Net1 shares slump 55% on corruption probe
Shares in Net1 UEPS Technologies fell R37.10 – more than 55% – in early trade on the JSE on Wednesday (5 December), after the group said it was being investigated for tender corruption.
Net1, a provider of alternative payment systems, has a primary listing on the Nasdaq and a secondary listing on the JSE.
The group said on Tuesday (4 December 2012) that it received letters from the US Department of Justice (DOJ) Criminal Division and the SEC regarding an investigation into possible acts of corruption in South Africa.
Net1, through its subsidiary CashPaymaster Services, manages and distributes social grants in the form of smart cards in South Africa, having been awarded a R10 million contract by the SA Social Security Agency (Sassa) in January.
In August, the North Gauteng High Court ruled that the tender process was improper, after rival bidder and Absa bank subsidiary, AllPay, voiced its concerns about the process.
The court however, ruled that the contract would remain valid and would not be set aside so as not to disrupt the payment of social grants.
Net1 said in a statement on Tuesday (4 November) that it had received a letter informing the group that the DOJ and the FBI had begun an investigation into whether the group violated provisions of the Foreign Corrupt Practices Act and other US federal criminal laws by engaging in a scheme to make corrupt payments to officials of the Government of South Africa in connection with the Sassa contract.
The letter stated that an investigation would also be conducted into whether Net1 engaged in violations of the federal securities laws in connection with statements made by the group in its SEC filings regarding this contract.
In mid-morning trade on the JSE‚ Net1, shaved off as much as 55.29%, or R37.10‚ to trade at R30, giving the company a market cap of R1.751 billion.
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