Finance

Purple Group directors accused of underhanded share tactics

• 26 April 2023
Charles Savage

Purple Group executives and directors are accused of talking up the company while dumping millions in shares, ultimately hurting retail investors. The company vehemently denies it.

On Monday, Purple Group released its financial results for the six months ended 28 February 2023, which revealed the company was struggling.

The company experienced a 158% deterioration in earnings, swinging from a net profit of R17.7 million to a net loss of R10.6 million over the reporting period.

It sent the share price plummeting, adding further pain to Purple Group shareholders, who saw 59% of their value destroyed over the last year.

Many commentators highlighted that Purple Group directors and executives sold millions in shares while telling retail investors it is a great company to invest in.

AltVest Capital chairman and BankerX founder Koshiek Karan said a crew of EasyEquities executives dumped R100 million in stock across the past 18 months while retail investors burned.

Karan said Purple Group executives used stock options as a vehicle to get rich quickly, which offered them great upside without much downside.

“While you were hustling to buy stock for close to R3.50, Purple Group executives were exercising their options to buy more stock at roughly 30 cents,” he said.

“Would you give up the chance to buy shares at 10% of the price? No. The EasyEquities executives agree.”

36ONE Asset Management founder and CEO Cy Jacobs also expressed concern about Purple Group CEO Charles Savage’s share sales.

He said, “It always concerned me listening to Charles Savage at the fourth Biznews Conference. So bullish but selling shares while on stage”.

Jacobs argued EasyEquities is not a unique product and that the complexities and costs of administrating so many clients are not a slam dunk.

“Purple Group was always overvalued but loved by many on Twitter,” Jacobs said.

The situation created a retail investor bubble which burst spectacularly. The Purple Group share price declined by 70% since its high in January 2022.

“Purple Group had been overvalued for a long time, and a reset was overdue. The entire retail investor bubble had been running off stimmy, cheap money and bad decisions,” Karan said.

Savage hit back at accusations that Purple Group executives were dumping their stock before the share price bloodbath.

“99.9% placed with institutions who wanted the shares and hold them today. Personally, I was a net buyer, as was the CFO,” Savage said.

Daily Investor asked Purple Group for proof that the shares were placed with institutions, but the company said it could not assist with this information via email.

Purple Group chief enablement officer Carel Nolte said the executive share option schemes aim to align all shareholders and the executive team in increasing the share price over the long term.

“Charles Savage and Gary van Dyk sold shares at the time to enable them to exercise options, including paying for them and the tax and to manage some debt,” Nolte said.

“Crudely put, they didn’t sell in Purple to take money to buy flashy cars but to largely invest more in the company.”

He added that the Purple Group CEO and CFO bought or exercised more shares than they sold. “They are long-time holders,” he said.

Purple Group directors’ dealings

Daily Investor analysed Purple Group directors’ dealing since the start of 2021 to gain a better understanding of the concerns raised by some investors.

The analysis showed only two types of trades since January 2021 – selling shares or buying shares via options.

The table below shows all the non-option share trades by Purple Group directors over the last two years.

DateDirectorType of tradeShare price Cashflow to director
28-Jan-21Mark BarnesSellR0.84R840,000.00
19-Feb-21Gary van DykSellR0.86R427,700.00
26-Feb-21Mark BarnesSellR0.84R840,000.00
22-Apr-21Mark BarnesSellR1.35R1,209,477.34
01-Jun-21Mark Barnes through BVISellR1.10R164,999,848.20
17-Aug-21Gary van DykSellR1.40R3,080,000.00
12-Nov-21Bonang Mohale through SerialongSellR1.10R2,750,000.00
08-Dec-21Bonang Mohale through SerialongSellR1.10R5,500,000.00
22-Nov-21Gary van DykSellR2.47R145,730.00
23-Nov-21Gary van DykSellR2.40R601,420.10
24-Nov-21Gary van DykSellR2.35R187,800.00
10-Dec-21Mark BarnesSellR2.10R4,999,999.20
14-Dec-21Charles SavageSellR0.98R245,000.00
04-Jan-22Gary van DykSellR2.99R1,823,900.00
13-Apr-22Bonang Mohale through SerialongSellR1.10R8,250,000.00
31-May-22Mark BarnesSellR2.45R40,553,916.55
03-Aug-22Charles SavageSellR2.06R102,900.00
31-Aug-22Charles SavageSellR2.05R14,350,000.00
31-Aug-22Gary van DykSellR2.15R2,150,000.00
31-Aug-22Gary van DykSellR2.05R8,200,000.00
12-Dec-22Bonang Mohale through SerialongSellR2.02R24,249,600.00

Purple Group explained that Savage and Van Dyk received options per the incentive share scheme rules. There was no obligation to exercise these options.

Delving into the details revealed that all the share options allowed directors to pay between 35c and 75c per Purple Group share. It is significantly lower than the prevailing market share price over the period.

It further showed that Purple Group directors and executives did not exercise all of their options, and many options were forfeited.

We could not find evidence that any Purple Group director bought stock in the company for over 76c per share since 2021.

The table below shows all the option share trades by Purple Group directors from January 2021.

DateDirectorType of tradeShare price Cashflow to director
10-Nov-21Charles SavageBuy (Option)R0.35-R702,000.00
10-Nov-21Gary van DykBuy (Option)R0.35-R702,000.00
10-Nov-21Mark BarnesBuy (Option)R0.35-R582,660.00
06-May-22Charles SavageBuy (Option)R0.75-R7,535,000.00
29-Aug-22Gary van DykBuy (Option)R0.75-R3,014,000.00
08-Dec-22Gary van DykBuy (Option)R0.75-R4,521,000.00
08-Dec-22Mark BarnesBuy (Option)R0.75-R3,767,500.00

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