EDITORIAL: Spar, private meetings and broker calls

Spar grabbed headlines recently for possibly breaching JSE listing rules after its CEO shared a March and February sales update in a meeting with select investors. 

JSE listing rules are clear that price-sensitive information must be released to all in the market at the same time, usually through an announcement on the bourse’s news service. However, Spar could argue that the information it shared was not price-sensitive because there was no clear share price reaction. 

Even so, for those who watch the company closely, knowing how SA sales are faring is useful data as the local business accounts for almost two-thirds of turnover and has been under pressure from competitor services that deliver groceries within an hour.

The anger at Spar for what is on the face of it a relatively minor infraction is worsened by the widespread view that SA is a leaky market, insider trading is not investigated properly, and there are seldom consequences. 

Take this example: Distell CEO Richard Rushton has admitted that the alcohol producer was forced in May last year to disclose Heineken’s interest in buying it after a leak drove trade in the share and affected the share price. Has there been even a cursory investigation into who was buying those shares with inside information?  

In the US one would never casually discuss retail sales data with a select group of investors, as Spar’s CEO did. But this is SA, said one analyst when asked to comment on the issue. There are few consequences for anything — failed politicians, severe corruption, Steinhoff-level fraud and even firms possibly breaching listing rules. 

Some of those who were vocal about Spar reject the very idea of exclusive broker calls. Large fund managers clearly get special treatment just by being invited to attend. It is illogical to suggest they do not offer an inside edge; why would busy corporate managers attend them otherwise? And who would know if price-sensitive information was shared? Excluding particular individuals is also an easy way for listed firms to punish analysts who criticise a firm publicly.

As the Spar saga shows, every now and then corporate SA needs to be reminded to be more careful with potentially price-sensitive information. Private broker meetings have a chilling effect on holding companies to account, because everything discussed, from strategy to new hires and losing billions abroad, is done privately. 

On Tuesday last week TFG, Foschini, Markham and @home held a second closed investor pre-close phone call in a week. The next day the volume of shares traded rose from 1-million to 6-million. TFG admits this was higher than usual, but the price didn’t change much on the day, and trade in all retailers was high that Wednesday.  

With TFG and broker RMB keeping the call under wraps, it was inevitable there would be speculation that what was discussed drove the trade in the share, especially since the share price did end the week 12% higher. This is the same company whose CEO, Anthony Thunström, famously told the Sunday Times it was not buying discount clothing chain Jet, only to announce the purchase very soon thereafter. 

The JSE is reluctant to ban private meetings or broker calls. Large funds do not want to share a space with smaller investors, who often appear unprepared, ignorant or have clear agendas. Spar’s recent annual meeting is a case in point. One unnamed activist wasted much time asking for information that is freely available, and falsely accused Spar of not rotating audit firms for 20 years.

Established fund managers rarely ask questions at a meeting or publicly call out firms, even if warranted. However, the idea of a public company that takes public and pension fund money being held to account is undermined by SA’s closed-door culture.  

It was a rare instance last July when 36 fund managers wrote a public letter criticising the Naspers and Prosus boards for their complicated share-swap scheme and Naspers management’s eye-watering salaries. 

One analyst suggests that a solution might be for video of broker calls to be posted on the company’s website soon after. Spar did this after questions were raised. TFG won’t.