THE BOTTOM LINE
More than a whiff of insider whispers about Dis-Chem
Lax JSE ought to be rapped over the knuckles ... again
Dis-Chem’s explanation for its initially mysterious share price fall – a not inconsiderable 5. 6% on Thursday, ahead of its results, is entirely plausible. Traders awaiting confirmation that this retail go-go share would deliver the goods – over 20% in earnings growth – were clearly on the wrong end of the trade and, knowing so, pushed the stock down when it failed to issue an update.
Companies are obliged to issue an update as soon as they know that earnings will move by a margin of 20% – either positively or negatively. However it’s now customary that South African companies issue voluntary updates, irrespective, and perhaps Dis-Chem will rethink its failure to do so in future. Chalk that down to naivety, or bad advice, but it’s a mistake they’d do well not to repeat.But back to the trading action: not all brokers are convinced that the lack of an update was the cause of Dis-Chem’s wobble. Rather, that someone had sight of the results and talked. They point to consistent selling that began on April 23, picked up in earnest on May 2 and culminated in Friday’s washout. For the JSE it’s yet another black mark that it really can’t afford, given the anecdotal view that the exchange is as leaky a sieve as they come. The JSE does itself few favours either, in trotting out its stock phrase that “trading activity will be reviewed by the market regulation division” and may end up being referred to the Financial Sector Conduct Authority (FSCA).
Given that, since 1999, only eight cases of insider trading have resulted in criminal prosecution, it’s hardly a statement to make chatty investors, advisors or company insiders quiver. While the exchange is not a regulator and therefore hamstrung by the FSCA sloths over in Pretoria, it’s time that its executives started taking a much harder line – if only through public comment – on the apparent ease with which sensitive information is glibly shared.