There will always be companies that come under the scrutiny of the JSE’s compliance division. These four took a rap on the knuckles or worse in 2022.
Luxe
Luxe, owner of NWJ and Arthur Kaplan jewellers, had quite a year: multiple director resignations, two auditors replaced and suspension from trading on the JSE. The jewellery retailer failed to release annual results to end-February by the end of June as required. When its July extension lapsed, the JSE suspended it in August. Luxe’s results are still outstanding.
In January, CEO Althea Grewar’s company Go Dutch bought just less than 34.9% of the company — the least she could buy without triggering a rule requiring her to make a mandatory offer for the whole company. By early December, Grewar had sold her stake in the company. It is now owned by businessman Mohamed Hussen, who has a range of firms, according to The Companies and Intellectual Property Commission of SA.
In September, Grewar announced she wanted to buy high-end jewellery store Arthur Kaplan from Luxe, as a related-party transaction. This has not been finalised.
At least two Arthur Kaplan stores shut down during the year.
In September, Luxe replaced auditors Nexia SAB&T with immediate effect. Nexia had replaced Mazars in February.
In July, Adrian Maizey, owner of the SA Starbucks licence, and accounting lecturer Mariska McKenzie resigned as nonexecutive directors.
Another director resigned in August. Nonexecutive director Thulani Ngubane who joined in August resigned on December 19.
Luxe was previously named Taste Holdings, and was mainly a fast food business that owned coffee chain Starbucks and pizza groups Scooters and Domino’s before it fell on hard times, suffering major financial losses.
According to the 2020 Luxe annual report, US-based investor Sean Riskowitz is the main shareholder with 71.2% through his various investments including Protea Asset Management, the Riskowitz Value Fund, and Conduit Capital. He is owed more than R16m in loans due to losses accrued by the food businesses.
Nutritional Holdings
The listing of penny stock Nutritional Holdings, which once sold dry foods to school hostels, was terminated on December 19. The JSE gave it an opportunity to explain why it should not be booted off the bourse but after considering the company’s response it still showed it the door.
Grewar was chair of Nutritional in 2021.
Nutritional raised eyebrows in 2021 when it launched what was called the first cannabis cryptocurrency dubbed cannacrypt with promises of a 12,000% investment return before the JSE intervened.
This year, the JSE censured Nutritional for transgressions including “false and misleading” statements about the digital currency, which had been an attempt to raise money to fund its cannabis business.
Nutritional Holdings was first suspended from trading in May 2021, but still managed to issue no fewer than 16 Sens statements in 2022. It is fighting bankruptcy and now has no business model.
Nutritional Holdings’ ongoing liquidation case will be heard in court on January 20 as its directors try to have a previous decision to put it in liquidation overturned.
Even if it wins its bid against permanent liquidation, it is unlikely to survive without the means to generate revenue. Its dry-foods business was unprofitable. It was to be sold to a former director, but the sale was called off and some production capacity was decommissioned.
Cannabis business Ukukusela intended to provide supplements to German and Japanese firms, does not appear to be operating and is awaiting licences from the SA Health Products Regulatory Authority.
Conduit Capital
In July, the Reserve Bank’s Prudential Authority (PA) asked the high court to place Constantia Insurance under provisional curatorship for failing to maintain minimum capital and solvency requirements, as prescribed in the Insurance Act. The high court granted the order in August even though parent company Conduit Capital held that was premature.
Conduit Capital CEO Riskowitz resigned in July. Constantia Insurance is Conduit’s largest subsidiary, generating more than 90% of revenue over the past three-and-a-half financial years.
The court placed Constantia Insurance in provisional liquidation on September 14, and Conduit Capital approached the JSE about having its shares suspended from trade.
“Given the material contribution of Constantia Insurance to the Conduit Capital Group, the provisional liquidation could have a material impact on the affairs of the Conduit Capital Group, including its future listing,” said the company. Trading in its shares was suspended in September.
Ayo Technologies
In late December, the JSE fined software and technology group Ayo Technology Solutions, R1.5m for not publicly disclosing that money was moved between related companies. Ayo is linked to Independent Media owner Iqbal Survé.
The fine concerns Ayo, its holding company and major shareholder African Equity Empowerment Investments (AEEI) and transactions with asset manager 3 Laws Capital.
The day after Ayo listed on December 21 2017 it entered into three performance management agreements with asset manager 3 Laws Capital to manage money invested for and on its behalf; R870m was paid to 3 Laws in terms of performance management agreements.
Survé ’s Sekunjalo Investment Holdings was the majority shareholder in 3 Laws, with an 85% stake, while it also held a 61% interest in AEEI, which owned 49% of Ayo.
That meant 3 Laws was related to Ayo in terms of the JSE’s listing requirements and had to disclose dealings between them on Sens.
Ayo’s accounting came under scrutiny after a controversial investment by the Public Investment Corporation (PIC), one of several investments in Ayo probed by the Mpati commission of inquiry into the PIC.
Ayo later asked the Financial Services Tribunal (FST) to overturn the JSE’s decision, but in December judge Louis Harms, FST deputy chair, dismissed Ayo’s application.
Ayo Technology Solutions, however, said it was considering taking the JSE to court for violating an alleged agreement not to publish the censure and fine until the Financial Services Tribunal heard Ayo’s suspension and reconsideration applications. It also disputed its R1.5m fine, saying the JSE’s earlier penalty of R6.5m was for the “same alleged contraventions” of the bourse’s listing requirements.
“Needless to say, the publication of the censure has caused, and will continue to cause, Ayo and its business significant and irreparable harm,” the company said.
With Nico Gous
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