The JSE has suspended trade in the shares of financial services group Trustco, opening another chapter in its numerous run-ins with the company over the years.
The exchange on Thursday advised investors that Truscto’s shares would not be traded on the bourse after the company failed to publish its results for the year ended August 2024 within the three-month period outlined in the listing requirements.
Trustco, run by Namibian tycoon Quinton van Rooyen, has never taken off with investors, with its share price down 95% over the past five years, valuing the company at just R375m.
The suspension of the company’s stock on the JSE, comes amid high activity in the group, in which it also announced its intention to delist from Africa’s largest stock exchange.
The company on Tuesday said it had requested an immediate suspension of share trading on the JSE due to “several factors affecting market information symmetry”.
It added that the “ongoing engagement with the JSE regarding the delisting process presents challenges in co-ordinating with shareholders across different time zones and jurisdictions, creating potential information gaps until the formal delisting announcement and offer are made”.
Trustco has set its sights on listing on the Nasdaq.
“For nearly two decades, Trustco has maintained its listing in Southern Africa, serving a predominantly local shareholder base,” Van Rooyen said in a statement.
“However, we’ve witnessed a significant shift in our investor demographics, with a substantial portion of our shareholders now based in the US. This natural evolution, combined with our planned Nasdaq listing, positions us to better serve our investors and enhance shareholder value.”
The company has endured a torrid period on the JSE, including previous suspension over its books. The Supreme Court of Appeal last year confirmed the JSE’s authority to compel companies to restate financial statements to ensure compliance with international standards, slapping Trustco with punitive costs in its long-running battle with the JSE and Financial Services Tribunal.
This is as the country’s second highest court dismissed an appeal by Trustco. The group had argued before the appeal court that the JSE did not enjoy powers to direct companies listed on the exchange to restate financial statements.
The company also challenged the makeup of the tribunal panel that heard its challenge to the JSE’s decision, arguing that the panel that heard the matter lacked the necessary financial expertise.
The dispute between Trustco, a penny stock on the JSE, and the bourse and tribunal can be traced back to 2020. At the time, the JSE suspended the trading in Trustco’s shares for not complying with its listing requirements and International Financial Reporting Standards in its 2019 annual and 2020 interim results.
At the heart of the exchange’s displeasure was that Trustco had incorrectly booked a gain of R1.5bn after Van Rooyen waived two loans he made to the group.
The JSE in 2020 directed the company to restate its financial statements for the year to end-March 2019 to correct certain entries relating to loans by Van Rooyen, who is its founder and CEO.
The directive also demanded the reclassification of immovable properties from inventory to investment property and for Trustco to reverse the profits declared in pursuance of those transactions.
Trustco unsuccessfully challenged the JSE tribunal and later in the high court.
The Supreme Court of Appeal found that it was critical that investors on the JSE were able to rely on accurate financial statements that complied with international accounting standards.
“It is also self-evident that a market cannot properly operate without them. It is the JSE’s statutory obligation, in terms of its listing requirements under the Financial Markets Act, to hold listed entities to this imperative,” the court held in an unanimous judgment.
“And, where financial statements do not accurately reflect the nature of financial transactions in accordance with international accounting standards, the JSE must be entitled to direct restatement of the financial statements to ensure that the full and correct position is stated. Both these grounds of review can therefore not succeed.”
The JSE in March 2023 lifted Trustco’s suspension after it published its restated audited annual financial statements.
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