eBusiness Weekly
Kudzanai Sharara
Delta Corporation’s newly appointed chief executive officer, Mathongonolo Valela, seems to have considerable confidence in the company that he leads following additional purchase of the company’s shares.
Valela, who took over from previous CEO Pearson Gowero this past July, already held a significant stake in the company prior to the latest purchase.
According to a directors’ dealing notice released by the Zimbabwe Stock Exchange on Wednesday, Valela bought 487 200 Delta shares worth $40 437 600 between July 27–29, 2021.
The shares were bought at $83 per share from the open market. Directors trading stock in their company’s shares can be a powerful share price catalyst.
On Wednesday, Delta traded at $98,16.
Amaval Investments Private Limited, where Valela has direct beneficial ownership now owns 13 446 490 shares in Delta.
But why is this information important to market participants?
In compliance with the Zimbabwe Stock Exchange’s listings requirements directors are required to report all share trading in companies of which they are principals.
A reference to a director includes the company secretary, senior management and any other member of staff who has knowledge of the company’s performance or is involved in the preparation of the company’s financial results.
Directors have to report to the stockmarket every time they buy or sell shares in companies of which they are principals. The announcements usually contain the following information:
(i) the date on which the transaction was effected;
(ii) the price, amount and class of securities concerned;
(iii) the name of the director or employee;
(iv) the name of the company of which the person concerned is a director or employee;
(v) in the case of options or any other similar right or obligation, the option strike price, strike dates and periods of exercise or vesting;
(vi) the nature of the transaction;
(vii) the nature and extent of the director’s interest in the transaction; and
(viii) confirmation that clearance has been given in terms of section.
Directors of companies with shares listed on a stock exchange are obliged not only to disclose details of their dealings but also to observe restrictions on when they can buy and sell shares in their company.
One such restriction is that directors should not buy their own company shares during a closed period.
According to the close period rules, directors must not deal in the company’s shares during the period between one month prior to the end of the reporting period till announcement of these results to the public.
Directors are also prohibited to deal in their listed securities when in possession of unpublished price-sensitive information.
Such restrictions aside, directors’ dealings in companies of which they are principals, is often regarded as a positive signal to the market and worth keeping a close eye on.
Company managers typically know better than anyone else the true value of the businesses they run.
Following their money can be a successful strategy given that directors have the expertise and executive powers to move the company in the direction that they deem most beneficial to various stakeholders. As a result, actions by company management can send powerful signals to the stock market.
Savvy investors who make it a priority to monitor directors’ dealings can easily take advantage before other investors latch on to the news of buying or selling by directors.
