A case of insider trading may be investigated by the JSE and the Financial Services Board following unusual activity in IT company Datatec`s share price ahead of it releasing a profit warning on Friday.
On Thursday, Datatec tumbled 32%, or R31.50, to R68.50 after shares valued at over R360 million changed hands - the highest volume trade for the day on the JSE. On Friday the slide continued with a further 550c having been shaved off the price with another R50 million worth of shares traded.
"Datatec`s results are supposed to come out next month and usually rumours about a company reaching targets come out about a week before. However, this time someone must have leaked the results and this must be investigated," says SG Securities director George Frantzeskou.
Other stockbrokers have echoed his views, but few were optimistic that any conclusive finding would be made.
"Generally the investigations either just peter out or the accused pay some kind of fine without admitting guilt," says another dealer who wished to remain anonymous.
The heaviest sellers of Datatec shares were stockbrokers Warburg Dillon Read and Nedcor Investment Bank, but other dealers came to their defence saying they were merely carrying out client orders.
"If my clients had told me to sell Datatec on Thursday, I would have done so as quickly as possible," Frantzeskou said.
Datatec released a JSE News Service statement on Friday blaming the lower-than-expected fourth quarter results on problems with its US-based Westcon subsidiary which has had problems with its product lines supplied by Lucent and Nortel, and due to reduced demand after the Y2K period.
The statement says Westcon`s lower fourth quarter profits are a direct result of it experiencing lower demand for its Lucent and Nortel product lines as a consequence of the announced reorganisation of Lucent and transitioning product lines within Nortel. Westcon has addressed this issue by realigning the cost and operations of relevant business units.
The Datatec news comes on the back of CCH chairman Mario Pinheiro`s resignation under a cloud of insider trading accusations. CCH`s share price was 5c lower at 825c on Friday.
Frantzeskou says the news with CCH and Datatec is coincidental due to the results season, but that it does not reflect well on the state of South African companies.
Another dealer says: "After the fiasco with the match-fixing allegations against former cricket captain Hansie Cronje and now CCH and Datatec, the picture of SA as a place to do business has been tarnished quite considerably."
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