The company believes its share price is being manipulated downwards to sabotage its expansion plans. The JSE and the alleged culprit, Ulrich Bester of Liberty Coal, disagree. From Moneyweb.
The Mantengu Mining AGM last week veered from some upbeat financial results to the bizarre when financial director Magen Naidoo claimed the company’s shares were being manipulated downwards by selling at artificially low prices.
It turns out that Mantengu had won an Anton Pillar award in the Joburg High Court to seize, without warning, documents and storage devices from former financial director Ulrich Bester, now chief financial officer at Liberty Coal, the new name for the old Gupta-owned Optimum Coal operations recently taken out of business rescue.
That much became clear when a Mantengu shareholder at the AGM asked who the target of the Anton Pillar award was (an Anton Pillar award is a court order to seize evidence without the other party knowing about it in advance).
“I am,” said Bester, who was in the meeting. He was clearly eager to speak further, but he was refused on the grounds that he was not recognised, though he is the fourth largest shareholder in the company.
It makes little sense that the fourth largest shareholder in the company would try to depress the share price and his own net worth.
Naked shorts
At least one of the suspicious trades alleged by Mantengu was a ‘naked short’, which is illegal in most countries. Naked shorting involves selling shares that the trader does not own or has not borrowed with the aim of making a profit by buying the shares back at a lower price. It can artificially depress prices and is seen as a form of market manipulation.
That’s what Mantengu claims is happening to its share price.
When asked for evidence, Mantengu provided Moneyweb with a database of trades that looked suspicious, showing huge blocks of shares being offered for sale below the market price just before the close of trade at 5pm.
When Moneyweb first reported on this, Mantengu’s share price jumped from 80c to 188c but has since returned to where it started at about 80c.
Bester’s response
Moneyweb caught up with Bester later by phone: “There’s no substance to this at all. At no stage has there been any market manipulation from my side. In fact, it’s in my best interests to see the share price rise so that I can get out should I choose to. I don’t have any intention to manipulate the share price, nor have I done it in the past.”
If not Bester, then who is behind the short-selling? And why?
This is detailed in Naidoo’s founding affidavit before the Joburg High Court in the Anton Pillar application. Mantengu is in the final stages of acquiring a non-core subsidiary from a blue-chip mining company listed on the JSE.
In January 2024, Mantengu received approval for a R500 million equity facility from an offshore funder, GEM, which allows it to issue shares for cash as it is drawn down. The lower the share price, the more the Mantengu shares are diluted.
“[Mantengu’s] share price is therefore of cardinal importance,” deposed Naidoo in court filings. “Over and above the negative influence on the equity facility, a lower share price may result in the acquisition of the target to be classified as a Category One transaction in terms of the JSE listing requirements, which will require shareholder approval.”
A Category One classification would delay the acquisition and raise transactional costs, potentially aborting the deal altogether. A competitor with an interest in acquiring the same target asset might have a motivation to short its shares and sabotage the deal, says Mantengu.
Trading anomalies
Naidoo then details a number of trading anomalies. Mantengu’s share price dropped from R2.50 on 1 June 2023 to less than 50c on 31 January 2024, representing a loss in shareholder value of R326 million, or R2 per share.
The mining investment firm reverse-listed onto the JSE in August 2022, followed by a roughly 1 000:1 share consolidation in March 2023.
The first of two proposed chrome processing plants was commissioned in May 2023, with a second plant coming on stream in calendar 2024. The company was valued by the JSE at R857 million at the time of the reverse listing, but its market cap has since fallen below R80 million.
This is despite a R200 million injection of assets into its Langpan open-cast chrome asset in Limpopo in 2023.
At the time of the reverse listing, the JSE valued it at R857 million. Langpan delivered more than 33 000 tons of chrome over the last financial year and has 2.1 million tons in reserve, giving it an estimated fair value of R1.7 billion. The company also operates a chrome processing plant, with two more in the development stage.
Given the apparent value of these assets, a market cap of R80 million makes little sense. In May, it acquired another chrome operation in Zeerust, North West, which increased the group’s investment in chrome. All of this was achieved with trade rather than bank financing.
