SA’s Net1 Under Investigation By U.S Law Firms Over “Securities Fraud Claims”

Several US-based law firms are investigating Net 1 but the company has “elected” not to inform local investors on the JSE

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Fraud. Olivier Le Moal / Shutterstock.com
Fraud. Olivier Le Moal / Shutterstock.com

Controversial JSE-listed Net 1 UEPS Technologies could potentially face a class action lawsuit over concerns whether the company has violated federal securities laws or engaged in other unlawful business practices.

Several US-based law firms announced investigations on behalf of Net1 investors.

Bragar Eagel & Squire, a New York-based law firm concentrating in commercial and securities litigation, is investigating potential claims against Net 1.

“Our investigation concerns whether Net 1 has violated the federal securities laws and/or engaged in other unlawful business practices,” Bragar Eagel & Squire disclosed in a statement on Wednesday.

On November 8, 2018, after market close, Net 1 announced that it will restate its financial results for the year ended June 2018 due to an accounting error related to its investment in Cell C.

On this news, the price of Net 1 UEPS shares fell over 30%, closing at $4.84 on November 9, 2018.

Law firm of Kirby McInerney LLP also disclosed it was investigating potential claims against Net1.

Kirby McInerney LLP is a New York-based plaintiffs’ law firm concentrating in securities, antitrust, and whistleblower litigation.

While Bernstein Liebhard said in a statement it is also investigating potential securities fraud claims on behalf of shareholders of Net 1, resulting from allegations that Net 1 and/or its executives may have issued materially misleading business information to the investing public.

Since 1993, Bernstein Liebhard has recovered over $3.5 billion for its clients.

In addition to representing individual investors, the firm has been retained by some of the largest public and private pension funds in the US to monitor their assets and pursue litigation on their behalf.

Furthermore, Glancy Prongay & Murray LLP also joined in on Wednesday, announcing its investigation on behalf of Net 1 investors concerning the company and its officers’ possible violations of federal securities laws.

The shares of South Africa’s controversial JSE-listed Net 1 UEPS Technologies dipped 14.5% at R64 by 15.55 on Wednesday after the company announced it has experienced unexpected delays in the filing of its Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2018.

The Nasdaq and JSE-listed firm informed the United States Securities and Exchange Commission that it expects that it will be able to conclude the remaining work in time to file the Form 10-Q within the five-day extension period.

The company did not inform JSE investors about the delay in publishing restated financials. For more read: Net1 Shares Plunges Again On Delayed Filing of Restated Quarterly Report

Net1, a shareholder in South Africa’s mobile phone firm Cell C, announced on Friday that it will restate its financial earnings for the year ended June 2018 due to an accounting error.

For more read: SA’s Net1 Will Restate FY Earnings; Cites Cell C’s Accounting Error

The company said is in the process of preparing restated financial statements for the year ended June 2018, which the company anticipates filing with the SEC (United States Securities and Exchange Commission) on Form 10-K/A for the year ended June 30, 2018, as soon as practicable.

Net1 UEPS Technologies’ loss of the lucrative contract to distribute billions of rand to social grants recipients and its poor financial reporting on Friday came back to bite the firm, its stock plunging 46%. The share price closed 46.8% lower at R50.54 on the JSE on Friday.

For more read: Net1’s shares plunge 46% on accounting error over Cell C

The group told Business Report its audit committee has discussed the error with its auditors with Deloitte & Touche.

Deloitte directed all question to Net1. “Our professional responsibilities, standards and contractual obligations with respect to client confidentiality prevent us from commenting any further…” Deloitte told Business Report at the weekend.

The shares of Net 1, which is now valued at more than R4.2 billion, has lost 25% in the past 7 days and 31.9% in the past 30 days.

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