SOUTH Africa’s capital markets regulator said there was insufficient evidence to support allegations of prohibited trading practices in Mantengu Mining – an outcome contested by the chrome miner.
“No evidence was found to support the allegations of price manipulation,” the Financial Sector Conduct Authority (FSCA) said on Friday, adding that it would not pursue enforcement action based on the findings of its investigation.
Mike Miller CEO of Mantengu replied that the investigation was incomplete. “While Mantengu has not yet received the full report from the FSCA, the press release indicates that the investigation was narrowly scoped,” he said.
The FCSA studied trade over only nine of some 24 months of illegal trading activities, said Miller. In addition, only the sample trades flagged by Mantengu were examined. Miller said this raised concerns “about the JSE’s monitoring and surveillance of the trading activity in Mantengu’s shares”.
Mantengu has alleged there have been coordinated efforts to suppress its share price involving Liberty Coal among others. Mantengu alleges the perpetrators worked to artificially depress Mantengu’s stock value and hamper its proposed Blue Ridge Platinum acquisition.
In response, Liberty Coal has filed a R250m defamation suit against Mantengu. It dismissed Miller’s complaints as baseless, stating that “each allegation of wrongdoing levied against Liberty Coal and [owner] Daniel McGowan is unsupported by any facts or evidence, ill-conceived and intended to cause harm and damage to their reputations, businesses and commercial interests.”
Since Mantengu’s market debut, its shares have suffered dramatic losses, plummeting 98% from its opening price of R27.35/share. It is currently trading at 59c/share.
Naked shorts
The FSCA’s investigation examined several specific allegations, including claims of naked short selling involving 387,044 Mantengu shares in the first week of June 2024.
The regulator concluded that these transactions did not constitute uncovered short sales, stating that the transactions and orders identified by Mantengu “were lawful securities transactions in the ordinary course of business.”
“Mantengu’s complaint was not about isolated short selling – which is legal in South Africa – but rather about alleged collusive and systematic manipulation by a syndicate to depress the share price, said Mantengu.
Earlier this year, Mantengu accused JSE representatives of borrowing and replacing stocks owned by the company’s largest shareholder to conceal a “naked short” – a practice where shares are sold by traders who have not bought or borrowed them.
The stock exchange rejected the claims, stating its staff would not be dragged to court over the dispute.
The FSCA also investigated trading activity following Mantengu’s criminal charges against the JSE and some of its staff. “Regarding the specific transactions investigated by the FSCA, the authority found no reason to suspect improper conduct by the JSE or any of its officials,” the regulator stated.
The authority said that given the serious nature of the allegations, and because they “in their untested form — met the threshold of reasonable suspicion, the FSCA considered it prudent to initiate an investigation.”
The regulator concluded by noting that “should the relevant enforcement authorities decide to investigate the criminal complaint(s), the FSCA will provide its full support and co-operation.”
