The value of shares in Cipla Medpro has shrunk almost a fifth in the wake of a probe into “serious allegations” concerning its chief executive officer, Jerome Smith. The drugs firm announced on 15 August that its boss had been suspended with immediate effect pending an investigation.
A day later, Cipla, a victim of one-off events, unveiled its worst-ever results since it was floated in 2005. This hit an already battered stock. Last week, Cipla board, under the chairmanship of Sbu Luthuli, shocked many when it admitted that the uncertainty surrounding the Smith probe had led to the termination of merger talks with an unnamed party. Bewildered, the market ditched the stock.
Since 15 August, Cipla has plunged from 838c/share to 700c this week (after returning from the 667c it touched last week). The Smith probe-induced uncertainty has eroded R600m in value, dragging it to R3.1bn at the time of writing. Last week, market cap declined to below R2.9bn for the first time in months.
In the same week, the embattled Cipla, represented by Edward Nathan Sonnenbergs, announced that a two-day disciplinary hearing has been convened before an independent chairman, Advocate Gerrit Pretorius SC. The hearing, which wraps on 7 September, will be held in Cape Town.
Last week’s delivery of a detailed charge sheet prompted Smith to turned to the courts in a bid to be reinstated. He later abandoned it.
It’s been a fortnight of drama.
Now, given that the imminent hearing, the end is nearing. Luthuli expects the probe will be concluded this month, at which point he will update the market. For now though, he said in a Sens statement, Cipla “will not be providing further details on these charges at this time, so as not to prejudice the disciplinary process.” Hard hit investors can’t wait for the end.
Shoks Mnisi Mzolo