The slide in MTN’s shares last week to the weakest level in more than a decade was compounded by forced selling by a director because of a financial instrument he took with a bank in 2009, the mobile operator said in a stock exchange filing.

MTN’s share price has plummeted more than 30% in the past two weeks.

The sell-off accelerated on August 29 after Nigerian authorities demanded the company return as much as $8.1bn, which it is accused of moving out of the country illegally.

The share price decline forced group chief human resources officer Paul Norman to offload R14.8m worth of stock at a volume-weighted average price of R73.62. The shares were sold on Wednesday.

MTN closed at R74.76 on Friday, down from R109.66 on August 28.

MTN’s latest trouble in Nigeria prompted some investors to question the wisdom of investing in Africa’s most populous country. Nigeria’s authorities courted further controversy last week when the central bank summarily deducted R75m from Standard Bank’s local operation for alleged contraventions of foreign-exchange rules, though the SA lender is disputing the charge.

Some analysts are critical of directors who hold instruments that can trigger share sales, including leveraged stock positions that can give rise to margin calls.

An investor receives a margin call from a bank or stockbroker if the value of a share they have bought with borrowed money falls below a certain level. The investor must then either deposit more money into the loan account or sell the asset to cover the margin call.

MTN described the dealings as an "involuntary on-market sale of shares actioned by a financial institution due to the shares being linked to an equity finance transaction".

Just One Lap founder Simon Brown said even though it is not illegal for directors to use leverage when acquiring their company’s shares, he would "fire the director" as these positions place unnecessary risk on the share. The forced sale would not have had a major effect on MTN’s share price given that trading volumes were particularly high last week, he said.

In December 2017, two directors at EOH faced margin calls that dented the group’s share price. The technology company’s 35% share decline in a single day was attributed to margin calls against equity-financed transactions.

The JSE is looking into trades by the same MTN director that took place ahead of the announcements from Nigerian regulators, which fuelled a slide in the share price. On August 20, Norman sold R10.3m of MTN shares on the open market at a volume-weighted average price of R102.77.

"The trading activity ahead of the announcement will be reviewed by the market regulation division, and if we conclude that any trades warrant further investigation, we will refer those trades to the Financial Sector Conduct Authority for their consideration," said Shaun Davies, director of market regulation at the JSE.

Late on August 29, the Central Bank of Nigeria told MTN to return $8.1bn worth of dividends it "illegally" repatriated from Nigeria between 2007 and 2015. Less than a week later, the office of Nigeria’s attorney-general told MTN it owed between $1.3bn and $2bn in taxes relating to imports of equipment over the past decade.

Moody’s Investors Service placed MTN Group’s debt ratings on review for downgrade owing to "the uncertainty around the potential implications" of the recent announcements on MTN’s credit profile. (BusinessDay SA)

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