Suspended penny stock Nutritional Holdings has failed to appoint a legally required corporate sponsor, which acts in a legal and advisory role, as it said it would. But the JSE is staying tight-lipped about possible sanctions against the company.
Nutritional, which once sold maize products to schools and hostels, has had its former CEO, chair, CFO and members of its audit and risk committee all resign and now faces being terminated by the JSE for multiple breaches of listing requirements.
CEO Nikhyle Dasarath told Business Day he is positive about the company’s prospects and will be issuing an update to the market on Monday.
Nutritional lost 96% of its value and was suspended from trade on the JSE in 2021 after it filed late and incorrect financial statements.
The company has been mired in controversy and once tried to create and sell a cryptocurrency, Cannacrypt, through a company run by then director Dasarath to raise money. It promised 12,000% returns for the investment in the digital currency in a letter riddled with spelling and grammar errors.
A sponsor or designated adviser is a firm that advises companies on the legal and financial requirements of being listed. Nutritional went through three sponsors in 2021, with Merchantec quitting its role in December.
After the JSE said it may remove the company from the exchange for breaches, including having no sponsor, Nutritional Holdings told the market it would appoint one by February 17 and update shareholders on progress. This has not been done.
Following process
The director of issuer regulation at the JSE, André Visser, said on Thursday that the company has not yet appointed a designated adviser as required by the listing requirements.
“The JSE is currently following the prescribed process as stipulated in the listings requirements,” said Visser.
While shareholders realise they may not recoup their investment if Nutritional is kicked off the exchange, some are asking if the JSE is providing sufficient protection to investors who tend to trust listed companies.
Many are embarrassed to comment publicly as the stock increasingly looks like a poor investment decision.
One, speaking on condition of anonymity, said: “I feel concerned that this whole thing may have been a scam from the onset and as shareholders we were swindled out of large amounts of money by a company that may not still exist.”
His concern is in part a lack of communication, with many asking Business Day to investigate due to the lack of communication from the firm.
“The fact that the JSE and Financial Conduct Sector Authority (FCSA) have been pretty silent on the matter is quite concerning as this is a listed company on the JSE.
“As shareholders, we have the right to be regularly updated on the status of affairs of the company.”
Cannabis venture
Asked if the JSE is indeed terminating the listing of Nutritional and if there is a timeline for such a process, the JSE said it is following the required regulations and is legally prohibited from giving detailed comment.
In 2020, Nutritional told the market it was switching from selling maize-based food and porridges into a cannabis-focused venture with German and Japanese clients that would be purchasing almost R2bn in cannabis supplements.
None of these claims — such as about the identity of the buyers, the cannabis suppliers or the locations of the production facilities or the type of supplement produced — have been disclosed.
Asked if the JSE will investigate Nutritional’s directors if it appears they have mislead investors, Visser said that companies and their directors are required to observe the “highest standards of care when publishing information”. He said the JSE cannot investigate fraud, but could refer companies or individuals to the FSCA.
The FSCA said in January it was not investigating the company or its directors.
Visser said, if information is false or misleading, the JSE will investigate the matter and refer it to the FSCA “in accordance with the sectors of the Financial Management Act dealing with false and misleading information”.
“If we determine that there has been a breach of the listings requirements then we can take appropriate action and refer the matter to the FSCA.”
Nutritional Holdings said that it is “turning around” and a statement will be issued on Monday, with Dasarath being optimistic about the company staying listed and getting back on track.
He could not give details to Business Day until the update was issued to the whole market.
The company still needs to file outstanding financial and delayed statements. But Dasarath believes the small-cap that said in February it needed a new business model, new directors and a new sponsor, does in fact have a future.
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