Penny cap Nutritional Holdings, which raised eyebrows when it launched the first cannabis cryptocurrency before the JSE intervened, has been placed in final liquidation, but its directors have sought court intervention to have this overturned.
The 1c stock’s last market cap was just R6.7m before it was suspended from trade on the JSE, resulting in a few million rand lost but paling in comparison with other failed listed companies. However, two shareholders told Business Day they felt angry and misled.
Even if Nutritional wins its bid against permanent liquidation, it is unlikely to survive without a means to generate revenue.
Its dry-foods business, selling milk powders and porridge to prisons and school hostels, was unprofitable. It was to be sold to a former director, but the sale was called off and some production capacity was decommissioned.
Its cannabis business Ukukusela, intended to provide supplements to German and Japanese firms, is not operating and is awaiting licences from the SA Health Products Regulatory Authority.
The share lost 96% of its value before it was suspended by the JSE in 2021 for late and incorrect financial statements. It once traded at 25c.
The company said on Wednesday that its directors are fighting the former directors and have asked the court not to reverse the final liquidation as they are in a battle over who owns the food business.
It also said it will fight the liquidation on many grounds including that the incorrect company name appears on court papers and that the summons was being delivered to a defunct, empty and burnt building.
The company has faced multiple leadership changes.
In 2021, the CEO, CFO and various directors quit and it went through three corporate sponsors in a year, with the final one quitting, but it failed to inform the JSE of this.
Sponsors are legally required by the JSE to help firms handle the regulatory requirements of being listed. Earlier this year, the JSE warned that Nutritional faced termination unless it attracted a new sponsor under strict conditions.
Retail investor Junior Smith, who spent months last year trying to contact the CEO and former chair, says the firm will not survive.
“We as shareholders of Nutritional Holdings are angry. We’ve been misled by each and every member of the board which has not done their job.
“I’ve tried to hold them accountable. I’ve spoken to the JSE numerous times and yet we’re in this position.”
Another retail investor said: “I feel really disappointed and deceived by the management of Nutritional Holdings. The news regarding the contracts worth R2bn with companies in Germany and Japan was the reason for acquiring shares in Nutritional Holdings as it seemed to have a lot of upside potential.
“This all seems to have been a lie to dupe potential investors into buying shares in the company.”
This disgruntled investor is still wondering whether the company ever had foreign buyers for its supplement.
In March, CEO Nikhyle Dasarath told Business Day he was “positive” about the company’s prospects.
Unable to raise money from sceptical banks, Nutritional in early 2021 issued what it called the world’s first cannabis cryptocurrency, CannaCrypt, a digital token to raise money for its cannabis business. In an e-mail full of spelling and grammar mistakes, it promised that investors who bought the digital token would see R20,000 transformed into R2.4m in 10 years, amounting to a 12,000% return.
While it was always a penny stock and speculative, there were many warning signs that should have scared shareholders: the revolving door of directors; an inability to raise money through bank financing; and unclear updates. These all gave no sense of the company’s businesses and how it was earning money.
Little was ever said about where it sourced its cannabis, who its German and Japanese buyers might be, what the supplement was called and where it was produced.
Nutritional Holdings going up in smoke adds to the perception that many penny or smaller stocks are poorly run and not worth investing in. Many legitimate smaller companies struggle to raise capital on the JSE.
Business Day tried to contact CEO Dasarath, but he did not respond.
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