“Just to set the record straight,” Naidoo told the AGM. “We have a long and growing list of enemies as we continue our remarkable journey. These include former employees and poor performing service providers that we’ve removed.”
Naidoo threw up a chart showing a more than doubling in production since December 2023 after removing underperforming executives at Langpan. One of Mantengu’s strengths is its ability to bring tough management to junior miners and get them to perform, with an uncompromising approach to corporate governance, says CEO Mike Miller.
“This is why we decided to go public, without the approval of the JSE, on the clear evidence we found of share price manipulation. We’re a small cap company. The JSE is more focused on the Top 40 from what we can see, but if we want to attract capital to the exchange, we have to do much better.”
Adds Mantengu chair Alistair Collins: “We reported the matter [share manipulation] to the JSE and the Financial Sector Conduct Authority (FSCA). The JSE has a duty to monitor strange share trading and to alert the issuer, ourselves, to such dealings. It’s common cause that they failed to do this. This has been a problem at the JSE for some years.”
The JSE responded (see full statement below), saying it had at all times acted “lawfully, appropriately and strictly in accordance with its statutory duties and responsibilities”.
It rejects the claim that it was asleep at the wheel in this instance: “On the contrary, the JSE acted independently, fairly and lawfully and our refusal to act in a manner that would best suit a specific market participant’s own interests may not be the outcome that certain parties had hoped for, but this does of course not mean that we failed to act in an appropriate and correct manner.”
When Mantengu raised its concerns over market manipulation with the JSE, it said it was denied the right to warn the public through a Sens announcement. It decided to bypass the JSE and issue a press release anyway.
The JSE’s response is incorrect, disingenuous, and littered with contradictions, says Mantengu.
“We operate in an anonymous trade environment. We get no trade visibility on who’s bidding and who’s offering and at what price. This means we as a board are effectively blind. That’s the challenge,” Collins told the AGM.
“There’s a mismatch between the Companies Act and Financial Markets Act. We are bound by Companies Act as our primary legislation.
“Our duties are to own the real estate of our company, including the share register. But we outsourced the surveillance of the share register to JSE and rely on them to alert us, and in our view they are falling asleep at the wheel.”
Mantengu has around 1 000 shareholders, double the number at the time of the reverse takeover in 2022. It sees itself as a new-generation mining company capable of taking a leadership position in the junior mining space by identifying plumb projects and injecting capital and expertise to get them off the ground.
The JSE’s response
Louis Cockeran, director of group legal and public policy at the JSE, responded as follows: “Thank you for providing us with an opportunity to respond to the matters raised in your e-mail of yesterday. The JSE is not privy to any of the information shared or statements made during the Mantengu AGM, and we can therefore only respond to the issues conveyed to us in your e-mail. It is also important to reiterate that the JSE is bound by statutory confidentiality provisions and our responses below are therefore limited to information that we may lawfully share with third parties.
“The JSE has a hard-won reputation for regulatory excellence and although we are not immune from fair criticism, it is unfortunate that Mantegu [sic] has made statements that are incorrect and unsupported by any facts.
“The JSE has, at all times, acted lawfully, appropriately and strictly in accordance with its statutory duties and responsibilities. As you will see from the facts briefly summarised below, the allegation that the JSE was ‘asleep at the wheel’ is wide-of-the mark and false. On the contrary, the JSE acted independently, fairly and lawfully and our refusal to act in a manner that would best suit a specific market participant’s own interests may not be the outcome that certain parties had hoped for, but this does of course not mean that we failed to act in an appropriate and correct manner. There is also no basis to suggest that there has been any ‘contradictory application of the rules’ as the JSE has applied all of its rules and listings requirements on an equal basis and after careful consideration of all the facts.”
Alleged share price manipulation
Cockeran continued: “Mantengu has reported its suspicions regarding the manipulation of its share price to both the JSE Market Regulation Division and the FSCA. The JSE Market Regulation Division is responsible for reviewing trading activity in JSE listed shares and referring any suspicious activity that it identifies to the FSCA for further investigation. The FSCA is responsible for all investigations into suspected market manipulation.
Read: No getting away with manipulating share prices
“The JSE cannot comment on the trading activity that it has reviewed following the reporting of suspicious transactions by Mantengu, due to confidentiality provisions in the Financial Markets Act. The JSE also cannot comment on behalf of the FSCA on any investigative work undertaken by the FSCA into transactions in Mantengu shares.
