Resilient's independent review raises hope, but will it be thorough enough?
Analysts and fund managers are hopeful that the independent review of property company Resilient, launched by its board, will be thorough enough to begin to unravel any possible illegalities committed by the company that has been accused of manipulating its share price and those of its associates.
Resilient’s market capitalisation halved in a month, its shares shorted by hedge funds and sold in large amounts by retail investors and smaller amounts by long-term investors.
Resilient was rumoured to be the subject of a report authored by US short seller Viceroy Research, which created initial panic in mid-January, but the subject turned out to be banking company Capitec.
Many hedge funds also shorted the share, sending its price into the mire.
Resilient, led by CEO Des de Beer, is part of a stable of property companies, along with Fortress, Nepi Rockcastle and Greenbay. In February, scathing reports by Dubai-based brokerage Arqaam Capital, SA36One Asset Management, which runs a hedge fund, and stockbroker Navigare voiced their concern about how companies in the stable own shares in one another, how the executives are remunerated and how Resilient accounts for its broad-based black economic empowerment (BBBEE) partner.
Resilient has met the investment community to hear its issues of concern and the board has launched the review, which will be led by Shauket Fakie, a former auditor-general.
Resilient’s share price closed 10.03% lower at R76.25 on Friday and was 49.56% worse off for the year to date.
Resilient’s board said it had noted the consistent feedback from its shareholders that the cross-shareholding of Resilient with Fortress should be unwound and the need to reconsider its relationship with the Siyakha Education Trust, which is its BBBEE partner.
"Resilient has prioritised these issues and is considering various options to undertake this," it said. Critics have said that Resilient should consider merging with Fortress, of which it owns about 16%, and that it should consolidate Siyakha, of which it owns 49% and receives income from its accounts.
Fund managers welcomed the announcement of a review but they did not want it to be a lost opportunity.
It would need to sit alongside investigations by the JSE and FSB into Resilient’s month of woes, they said.
"It is a step in the right direction by Resilient in showing they believe that they have nothing to hide," said Ahmed Motara, an analyst at Stanlib.
"Given, however, the lack of trust in the market currently concerning management teams post the Steinhoff debacle, what will be emphatically welcomed by the market is the final investigation by the regulatory authorities and their findings regarding the allegations leveled against Resilient."
Analyst at Golden Section Capital, Garreth Elston, said the review needed to be extensive and thorough and examine trading of the shares by individuals connected to Resilient executives and Siyakha. "It is a good step for the company to fully and independently review all allegations and commentaries, and we believe that complete openness is the only way to proceed.
"We would … like to see the period under review cover the entire 2017 period, as there were trades mentioned in the report that occurred earli er than July 1 last year," he said.