PPC shares rocketed just before big news. Now the JSE is checking for insider trading
- PPC announced a breakthrough deal on Wednesday, which sent its share price rocketing.
- But its share price already started running a week before the release of the information.
- The JSE is now reviewing trades, while PPC says it does not have full control over whether information is leaked.
- For more articles, go to www.BusinessInsider.co.za.
PPC announced some good news on Wednesday: a major deal with lenders to its business in the Democratic Republic of Congo (DRC) to restructure almost R3 billion in loans.
This is a positive development for the debt-ridden cement company – and excellent news for those who started buying PPC a week before, when it was still trading below 170c.
In the week before the announcement, the share price started running hard, surging by more than 30%. It hit 222c just before the price-moving announcement, which triggered a further surge to above 240c.
Now questions are being asked about insider trading, and whether information around the deal was leaked.
“A leaky sieve profited some in the know,” remarked Anthony Clark, an analyst at SmallTalkDaily Research, on Twitter.
Others also expressed doubts about the share price's premature move.
Colour me skeptical, but two days before PPC releases a debt restructure in DRC, volumes and price suddenly spikes. Everyone was aware of the 31 March deadline, but why would you assume it was going to be positive without access to the details of the deal?— Dave Hazelwood (@hazelwood_dave) March 31, 2021
'Not fully under PPC's control'
PPC itself told Business Insider South Africa it can’t be held completely responsibly for the risk that information leaks.
“PPC has the necessary processes and procedures in place to limit access to confidential information, however, complex projects such as the capital restructuring project involve numerous parties and the risk of information being leaked is therefore not fully under PPC’s control,” a spokesperson told Business Insider.
“PPC also regularly monitors share movements and has no reason to believe that there has been irregular trading based on the data analysed until now. PPC will however take the necessary steps and inform the regulator should anything to the contrary come to light.”
For its part, the JSE has confirmed that it is reviewing trades in PPC “due to the significant increase in the price and the increased trading volumes ahead of the announcement”, its director of market regulation Shaun Davies, told Business Insider SA.
“If we believe that the trading activity warrants further investigation we will refer it to the [Financial Sector Conduct Authority] for their consideration.”
PPC is struggling with billions in debt, much of which is dollar-denominated and relates to its operations in Zimbabwe, the DRC and Rwanda.
To complicate matters further, the international lenders to its DRC business (called PPC Barnet DRC Holdings) have legal recourse to PPC’s South African business for R2.7 billion of that dollar-denominated debt. PPC doesn’t have the money to cover that.
“If we just walk away from the DRC operations, the international lenders would have a legal right to come after the South African balance sheet,” Roland van Wijnen, CEO of PPC, said previously. “We had to make it clear to the international lenders that recourse to the South African balance sheet isn’t a viable option – the money simply isn’t there.”
PPC seemed to have succeeded in doing that as part of a new restructuring agreement, which also effectively hands over the DRC business to its lenders. PPC will manage the business on behalf of the lenders, for a fee.
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