The Financial Sector Conduct Authority (FSCA) yesterday closed one investigation and opened another into Huge Group’s transactions on the Johannesburg Stock Exchange.
The financial services regulator opened an insider trading probe into the company, immediately after presenting findings of a different investigation, which it had concluded.
The FSCA had examined whether Huge Group had been buying back its shares to boost the value of the stock and to improve the financial statements amid Adapt IT takeover negotiations.
The investigation concluded there was insufficient evidence to implicate Huge Group in repurchase transactions.
Earlier this year, Huge Group initiated buyout discussions with software services company Adapt IT.
Led by CEO James Herbst, Huge Group launched a shock takeover bid for the company, offering a 33% premium on the Adapt IT shares.
Yesterday, the FSCA said its investigation finding is not an endorsement, affirmation, or expression of opinion regarding the fair value of the Huge Group share price.
The FSCA then announced it is beginning a new probe into other transactions.
“The FSCA further wishes to advise that it has registered an insider trading investigation (Section 78 of the Financial Markets Act No 19 of 2012) that will cover disclosures and transactions in Huge Group Limited securities during January 2021.”
Furthermore, the regulator said, it intends to engage with the licensed exchanges and the broader market regarding the rules applicable to share repurchase programmes.
“The aim will be to gather information on whether the present rules provide sufficient investor protection when a listed company is significantly the largest purchaser of its own thinly-traded shares. This is because the consequences, as in this case, may be to affect a share price. This is a matter of concern for us as the regulator of the financial markets.”
Huge Group expressed relief at the findings of the repurchase transactions investigation.
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