Listed ICT group EOH has issued a statement explaining why its share price tanked last week, amid renewed concerns over governance and a reported IPID probe into companies it acquired from businessman Keith Keating.
In a statement on JSE on Monday, EOH said that the share price shock in the first week of December was triggered by the forced sale of shares by financial institutions against equity financed transactions to various individual shareholders, including two EOH directors.
This resulted in high volumes as well as the substantial drop in the share price, it said.
On Monday, EOH’s shares showed a recovery of sorts, adding R7.48 or 15.74% to R55, having dropped 35% on Thursday and Friday last week.
“EOH confirms that the directors affected did not voluntarily sell their shares, but rather that the sale was caused by margin calls against these equity financed transactions (a separate SENS announcement will be issued in this regard),” it said.
According to the ICT firm, recent media allegations relating to Keith Keating caused EOH to expedite the unwinding and conclusion of the sell-back agreement relating to the companies it acquired from him – Grid Control Technologies, Forensic Data Analysts and Investigative Software Solutions.
The group said that it has finalised a sell-back agreement to unwind these acquisitions, which were acquired in November 2015.
“EOH had been in discussions with the previous shareholders of the above-mentioned companies for some time about unwinding the transaction. These discussions were initiated as a result of a significant underachievement against performance warrantees,” the group said.
“In view of the allegations and in the interest of good governance, EOH has appointed Edward Nathan Sonnenbergs Incorporated to conduct a full fact-finding review of the commercial activities of the three companies mentioned above. In keeping with the Group’s zero tolerance commitment, it will act against any identified wrongdoing or misconduct involving any individual or entity.”
To further strengthen its corporate governance, EOH said its material public sector engagements and contracts will also be subject to independent oversight by ENSafrica.
“This is in addition to the internal compliance measures adopted by the board’s Audit Committee in July this year, which includes a review of EOH’s governance framework and all material public sector contracts, which is well underway.”
The group warned shareholders in EOH and other potential investors to exercise caution when dealing in the securities of EOH until the financial impact of the sell-back transaction is announced.
Read: EOH shares plummet 35%