Cell C and its minority shareholder Ubambo, want a Johannesburg stockbroker, Michael Berk of Buyers Equity Guide, to cease selling over the counter shares, but he says his actions are perfectly legal.
Last week Berk`s company sent an e-mail headlined "Ubambo Shares" saying: "With christmas (sic) around the corner and many of you awaiting your bonuses, why not invest some of it into this share that is rumored (sic) to enter the market once Cell C (sic) lists at record breaking figures?"
This has been vigorously denied by Cell C, which says in a statement it is not selling shares and neither is Ubambo Investment Holdings.
Umbambo is part of the CellSaf consortium that holds 25% of Cell C.
Berk`s e-mail goes on to say that this is an "unique opportunity to buy shares at these low prices of R3.50".
Over the past three years, Berk tells ITWeb, he has traded in between 4.5 million and five million Umbambo over-the-counter (OTC) shares with a starting price of about 150c per share.
An OTC share is a privately held share in a company and is not listed on the Johannesburg Stock Exchange. It does not have the same voting rights that a Class A share listed on that exchange has. Companies often use OTC shares in lieu of cash to pay non-executive directors or other people for work done.
Trading in OTC shares is fairly widespread in SA. A person who holds such shares can go to a financial services firm registered with the Financial Services Board and sell them by transferring ownership to that firm. The firm then has the right to sell them onto a third party.
Berk also contends that Cell C could list next year - but this is denied by Cell C. Cell C also denies that the joint venture it recently concluded with Virgin Mobile is worth about R500 million.
"If all of this is untrue, then why is Cell C looking at stopping this trade?" Berk asks. "This is not the first time that a company, when preparing to list, goes out and buys up the minority OTC shares."
Cell C`s statement says that Berk`s e-mails contain inaccurate, ambiguous and misleading information and are unauthorised.
"Members of the public are advised to exercise caution and to seek independent advice when approached to trade in such shares," it says.
The statement concludes by saying that Cell C and Ubambo have written to Berk requesting him to desist from disseminating any false reference to either Cell C or Ubambo or any misrepresentation of their respective businesses or strategies or the nature or value or availability for sale of their shares.
Berk says he will be publishing the Cell C lawyer`s letter along with his refutation later today on his company`s site: www.beg.co.za.
Related story:
Cell C signs deal with Virgin
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