Probe into Didata deal a surprise
An investigation into insider trading of Dimension Data shares prior to the announcement of a $3.2-billion takeover bid by Japan's Nippon Telegraph and Telephone Corp (NTT) took the market by surprise on Friday.
Analysts said the deal was one of the few which was not leaked prior to the announcement. This was evident in the huge spike in the share price once it was announced in mid-July.
The Financial Services Board's (FSB) Gerhard van Deventer said on Friday the market regulator was looking into the share price movement of Didata for signs of insider trading in the days prior to the announcement on July 15.
Immediately following the bid announcement, Didata's share price jumped 20% to exceed the value of the hefty cash bid, possibly hoping for a higher counter-bid.
In a statement issued on Friday, Didata said it had been made aware of the investigation and would support it.
But analysts were left nonplussed.
"I'm not one to get emotional about shares, but I remember this was a big day for the market. I've been analysing this industry for 10 years and everyone, including me, was amazed at just how well this deal had been kept under wraps before the announcement. Nobody knew. Jeremy Ord (Didata's executive chairman) at the time said talks with NTT had been going on for a long time and we'd heard nothing, so I'd be surprised to hear insider trading had been going on. That would only have happened if they'd known the value of the deal," said Irnest Kaplan, MD of Kaplan Equity Analysts.
"Compared with the entire JSE's movement over the same period, the share did not move that much. On July 14 the share closed on R11.57, and on the 15th it closed at R14.12. In the preceding days it moved from R11 to R11.50, and looking at the chart of the share price, which has been steadily increasing over the last three years to more than triple its price, Didata has increased based on good fundamentals," added Kaplan.
He said the investigation may be a matter of formality, given the infrequent occurrence of such large deals on the JSE.
The JSE said it had investigated trade in Didata's shares ahead of the offer and forwarded its findings to the FSB as a matter of standard procedure.
"Didata had been strong for some time, and it's a volatile stock. It doesn't look overly worrisome to me," said Peter Leger, a portfolio manager at Coronation.
"A 4.8% rise over three days would equate to less than 2% per day and because Didata is a geared stock it's not unusual for it to move much more strongly when the whole market moves up by just 1%. Relative to the other moves in the market it doesn't seem unusual, so the volumes of trade would be an important indicator of someone trying to get their hands on all the Didata shares they could, and one would have to consider the London trade as well."
Didata's primary listing is in London, with its shares linked to those listed locally on the JSE.