“People are concerned about two things: what will this do to Pinnacle’s reputation for future government business, given that it is a significant portion of the group’s business, and will this lead to any future investigation into past contracts, and will this uncover any irregularities,” Irnest Kaplan of Kaplan Equities told CNBC Africa.
“What’s important here is what does this mean about their reputation going forward. As investors, we hope that they can get through this and keep their reputation intact. It’s going to take a lot of effort.”
This was after the company dropped twenty five per cent yesterday following recent revelations that police had charged Pinnacle Holdings’ executive director, Takalani Tshivhase, with allegedly offering a bribe of five million rand to a lieutenant general, in order to secure a contract.
“I don’t know why they would want to shave off that much value. If the business is still intact in a years time, it, in theory, should be worth well more than this. Where the issue comes is that Pinnacle derives a lot of its business from government. What’s happening now is that investors are taking a dim view of what the implication of this could be on their government business going forward,” Kaplan explained.
“According to the company, and to the CEO, this comes as a big surprise and they totally deny these claims. Bear in mind that the claim was made many months after the actual event took place so it does sound a bit weird.”
Kaplan added that, as an investor, he is happy with the performance of the company and with the way it has conducted itself, and that the events that took place yesterday came as a surprise to him.
(READ MORE: Pinnacle plugs into positive results)
“The business claims to be doing everything above board but investors are clearly saying, ’We don’t want to hang around until we find out what’s going to happen’ and this may take a while. Maybe that’s why people are taking a dim, longer term view,” he said.
“In my mind, it still is a well-run company. If there is any wrongdoing here, it’s probably an isolated case, and it doesn’t mean the company is rotten to the core – that’s what I would like to think. We will see how it pans out.”