Huge Group PR - Huge question mark over JSE action


Huge Group PR - Huge question mark over JSE action

By Huge Group - Thursday, March 19, 2009

 

 
Huge question mark over JSE action
19 March 2009
 
Huge Group directors, James Herbst and Anton Potgieter, have hit back at allegations of a related party transaction, stating that the case is not cut and dried as this would have resulted in the JSE taking action much sooner. The allegations relate to a Single Stock Futures transaction that took place in October 2008.
 
"We firmly support the opinion of our senior legal counsel, which is that the transaction was neither related party nor in fact even a share repurchase," says Anton Potgieter, chairman of Huge Group. "Further, if we had contravened any laws or regulations in this transaction, the JSE would firstly not have taken six months to reach a firm position on the trade, and secondly they would not have taken a 'deemed decision' on the matter, but rather referred us directly and explicitly to the rule that they could show we had transgressed."
 
Certain articles in the media have raised the question around what would happen should shareholders not approve the deal retroactively.  "It is Huge Group's understanding that the JSE is asking shareholders to approve a future potential repurchase of shares, but are deeming the future repurchase to be from a related party, which means that James and I will be excluded from the voting process," explains Potgieter. "They are not looking for approval after the fact and frankly any other interpretation of this is nonsensical.  However even the demand for a circular is extraordinary, as the consequence of a negative vote would simply be that the status quo remains, in other words, we retain the SSF contracts as they are, and never get around to converting them to shares.  Considering that all but R4.5 million of the margin on the contracts has been settled, not converting them to shares in the future would just not make business sense."
 
Potgieter is also emphatic that the single stock futures (SSF) transaction was never "a gamble", as has been speculated in the press.  "Purchasing these instruments was a means of securing the option to buy back the underlying shares at a defined future price.  It was never a speculative investment, or premised on a share price prediction.  At the time of the transaction R3.62 was a good price to buy Huge shares, and in line with market performance - obviously with hindsight it is easy to say that the transaction would have been cheaper to do now, but this was done well before the market crash.  And if the share price had gone up after the transaction people would now be calling us financial maestros."
 
Potgieter believes that the JSE has done serious damage to the reputation of Huge Group. "Allegations have been made in the public domain without outlining the detailed complexities on hand," he says. "I again have to ask the question - if it was a clear and demonstrable case of a related party transaction, why has it taken the JSE six months to get to a mere 'deemed' position?"
 
Huge Group is currently in a closed period pending its 2009 annual results, as its financial year end is 28 February.
 

For further information contact:

Duncan Palmer
Group Marketing Manager
(t) +27 11 603 6000
(f) +27 11 603 6001
dpalmer@hugegroup.com
www.hugegroup.com