The recent drop in the Netcare share price following the release of weak interim results has forced CEO Richard Friedland to sell R200m worth of his shares to cover finance and other costs relating to share purchases over several years.
The sale of 10.4-million shares, earlier this week, at just under R19 each, appears to represent almost all of the Netcare shares held by Friedland. The group’s September 2018 annual report reveals that in addition to the 10.4-million shares, Friedland held 1.4-million forfeitable shares.
In a statement released to the market late on Wednesday the hospital group said Friedland remains “absolutely committed to Netcare”, adding that he “has confirmed his intention to remain in office as CEO to oversee the implementation of the [Netcare’s] revised strategy until at least 2022”.
Friedland has been with the group for 22 years and was appointed CEO in May 1997.
In the middle of May the group reported pedestrian results for the six months to end-March and warned shareholders that margins would be under pressure for the remainder of the year due to stricter management from medical aid schemes.
Within days the share price dropped below R20. On Wednesday the share price eased off its five-year low of R18.76 to close at R18.85.
Friedland is the latest high profile corporate executive forced to sell shares to cover debt-funded share acquisitions. In December 2017 two directors at EOH sparked a 35% share price decline in a single day when they were forced to sell shares to meet obligations to lenders.
In September 2018 forced selling by an MTN director compounded a slump in that group’s share price, which had been triggered by repayment claims made by the Nigerian government. In 2018 the Ascendis share price was also hit by uncertainty around forced sales by one of its directors.
In its discussion document released in September 2018, the JSE said it had taken note of recent transactions in securities relating to directors where pressure was placed on the company’s share price and the market was unaware of the underlying arrangements that resulted in the transactions.
The recently released proposed amendments to the JSE listing requirements includes an obligation that directors, company secretary and any prescribed officer must immediately disclose these arrangements.
“The [Sens] announcement must disclose the nature, term and amount of the financial obligation as well as the number of securities offered as security, guarantee, collateral or otherwise,” reads the proposed amendment.
Netcare has had a torrid five years as the tough conditions in SA compounded the disappointing performance from its UK business, which was sold during 2018. In 2018 profit from continuing operations was R1bn, just half of the R2.1bn the group reported for financial 2014. Headline earnings were 49c a share, down from 158.2c five years earlier.
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