Software services company Adapt IT will cooperate with the Financial Sector Conduct Authority (FSCA) investigations into Huge Group’s transactions on the Johannesburg Stock Exchange (JSE).
Reacting to last week’s announcement by the financial services regulator, the JSE-listed Adapt IT says it supports the investigation.
In its public notice on Thursday, the FSCA said an insider trading probe had been opened into Huge Group, just after the regulator had closed another investigation into the firm.
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 the Adapt IT takeover negotiations.
The investigation concluded there was insufficient evidence to implicate Huge Group in repurchase transactions.
In a statement today, reacting to the FSCA’s decision, Adapt IT notes: “The FSCA has expressed the concern that Huge's share repurchases did affect its share price because Huge was significantly the largest purchaser of its shares.
“As a result of this concern, the FSCA will engage with South Africa's licensed exchanges on the adequacy of the investor protections regarding such share repurchase programmes, and we look forward to the outcome of that engagement. This concern has also led the FSCA to be careful to ensure it is not seen as endorsing, affirming or opining on the Huge share price.
“We also note that, although the FSCA has concluded there is insufficient evidence of prohibited trading practices by Huge, the FSCA remains open to new evidence and has also initiated an insider trading investigation relating to trading in Huge's shares during January 2021. We will, of course, continue to co-operate with the FSCA in its investigations."
Led by CEO James Herbst, Huge Group earlier this year launched a shock takeover bid for the company, offering a 33% premium on the Adapt IT shares.
Last week, the FSCA said: “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 regulator of the financial markets.”