Eyebrows raised after spate of director share purchases

Mbongeni Mguni | Friday November 6, 2020 15:06

Public records from the BSE show that between October 15 and 30, 2020 Turnstar Holdings managing director, Gulaam Abdoola and his close associates bought 137,522 shares of the property group worth more than P307,500 on four different occasions.  Turnstar’s shares had fallen to an annual low of P2.20, but rose 11% after the director and associate purchases.  At Choppies, meanwhile, CEO Ramachandran Ottapathu and founder Farouk Ismail bought about 18.4 million shares between October 23 and 28, at a combined value of more than P11 million. The regional grocer’s shares, however, remained at 60 thebe, the level to which they fell after Choppies was reinstated to trading on the BSE in July.  Market analysts said the purchase of shares by directors could simply be them taking advantage of the lower price of their companies’ shares or an effort to show confidence in the value of their stock.

“However, the BSE needs to carefully look into the transactions and check whether brokers possibly sidelined other bidders in preference for the directors’ dealings,” a market analyst told BusinessWeek.

“It is possible directors are attempting to shore up the value of their companies and prevent share prices from sliding too low.” By the BSE rules, directors of listed companies may purchase their own shares on-market, but are required to make this public, which those involved in the latest transactions have done. BSE Limited head of market development, Thapelo Moribame said like other shareholders, directors can buy shares of listed entities at any time, except when a company is in a closed period. She added that in addition, some listed companies have ‘dealing policies’ that govern how directors and executive management trade in securities. “Over and above that, at the BSE we do market surveillance on all market activities to pick any instances of market abuse,” Moribame said.

“Given the above we cannot always conclude that because the price of a share has gone up after a director’s trade then it is tantamount to price manipulation.

“If a market offence has been committed, the BSE takes action accordingly.” According to last available records, Abdoola owns about 17% of Turnstar Holdings, while Ram and Ismail hold 19.55% and 15.34% respectively in Choppies.