Scangroup market value falls $3.3 million on CEO suspension

WPP Scangroup’s shareholders have lost Sh363 ($3.3 million) million in paper wealth since Friday’s announcement of the suspension of its founder and long-serving chief executive Bharat Thakrar.

The company board suspended Mr Thakrar and the chief finance officer Satyabrata Das to allow for an investigation into allegations of gross misconduct and possible offences in their capacity as senior executives and employees of the company.

The company’s share price at the Nairobi Securities Exchange (NSE) has fallen by 14 per cent since the announcement, having opened trading on Friday at Sh5.94 and closing at Sh5.10 Monday.

The price erosion has resulted in the company’s market capitalisation falling to Sh2.2 billion ($20 million), from Sh2.56 billion ($23.3 million) at close of trading on Thursday.

There is negative sentiment because people are flying blindly and we still don’t know what the investigations will reveal, so the decline might continue until there is clarity,” a trader who did not want to be named said.

Suspension of the CFO indicates that the allegations facing the executives could be financial in nature.

The firm said it will provide more rmation about the actual reason for kicking out Thakrar.

Further announcements concerning this matter will be made when appropriate. For the time being, therefore, shareholders and investors are advised to exercise caution when dealing in the company’s securities,” the firm said in a statement on Friday.

UK-based conglomerate WPP, which holds a controlling 56.3 percent in Scangroup, is said to have pushed out the CEO owing to its strict ethical code.

Mr Thakrar has been the face of Scangroup which he took public in August 2006 in an initial public offering (IPO) that raised Sh94 million ($856,335). He was the top shareholder at the time with a 28.53 per cent stake, but this has fallen to 10.6 percent, now valued at Sh235 million ($2.14 million).

His potential exit poses risk of the company losing local contacts or resulting in a situation where he may decide to build another company to compete with Scangroup.