Trustco Group Holdings has accused the Johannesburg Stock Exchange (JSE) of regulatory obstruction after the group was fined N$5 million for selling off shareholding without shareholder approval.
The fine was imposed after the group sold off 65% of its shareholding in Meya Mining, a company registered in Mauritius and operates a diamond mine within the Eastern Province of Sierra Leone.
On 1 August 2022, Trustco’s subsidiary announced an agreement to invest US$75 million (about N$1.2 billion) into Meya Mining, which resulted in a dilution of its interest in the project.
According to a statement issued by Trustco, the deal was backed by written, irrevocable shareholder undertakings.
Trustco confirmed the transaction’s completion days later on August 4 2022. Yet, the JSE was yet to approve.
“Trustco had numerous in-person meetings and filed requests for rulings ad nauseam regarding the categorisation of the transaction and a required preliminary economic assessment (PEA) report.
Throughout the process, we maintained open communication with the JSE, but the exchange adopted an obstructive approach,” noted Trustco.
Between 2022 and 2024, Meya Mining invested over US$12 million (about N$205 million) to commission a PEA.
Trustco says after the report was finalised and shared with shareholders, the JSE refused to submit it to their readers’ panel, citing unspecified concerns.
Only in August 2024 did the JSE finally approve the submission to the readers’ panel.
However, the process remains unresolved, with the JSE yet to conclude its review.
No shares were supposed to be sold until the review was done.
Trustco chief executive Quinton van Rooyen says shareholders support this transaction and the directors acted in the best interest.
“The JSE’s refusal to exercise proper discretion, in the best interest of shareholders, contradicts principles of efficient capital markets. As directors, we acted in shareholders’ best interests, prioritising fiduciary duty over regulatory obstruction,” says Van Rooyen.
The issue started in 2021 when Trustco’s subsidiaries, Meya Mining and Germinate, entered into an agreement with SJSL Investments to sell up to 70% of Meya Mining for up to US$50 million (about N$805 million), with each subsidiary disposing of shares worth US$25 million (about N$429 million).
The transaction’s value for Trustco was approximately N$460.5 million.
According to a statement issued by the JSE, Trustco planned to distribute a circular and hold a general meeting for shareholder approval.
However, it was found that Trustco’s subsidiaries had already started selling shares in Meya Mining before obtaining shareholder approval, breaching listing requirements, the JSE says.
“JSE’s investigation uncovered that Trustco’s subsidiaries had already started implementing the transaction by disposing of shareholding in Meya Mining before Trustco had distributed a circular to shareholders and obtained their approval,” it says.
A look at Trustco’s annual financial results showed that shareholding in Meya Mining decreased from 65% to 55.25% by August 2022, and further down to 19.5% by August 2023, before proper approval was secured.
“The result of this was, in effect, that the transaction whereby Trustco’s shareholding in Meya Mining collectively reduced from 65% to 19.5% was implemented prior to shareholder approval being obtained,” says the JSE.
This led to the JSE fining Trustco.
Trustco announced its intention to formally appeal both the censure and the fine from the JSE.
Meanwhile, Trustco shareholders still have not seen the latest annual results for the year ended 31 August 2024.
Earlier this year, Trustco announced it will be delisting from the JSE, Namibia Stock Exchange, and the OTCQX Market in the United States and shareholders are still waiting for the way forward.
Email: shania@namibian.com.na
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