Retail group Spar may have breached JSE rules on inside information with a briefing to a select group of investors on its latest sales figures.
Spar sales in SA for the past seven weeks have risen more than 6%, with liquor sales driving local turnover higher with a healthy 9% rise in February, Spar management told select clients of Standard Bank’s broker service in a call on Thursday. The information appeared to have slipped out in the broker call.
While trading in Spar shares was no higher than average after the call, suggesting the information did not affect the share price, the call may have contravened JSE listing rules. The rules, which are designed to prevent insider trading, prohibit companies from sharing material financial information with some investors but not others.
The rules require that information that could drive share trading — such as a sales update or a buyout offer — must be released on the JSE news service so it is available simultaneously to everyone in the market.
In another incident that has raised eyebrows in the market, a well-known clothing retailer last week held a call for selected fund managers, after which its share price rose by just more than 12% on the back of increased trading.
So-called pre-close calls with select brokers and their clients just before the closed period, which kicks in ahead of the release of a company’s financial results, are common practice but controversial.
Listed firms are not allowed to share price-sensitive information in these calls, but in order to offer a service to the select investors, they may wish to discuss more than publicly known matters.
The calls for invited fund managers exclude media and can be used to reward analysts who are positive about the company.
Spar, a wholesaler that sells to independent franchises, did not give a full update or release performance information on its Polish, Swiss or Irish businesses on Thursday.
The SA Spar business accounts for about 63% of its annual revenue. The local Tops liquor business was negatively affected by liquor bans in 2021 and Spar’s model of offering convenience by being located in suburbs has been under pressure from grocery delivery services offered by Pick n Pay and Checkers.
Spar admitted that some info regarding SA sales in February and March was released. After questions from media and investors on Friday afternoon, it immediately discussed this call with its corporate sponsors.
Spar investor relations executive Kerry Becker said: “Please note that there was reference made to a seven-week period into February and March. It was not a cumulative number for the five-and-half-month period. It’s important to understand this. It was not an indication for the group as a whole.
“I have been consulting with our corporate sponsors on the matter this afternoon.
“I think you have touched on a very valid point in respect of the way companies manage their pre-close calls.”
Spar put a copy of the call on its website after it obtained permission from Standard Bank subsidiary SBG Securities, it said. This recording is hard to find but can be obtained by clicking on the Spar logo at the top of the webpage.
The JSE says it will investigate the issue but cannot comment until it has all the facts. It said: “The JSE will immediately engage with the company and its sponsor to establish the facts and to ensure that the listings requirements have been complied with.”
The JSE shared with Business Day the general principles of what information can only be shared with the whole market, pointing out that price-sensitive information has to be released on the stock exchange news service (Sens) first.
“The listings requirements contain clear and well-established principles that are aimed at ensuring that full, equal and timely public disclosure is made to all holders of securities regarding the activities of an issuer that are price sensitive.”
It said: “The listings requirements also contain specific provisions that prohibit the release of price-sensitive information prior to it being disseminated on Sens.”
Insider trading allegations are fairly common on the JSE.
The bourse is investigating allegations of insider trading at cement producer PPC.
Questions have been raised about the sales of certain shares by Reit Fortress.
Distell CEO Richard Rushton admitted it was forced to disclose Heineken’s interest in buying the company in May 2021, after a leak of the deal led to the Distell share price spiking.
Spar’s share price closed 0.38% higher on Friday at R163.11.
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