THE JSE said on Monday it was investigating trading activity in pharmaceutical stock Aspen which took place ahead of last Friday’s investor conference call and which led to a major dip in the share price.
Aspen’s share price dropped to a low of R283.19 on Friday after going as high as R313. It closed at R288, clocking a loss for the day of more than 6%. It recovered to just under R300 on Monday to register a gain of nearly 4%.
Executive partner and head of trading at Inkunzi Investments, Owen Nkomo, said on Monday it was "disheartening" when only a few analysts — those invited to a briefing — benefited from information that may be perceived to be price sensitive. As he was not at the pre-close briefing on Friday, he said he was in the dark as to what was moving the price.
"I know the JSE has issued a formal response already. But as a matter of principle we will be drafting an email about it and a suggestion to the JSE," he said.
According to Mr Nkomo: "You can’t invite everyone to a pre-close, but everyone has access to the JSE Stock Exchange News Service (SENS). Key points in a pre-close should be raised on SENS."
His view is that while share sensitive information should not be discussed "it is a tough one as management does not necessarily know what moves share prices".
But the concern is that with a drop of 6% — investors who had bought above R300 — as much as 70% could have been lost on a geared instrument if the stock was traded in an aggressive manner as gearing is about ten times the loss on the underlying instrument.
He said Inkunzi would continue to hold its Aspen stock despite the problems as it had already moved higher and was a great business.Reports doing the rounds were that Aspen executives at the conference had cautioned that margins and volumes were not doing well and that this made the share vulnerable to a sell off. To investors it seemed like the company’s performance had worsen since the last official update.
Insider trading was not expected to have led to the price movement, according to one source.
Aspen, which is a buy according to an I-Net BFA consensus analyst forecast, dropped to as little as R212.30 in July last year, but has been one of the better performers on the market since then — it hit its one year high of R321.97 at the end of last month.
The JSE said it would investigate whether there had been any contravention of its listing requirements — the exchange’s market regulation division is already reviewing the trading activity.
The JSE said if there was any trading activity it believed warranted further investigation, it would be referred to the Directorate of Market Abuse at the Financial Services Board.
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