The Johannesburg Stock Exchange (JSE) news service’s directors’ dealings reports reveal that not a single Vodacom top executive or director bought shares in the company over the last seven years.
Trading in shares by directors draws attention because it can give a glimpse of their view on the company’s prospects.
Directors have a good understanding of their company’s operations and what future performance will look like. This, in turn, can determine the share price.
When a director buys shares in their company, it shows confidence that the company, and its share price, have good prospects.
When a director sells shares in a company without a good reason, the market can see it as a sign that the company is overvalued or that bad news is on the way.
Since 2016, there have been 52 dealings in Vodacom shares by directors in the company, which include its top executives.
What is striking is that the 52 transactions all involve Vodacom directors selling shares in the company.
There has not been a single case where a Vodacom director or top executive bought shares in the company with their own money.
MTN, in comparison, had numerous cases where directors bought shares in the company over the same period. There was also an equal split between buying and selling MTN shares.
It raises questions of whether Vodacom directors don’t trust the company and prefer to put their own money into other companies.
It further questions why ordinary investors should buy Vodacom shares if the company’s directors are not willing to do the same.
Vodacom spokesperson Byron Kennedy said they could not comment on behalf of individual directors on their personal finances.
However, he highlighted that individuals often sell vested shares to cover their tax liability in a given assessment year.
“Directors are awarded shares as part of their compensation and are a mechanism that invariably makes a meaningful contribution to their overall reward and hence their personal wealth,” he said.
“This creates alignment between management and shareholders, given shares are linked to performance criteria.”
He added that the fact that no Vodacom directors are buying the company’s shares does not detract from the investment case.
“We believe there is a compelling investment case for Vodacom. However, one of the fundamental principles for investing success is balance and diversification,” he said.
“It follows that if an individual already has high exposure to a single market position, they may seek to ensure a broader, diversified portfolio.”
Vodacom versus MTN directors’ dealings
|Vodacom||Buy or Sell||MTN||Buy or Sell|