“Naked short sales are sales in which the seller does not own the shares being sold, nor have they borrowed them to facilitate settlement of the trade. An allegation that investors have executed naked short sales would need to be supported by the underlying facts regarding ownership or borrowing of the shares that have been sold.
“The JSE does not know whether Mantengu has all the necessary facts to allege that there has been naked short selling of its shares, and that if there has been naked short selling of Mantengu shares, it has been undertaken to manipulate the Mantengu share price.
“But only a full investigation by the FSCA could determine whether there has been naked short selling of Mantengu shares to manipulate the Mantengu share price, and any claim regarding this type of activity in Mantengu shares would be speculative prior to the completion of the FSCA’s investigation.
“The JSE has no obligation to alert Mantengu, or any JSE listed company, to naked short selling or any other form of trading in the company’s shares. Any information that the JSE may possess regarding investors’ trading practices is only known to the JSE by virtue of the JSE’s exercise of its licensed regulatory functions and is subject to the confidentiality provisions in the Financial Markets Act [FMA]. The obligation to maintain the confidentiality of this information applies equally to what the JSE may disclose to a listed company about trading in its shares on the JSE.
“In addition to the fact that the JSE is not obliged to ‘alert’ Mantengu about the alleged ‘naked shorts’, and even if, hypothetically, the JSE had such information, the peremptory provisions of the FMA expressly prohibits the JSE from sharing this information with Mantengu.
“The JSE strongly refutes Mantengu’s allegation that its Market Regulation Division has not performed its market surveillance function effectively, particularly in relation to trading in Mantengu’s shares. The Market Regulation Division has acted on all allegations and information reported to it by Mantengu and has subjected the trading in Mantengu shares to its standard, detailed and comprehensive surveillance processes.
“Mantegu’s [sic] incorrect and subjective views on the effectiveness of the JSE’s market surveillance function are no more than that, as it does not have insight into the information that the JSE has access to and the process applied by the Market Regulation Division in reviewing trading activity to identify possible market manipulation.
“The JSE cannot comment on allegations regarding the possible involvement of specific persons in the manipulation of Mantengu’s share price. Share price manipulation can only be conclusively determined once an FSCA investigation has been completed and the FSCA has taken enforcement action which leads to a finding that an offence has been committed. We hope that you will agree with us that it would be irresponsible to speculate about whether statutory offences have been committed prior to the conclusion of the FSCA’s investigation and findings.”
Sens announcements
Cockeran added: “Although it would not be lawful for the JSE to comment on specific engagements with companies, it may be helpful to provide some general comments and context to matters of this nature. The JSE does not pre-approve SENS announcements as it is important that company information is released timeously. It is the responsibility of the company and its sponsor to ensure that SENS announcements comply with the applicable listings requirements prior to release.
“The JSE does, however, review SENS announcements after their publication to ensure that they complied with the listings requirements, and we will then engage with companies if necessary.
“The listings requirements impose an obligation on all issuers and their sponsors to ensure that companies only publish announcements on SENS that contain relevant company information, being price sensitive information and announcements that are specifically required in terms of these requirements. In cases where there is doubt, sponsors will approach the JSE in advance of the release of an announcement, and if the JSE determines, based on the facts and information presented, that the information is not specifically required in terms of the Requirements, or it is not price sensitive, then the JSE will advise sponsors that such information should not be released on SENS. This is often the case when information is not specific or precise in terms of the Requirements, and therefore not price sensitive.
“The JSE applies and enforces the listings requirements on an equal basis and with due regard to the specific facts and circumstances applicable to each company.
“Mantengu and all other issuers are entitled to publish press-releases and any other information that they deem appropriate and there is nothing inherently wrong in doing so ‘outside the JSE’.
“The JSE is not investigating nor ‘pursuing any disciplinary action’ against Mantengu for its decision to issue the public statement referred to in your e-mail.
“We hope that we have provided you with sufficient facts and information to report on this issue fairly and in a balanced manner. Please let us know if you require any further and more detailed information, always being mindful of the confidentiality constraints within which the JSE must operate.”
