The Public Investment Corporation (PIC) this week began legal proceedings against AYO Technology Solutions to set aside its subscription agreement and recover the R4.3 billion it invested for a 29% stake in AYO when the company listed in 2017.
The investment occurred through the PIC’s participating in the initial public offering by AYO through a private placement in December.
AYO’s senior counsel, Nazeer Cassim, began his cross-examination of witness, Victor Seanie, a former PIC analyst and assistant portfolio manager, yesterday afternoon, showing documentation to Seanie, and saying that it could not be disputed that British Telecom South Africa (BTSA) and major client, Sasol, were supportive of AYO’s black empow- erment credentials, given AYO was more than 51% black owned and 31% owned by black women, and that in fact the company was “pretty attractive” to have as a BEE partner.
This, after Seanie said his own analysis of AYO had included that the empowerment claims, in relation to the group’s long-term sustainability and competitiveness, was lacking, and that some forecasts in the pre-listing state- ment were over-inflated, but that he did not receive documentation from AYO relating to these questions prior to the PIC’s decision to go ahead with the deal.
However, Cassim pointed out, that a read of AYO’s pre-listing statement meant there could be no question that the transaction with British Tele- com SA, which had been expected to substantially lift AYO turnover in line with the forecast after the listing, was a real possibility with talks already under- way.
Cassim said auditors Grant Thorn- ton had signed off on the forecasts in the pre-listing statement, to which Seanie replied that as an analyst, he did not rely on auditor or lawyer opinions in his analysis, but rather on the managements of the companies concerned.
Seanie, however, said there was not enough time for him to see the final pre-listing statement, which was released, a day before the PIC approved the deal in December 2017.
This despite having the draft PLS since mid-November. Earlier in the day, the flawed internal processes of the PIC were highlighted, as the state-owned asset manager that manages mainly the Government Employees Pension Fund, bypassed its normal investment vetting and risk analysis procedures when it invested in AYO.
Seanie, after being questioned by the PIC’s legal representative Phumlani Ngomgo SC, said the PIC usually held two investment portfolio management committee meetings to approve new investments, but in the case of AYO, no meeting took place before the invest- ment decision was taken and signed off by former CEO, Dan Matjila. Seanie told the court that typically, four teams, an equity team that he headed, an environmental, social, and governance team, a risk and a legal team would compile a due diligence report to assess any potential investment by the PIC into a new listing.
Cross examina- tion of Seanie continues today.
BUSINESS REPORT