Mergers, Acquisitions and Financial Results

An equity trader selling shares related to the cellular operator Cell C has been accused of hyping the stock with false rumours of a potential listing. The Buyers Equity Guide is sending out bulk e-mails offering shares in Ubambo, a small stakeholder in Cell C, and touting them as a good buy because a Cell C listing is imminent.

But the cellular operator says it is two years short of a listing qualification, and other statements about the company are inaccurate and misleading.

Buyers Equity Guide's CEO Michael Berk is offering over-the-counter (OTC) shares in Ubambo at R3,50, and encouraging people to invest by claiming that Cell C could list on the JSE "at record breaking figures".

Berk also describes a deal that Cell C struck with Virgin Mobile to set up a joint venture in SA as having a value of R500m.

Ubambo holds 10% of CellSaf, the empowerment group with a 25% stake in Cell C, giving Ubambo a 2,5% interest in Cell C.

The cellular operator has sent a lawyer's letter to Berk asking him to desist and challenging his comments about the company's strategies and prospects.

"Buyers Equity Guide claims that Cell C will be listing on the JSE Securities Exchange in 2006 and that its 50/50 joint venture with Virgin Mobile is valued at R500m. These statements are patently untrue," said Vanashree Pillay, Cell C's head of corporate communications.

The cellular operator has refused to disclose any financial details of the Virgin tie-up, which will see cellular services launched under the Virgin brand but built on Cell C's infrastructure.

Cell C said it could not list because a company must be earnings positive for three years to qualify. Cell C has been earnings positive for less than two years.

An OTC share is a privately held share in an unlisted company, often issued as payment to nonexecutive directors. The recipients can sell their shares, and stockbrokers registered with the Financial Services Board can buy and sell the shares. OTC Ubambo shares gave investors a back-door into Cell C and had been trading for years, Berk said.

Business Day