Lessons from the R25m “profit” banked by Ellies chairman’s share sales

After yesterday's disclosure on SENS, there will be renewed debate around the sale of shares by Ellies chairman Elliot Salkow. In his daily newsletter Alec Hogg explores the glaring lessons investors can learn from the events leading up to the sale.

Published on:

25 Nov 2014, 8:06 am

By Alec Hogg

After yesterday's disclosure on SENS, there will be renewed debate around the sale of shares by Ellies chairman Elliot Salkow. The story is complicated. Salkow didn't dump the stock, but offloaded over a couple of years through a "zero-cost-collar-option" that guaranteed him a floor price but limited the upside. At the time of Salkow's strung out sale, the Ellies share price plunged to a tenth of its recent peak. Adding to the complexity, even at its current 123c, the share price remains vulnerable. There's an unwanted line of stock at HCI, accumulated by since departed chairman Marcel Golding.

Those who bought and held the shares will be peeved to see their chairman cash in a R25m "profit". But there is a lesson here for all of us. Salkow, who founded, built and still chairs the business, should know its value better than anyone else. So when he publicly discloses a deal to sell a lot of shares, existing and potential Ellies shareholders should have paid attention. Further investigation would soon have pointed them towards Vunani's analyst Anthony Clark who for months has been warning about the fragility of the Ellies share price. Those who bought the shares anyway have only themselves to blame. They tried to catch a very sharp knife that was falling.

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