Telkom stock remained under pressure yesterday, and failed to claw back the sudden fall in price sparked by its announcement that CFO Jacques Schindeh"utte had been suspended.
Within about 30 minutes of the news hitting the market - through the JSE's stock exchange news service - the stock lost 3.93%, to trade at R26.90. It wavered through the rest of the day, before finally closing at R26.90.
The JSE's all-share index, which shows the broader market performance, closed slightly higher, gaining 0.06%.
The 3.93% decrease in the value of the share amounts to almost R573 million in market capitalisation being lost in a single day. Telkom's value is now just more than R14 billion.
However, the news was not enough to reduce the shares to a new low. On 6 May, Telkom's shares hit an all-time low of R11.93, before starting to show signs of recovery.
The stock hit a 52-week high of R28.65 last Wednesday, as it continued to improve on gains seen after the appointment of new CEO Sipho Maseko, improved operating performance, and a clean-up of its balance sheet.
Wait and see
Telkom's suspension of Schindeh"utte is pending a disciplinary process. In a statement, Telkom says its board was "recently made aware of certain allegations and appointed an independent law firm to investigate them".
Following the probe, the board suspended the CFO after taking "professional advice about the correct way to deal with the report". CEO Sipho Maseko said the board "is determined to act responsibly and to uphold all governance requirements".
Maseko says stakeholders will be told the outcome of the disciplinary hearing once the matter is wrapped up. "Until then, the company is not in a position to provide more information."
The telco has a duty to probe the validity of the allegation, which it will do "fairly, without favour or prejudice", notes the CEO.
Welcome discipline
Absa Investments analyst Chris Gilmour says the market will watch the matter closely, although he does not expect Schindeh"utte's suspension to knock the share to a new low. He adds: "The sooner they get this thing sorted out, the better."
Schindeh"utte was instrumental in turning around Telkom's balance sheet and made it reflect reality, says Gilmour. He notes Schindeh"utte applied a discipline to its financials that had been previously lacking.
Addressing the media in August 2011, shortly after taking over as CFO, Schindeh"utte said he would probe all of its investments and projects to make sure they delivered value for money.
Deputy CFO Deon Fredericks will once again act as CFO. He filled the same post a few years ago, after Peter Nelson's abrupt departure.
Update
Since publication, Telkom has released a statement clarifying its suspension of Schindeh"utte. It says there is "no connection whatsoever" with an insider trader inquiry by the JSE into Schindeh"utte's 30 September purchase of Telkom stock worth R6 million.
Schindeh"utte bought the shares just eight days before the company issued a trading statement indicating earnings would be at least 20% higher when it next reports interim results. Telkom's board says Schindeh"utte's suspension will not affect its financial performance.
Telkom's statement follows an article by Bloomberg saying the JSE had referred the trade to the Financial Services Board's (FSB's) market abuse department.
Solly Keetse, head of the FSB's Department of Market Abuse, says he is only aware of what is in the public domain. He adds the board does not comment on ongoing investigations.
Telkom notes the suspension relates to allegations of personal misconduct against Schindeh"utte, which came to its attention via a whistleblower. He has been served with a letter of suspension, which details the allegations, to which he must respond, the telco adds.
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