Software and technology company EOH plunged 34.7% on Thursday to close at R45. The free-fall came one day after investigators from the Independent Police Investigative Directorate (Ipid) reportedly searched the home of Keith Keating, a director of three businesses owned by the group, over his involvement in corrupt government contracts.

On Wednesday, Daily Maverick reported that Keating was implicated in alleged procurement irregularities in the South African Information and Technology Agency and South African Police Service (SAPS) amounting to about R6.1bn.

Ipid told the standing committee on public accounts that the procurement system had been manipulated in favour of Keating’s company, Forensic Data Analysts (FDA), and that there was a corrupt relationship between FDA and SAPS, the Daily Maverick’s article said.

Responding to volatility in its share price, EOH issued a short statement after the market closed on Thursday noting that it had agreed with "the former shareholders" of FDA, Grid Control Technologies and Investigative Software Solutions to "unwind the transaction", effective October 31.

It made no mention of Keating or the Ipid investigation. EOH bought these businesses in 2015 and Keating remains a director of all three.

EOH’s share price has fallen more than 73% over the past year, as questions arose over the way in which the group landed lucrative government contracts.

"I’ve always been suspicious of EOH," said David Shapiro, deputy chairman of Sasfin Securities. "It’s been a mystery. They just had this incredible track record of growth against an industry going nowhere. It always bothered me...."

The fall in the share price over the past year was "incongruous" with EOH’s financial performance, he said. "I think there’s a lot more to it."

Cy Jacobs, founder and CEO of 36One Asset Management, said EOH had disclosed at an investor road show in Johannesburg some weeks ago that its decision to unwind the purchase of Keating’s businesses because they had, EOH said, "failed to meet profit warranties".

"I asked them why they had not yet put out a statement about this, but this question was not satisfactorily answered," Jacobs said. EOH then cancelled the Cape Town road show.

Jehan Mackay, CEO of EOH’s public services division, sold EOH shares on December 1 and November 24, when the price was about R80, at a total value of R12.2m. The second transaction was a sale of shares by a company of which his family trust is a beneficiary.

EOH did not respond to requests for comment but said that it remained "committed to its purpose of being an ethical and relevant force for good in society, ensuring that all our business is conducted with integrity, transparency and the highest moral standards".


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