Shares in Ayo Technology Solutions fell to a record low on Monday as its former chief investment officer, Siphiwe Nodwele, told the inquiry into the affairs of the Public Investment Corporation (PIC) that the technology company had been grossly overvalued.

In December 2017, the PIC controversially invested R4.3bn into Ayo, acquiring a 29% stake in the process at R43 a share. That valued Ayo at R14.8bn.

But Nodwele, who resigned in August 2018 without ever having signed an employment contract with Ayo, said on Monday even a R1bn valuation “would have been extreme”.

He said a maximum valuation of R700m was probably more realistic.

There was “no real intention” by the company to deliver on its pre-listing statement, including its ambitious revenue targets, Nodwele said. “That would be deliberately misleading to the market," he said.

He also said the 30% stake in British Telecommunications SA, which Ayo had pledged to buy from related party African Equity Empowerment Investments (AEEI) for R990m, was only worth about R180m.

The PIC’s investment is under scrutiny at the Mpati commission of inquiry into the PIC. The state asset manager has vowed to recover its investment.

Ayo’s shares fell to a historic low of R14 on Monday, valuing the company at R4.8bn.

However, the bid price for Ayo’s stock, which reflects the price at which investors are prepared to buy, was just R1.14. If a single trade goes through at this level, the PIC will have lost 97% of its R4.3bn investment.

Last week, Ayo's financial statements showed that more than half of its pre-tax profits in the six months to February came from interest earned on the PIC's funds.

Business Day's Warren Thompson gives Business Day TV an in-depth perspective on Ayo Technology.

Ayo’s investment revenue from bank deposits leapt from R38.2m a year before to R150.2m in the six months to February. That equates to 56% of group profit before tax of R266.7m.

Independent Media chair Iqbal Survé, who owns a large portion of Ayo via Sekunjalo Group, told the Mpati commission last week the PIC’s investment in Ayo was “very legitimate”.

Ayo’s current CEO, Howard Plaatjes, was chief operations officer at Independent while corporate affairs director Vanessa Govender was the company’s executive for human resources, according to the technology firm’s website.

The close relationship between Ayo and Independent meant it was “easy” for Survé to ask for favorable articles to be published, Nodwele said.

“Editorial independence of Independent Media does not exist,” he said.

With Bloomberg