South Africa’s financial markets have recently been shaken by a controversial battle involving Mantengu Mining, Liberty Coal, and the Johannesburg Stock Exchange (JSE). Mantengu has accused the JSE and Liberty Coal of participating in or enabling alleged share price manipulation that, according to the company, damaged its market value and disrupted its strategic plans. In turn, the JSE and Liberty Coal strongly deny these allegations and have threatened legal action, setting the stage for one of the most high-profile disputes in recent years.
This dispute not only raises questions about fairness in capital markets but also spotlights the vulnerability of smaller companies when challenging powerful institutions. This article provides an in-depth analysis of the conflict, the claims and counterclaims, regulatory findings, and the broader implications for South Africa’s financial system.
Mantengu Mining: Background
Mantengu Mining is a small-cap mining firm listed on the JSE. The company primarily operates in chrome and related minerals, with ambitions to expand into other mining assets. Its growth strategy relies heavily on raising capital through share issuances and pursuing acquisitions.
For a company like Mantengu, share price stability is critical. A healthy valuation ensures smoother acquisitions and helps avoid excessive dilution of shareholder equity. Conversely, a sharp decline in stock value can disrupt capital raising and force a company to change or delay strategic deals.
Liberty Coal and the Connection
Liberty Coal is a coal mining entity with a significant presence in South Africa. It became a central figure in Mantengu’s accusations because of overlapping connections between the two companies. Mantengu alleges that Liberty Coal — along with individuals linked to both companies — acted as a “front” in a broader scheme to manipulate Mantengu’s share price.
Adding to the complexity, Liberty Coal’s CFO, Ulrich Bester, was once Mantengu’s financial director and is still a substantial shareholder. This relationship, Mantengu argues, creates both the incentive and the means for manipulation.
The Core Allegations
Mantengu Mining has made several strong claims:
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Naked Short Selling – Mantengu alleges that a syndicate engaged in selling shares it did not own or borrow, a practice known as naked short selling. This tactic can artificially increase supply and push share prices downward.
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Use of Front Companies – According to Mantengu, companies such as Liberty Coal and others were used to obscure the ultimate beneficiaries of these trades.
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JSE Involvement or Negligence – Mantengu contends that the JSE either facilitated the scheme or failed to act despite being aware of the alleged manipulation. The company claims the JSE even blocked it from issuing critical announcements through the SENS system, which is vital for keeping investors informed.
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Strategic Disruption – Mantengu argues that the manipulation jeopardized acquisitions like Blue Ridge Platinum, as its weakened share price complicated deal structures and risked shareholder dilution.
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Criminal Complaint – The company escalated the matter by filing a criminal complaint with South Africa’s crime investigation authorities, naming specific individuals from both Liberty Coal and the JSE.
JSE’s Response
The Johannesburg Stock Exchange has rejected all accusations. Its position is that:
- All its actions comply with the Financial Markets Act.
- Allegations of manipulation are baseless and defamatory.
- Securities lending and borrowing are normal mechanisms of market operations, not evidence of illegal activity.
- Mantengu’s claims reflect a misunderstanding of exchange processes and regulations.
The JSE has even issued a cease-and-desist notice to Mantengu, warning the company and its executives against making further defamatory statements.
Liberty Coal’s Position
Liberty Coal has also strongly refuted Mantengu’s claims. The company has described the allegations as unfounded and damaging, arguing that there is no motive for it to manipulate Mantengu’s share price. In fact, Liberty Coal has gone further, threatening defamation proceedings and demanding compensation for reputational harm.
For Liberty Coal, the accusations are not only harmful to its image but also cast doubt on its corporate integrity. As such, the company is determined to clear its name through legal channels if necessary.
Regulatory Findings
The Financial Sector Conduct Authority (FSCA) conducted its own investigation into the claims. After reviewing Mantengu’s flagged transactions, the FSCA announced that it found no evidence of naked short selling or deliberate market manipulation.
However, Mantengu disputed these findings, arguing that the FSCA’s investigation covered only a portion of the relevant timeframe and overlooked critical data. According to Mantengu, the regulatory review failed to consider the broader pattern of suspicious trades that it had identified.
Implications for South Africa’s Financial Markets
The dispute between Mantengu, Liberty Coal, and the JSE carries implications that extend far beyond the immediate parties involved.
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Investor Confidence – Even unproven allegations of manipulation can harm investor confidence in capital markets. Questions about fairness may make investors hesitant to back smaller companies.
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Regulatory Effectiveness – The FSCA’s findings, coupled with Mantengu’s criticism, highlight concerns over whether regulators have the tools and independence to fully investigate market abuse claims.
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Corporate Risk Management – Companies like Mantengu must weigh the risks of going public with serious allegations. While they may hope to defend shareholder value, such actions can expose them to legal backlash.
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Power Imbalance – The case underscores the imbalance between small-cap firms and large institutions. Smaller companies often feel disadvantaged when challenging exchanges or larger corporate players.
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Potential Reforms – Regardless of outcome, the controversy may fuel calls for stricter disclosure, enhanced oversight, and greater transparency within South Africa’s markets.
Frequently Asked Questions (FAQs)
What is naked short selling, and why is it significant in this case?
Naked short selling is when shares are sold without being borrowed or owned. It is prohibited because it can create artificial downward pressure on a stock’s price. Mantengu believes this tactic was used against its shares.
What did the FSCA conclude after its investigation?
The FSCA announced that it found no evidence of deliberate market abuse in Mantengu’s stock. However, Mantengu disputes the scope of the regulator’s investigation.
What risks does Mantengu face by pursuing this dispute?
If Mantengu cannot prove its claims, it may face defamation lawsuits, financial damages, and reputational harm. Liberty Coal and the JSE have already indicated they may take legal action.
Why is the JSE involved in this conflict?
Mantengu claims the JSE either facilitated or ignored manipulative trading practices and even blocked its shareholder announcements. The JSE insists it complied with all regulations.
Could this case change how South African markets operate?
Yes. Even without proven wrongdoing, the case has raised debates about transparency, fairness, and oversight. It may encourage reforms to strengthen investor protection.
Conclusion
The confrontation between Mantengu Mining, Liberty Coal, and the Johannesburg Stock Exchange has become one of the most significant corporate disputes in recent years. Mantengu maintains it was unfairly targeted by a coordinated scheme, while the JSE and Liberty Coal reject the accusations as baseless and harmful. The FSCA has so far found no evidence of manipulation, but Mantengu continues to contest the findings and seek further scrutiny.
This dispute is not merely about one company’s share price. It highlights broader issues of market fairness, the accountability of exchanges, and the ability of smaller firms to stand against powerful institutions. For South Africa’s financial markets, the outcome of this case may set important precedents about trust, transparency, and regulation.
At its core, the case reminds us that market integrity is fragile. Investors, regulators, and exchanges must work to protect it, because once trust is eroded, it can take years to restore.