BUSINESS MAVERICK: A case of EOH – when a jumbled information flow meets low liquidity, devastating share price

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BUSINESS MAVERICK: A case of EOH – when a jumbled information flow meets low liquidity, devastating share price By Ruan Jooste duritz79

In 2016, EOH was a darling of the stock market; a new age company providing a wide array of digital solutions to a wide range of businesses. But a too-aggressive acquisitions strategy eventually made it difficult for them to consolidate, left some elements of the business, particularly those that had contracts with government agencies, to their own unsavoury devices.

There are two terms worth knowing here: Outstanding shares, and float. A company’s outstanding share count tells us the total number of shares in existence. For EOH a large chunk of those shares is held by company insiders and other institutional investors. This means there aren’t many shares available to trade freely on the JSE. The company’s majority shareholders include management , operating company Lebashe, and fund managers Fairtree, Foord and the PIC.

When Van Coller joined, the company had an average traded volume of between 300,000 and 400,000 shares a day.You tell people that you aren’t going to do that well, and there is share price movement of between 8%-9% on 600,000 shares, which is only a half percent of your issued share capital. It doesn’t make sense.”

Such a limitation will stop manipulation. As it stands, it is not fair trade and not what capital markets are there for. It has been tried with Capitec, Aspen and even the property companies.In response to a range of corporate scandals, speculation and innuendo that have characterised South African financial markets recently, the JSE embarked on a public consultation process to review its responsibilities and to strengthen regulation around primary and secondary listings.

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