Can the Gupta's Oakbay survive delisting?


File: Indian businessmen, Ajay Gupta and younger brother Atul Gupta and Oakbay MD Jagdish Parekh at a Business Day interview in Johannesburg on 2 March 2011, regarding their professional relationships.

JOHANNESBURG - Gupta-owned, Oakbay Resources and Energy will be delisting from the Johannesburg Stock Exchange.

The company has no choice, after failing to meet the JSE's requirements.

It's transfer secretary and sponsor to the JSE are cutting cut ties with the company.

Oakbay shares will stop trading on the JSE from Tuesday.

READ: IDC denies Oakbay will cost it millions

The company faces an uncertain future.

“What’s happened here is the financial ecosystem has come out and said, the people that run Oakbay are not honest or scandal proof enough for us to even be associated with them,” says Viv Govender, a Senior analyst at Swiss Rand.

The country's big five banks and auditors, KPMG were among the first to cut ties with the firm last year. 

Then, last month, Oakbay's JSE sponsor, River Group terminated its relationship with the company.

Now, Terbium Financial Services is ending its role as Oakbay's JSE transfer secretary at the end of July.

“There are two ways to be delisted," Govender explains. "There is SAB way. It’s a great way to be delisted. Someone bought you and paid a huge premium. And that case you smiling all the way to the bank as management of that company. You get a lot of money. But management of a company that is delisted for these kind of reasons would hang their heads in shame.

READ: Temporary JSE suspension good for us: Oakbay

Govender says it’s going to be difficult for Oakbay to operate in this financial environment. “I think it is very difficult for them to operate in a financial environment going forward. Even their PR firm had to issue a PR statement about the relationship with them. That is an indication of the reputational damage. Whether that affects them personally, I wouldn’t think that reputational risk is what they most concerned about right now. I mean the reputation of Oakbay as well as the owners is very negative. You not going to find many out there that are going to say this is the paragon of virtue or of great business ideals."

The company’s shareholders will be unable to trade the shares on the JSE from the 18th of July. 

They will only be able to trade shares among themselves.

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