Pinnacle Holdings has come under the spotlight in recent weeks, as it is currently being investigated for insider trading, while one of its directors is under arrest on charges of bribery.
The JSE-listed technology firm’s share price has suffered dramatically as a result, wiping off almost half its value since 24 March, to a low of R11.20, before recovering slightly to trade at around R13.30 at close on Friday (9 May).
Last month, the Financial Services Board (FSB) launched an investigation into possible insider trading into the group.
Pinnacle director Takalani Tshivhase was arrested in March on charges he offered a bribe to a senior police official in order to win a contract for the company. Tshivhase has denied the charges and Pinnacle says it has no reason to doubt him.
However, the company waited 20 days to announce the arrest, during which time Tshivhase, chief executive Arnold Fourie and another director all sold Pinnacle shares.
The company has a market cap of R2.3 billion, a price to earnings ratio of 6.9 and a dividend yield of 2.6%.
Speaking on CNBC Africa, Paul Theron, CEO of Vestact, noted that investors were looking at the company as a value opportunity given its recent declines. Historically, Pinnacle has been a top performer on the local bourse over the past several years.
Tshepo Modiba from Seriti Asset Management said: “This is one I have been a very big fan of for many a year. If you had asked me a year ago, I would have said phenomenal management team…from an operational point of view, you can’t take anything away from them.
“The difficulty is if the allegations of insider trading are actually proved to be true, how do you then go on to trust management. And given how big a stake Arnold Fourie and the rest of the management team have in this business, that’s a big concern,” the analyst said.
“The biggest concern here for investors is the trust issue,” he added.
He said that the current position of Pinnacle made it one of the most difficult to analyze because if the allegations did prove to be true, its shares would continue to drop “massively”.
Theron agreed, said that there were too many dark clouds hanging over the firm to invest in it.