himself and 20000 shareholders.

The matter relates to Shoprite’s initial public offering in 2003 after it had acquired a state-owned chain store company in Zambia. Terms of the acquisition included that Shoprite issue new shares to Zambians as part of an empowering exercise.

Mosho claims that during the IPO Shoprite published a prospectus in which material information about the offering is made to allow prospective investors to make informed decisions before buying shares. Mosho says material information was omitted from the prospectus. The IPO was not fully subscribed because “the price was too high”. Only about 400000 shares were taken up out of 2.7 million.

The letter alleges that in 2004 Shoprite passed a resolution authorising Mosho to sell the balance of the shares on the open market and requested him to remit the proceeds of the sale to a third party appointed by Shoprite as a collection agent.

Shoprite later confirmed receipt of the funds. Six years later, in 2011, Shoprite denied having issued any instructions to Mosho for the sale of shares, despite its own board resolution dated September 2, 2004 authorising him to sell. Mosho was arrested in 2011 but in July this year was acquitted on all of the 43 charges against him.

The charges of theft and money laundering related to illegally selling Shoprite shares from 2005 to 2011. He alleges Shoprite violated the rules of the JSE by proceeding to offer the 2.7 million shares in Zambia without first having obtained approval of the JSE and without disclosing this breach to its South African shareholders.

“Our client requests the JSE to investigate why Shoprite offered these shares without JSE approval and why Shoprite has to date concealed such breach from its shareholders and the market. “Our client finds that this breach is sufficient for the JSE to mete out punishment against Shoprite in order to protect investors and the JSE,” the letter reads.

Mosho says that Shoprite was dishonest to its stakeholders when it stated in its prospectus and throughout the period of listing that the 2.7 million shares it publicly offered and listed on the LuSE were dual-listed shares when in actual fact they were not. Mosho says this false statement still stands.

“The truth is that the 2.7 million shares were not and are still not dual listed shares. The result is that Shoprite shareholders, as a result of this deliberate concealment, were made to believe that their shares could trade on both the Lusaka exchange (less liquid) and the JSE (more liquid). In fact the shares were never tradable on the JSE.”

Mosho says investors have lost 100% of the value on their investment because they cannot trade their shares.

John Burke, the director of issuer regulation of the JSE, yesterday confirmed that his office had received the letter. “I received the letter and handed it over to our investigation unit, which will contact Shoprite and its sponsor,” Burke said. Shoprite communications manager, Mandy Janke, initially promised to provide The New Age with a response but subsequently ignored all communication on the matter.

 

Source: The New Age News

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