Sagarmatha controls African News Agency, online retailer Loot, Independent Online and Sagarmatha Enterprise Solutions. Proceeds from the group’s failed listing would have been used to buy Sekunjalo Independent Media, which controls Independent Newspapers, which publishes a suite of daily newspapers like the Cape Times, the Argus and the Star amongst others. Sekunjalo Independent Media is in a challenging financial position. According to the 201-page pre-listing statement, as of June 30 2017 it had accumulated losses of R752m, while the company’s total liabilities exceeded its assets by R547m. 

Sagarmatha, the "African unicorn" that was to house Survé’s media and online shopping interests, seemed to be following the same script, with a private placement being touted at R39.62 per share, for a company with a negative Net Asset Value.

Despite the presence of several prominent named investors who were advertised as being committed to invest at that price, the suspicion was that PIC money would again really sweeten the deal. That fear proved well founded.  It has been confirmed that the same pressured timetable was followed, and the PIC investment committee met on April 11 to decide whether to fund Sagarmatha – just two days before the revised listing date of April 13.  Sources with knowledge of the 11th-hour meeting said that one of the loudest voices lobbying for the PIC to buy an undisclosed stake in Sagarmatha was PIC CEO Dan Matjila. He allegedly delivered letters of support from trade unions that stood to benefit from the investment.

The full extent of the destruction at Independent Media since the Public Investment Corporation placed the company at the disposal of Survé has been laid bare – ironically via Survé’s attempt to use other people’s money to plug the R2,3-billion hole in his media balance sheet.  AmaBhungane reported that the situation was “dire” because Survé needed to find R863 million by August 2018 to replay loans to the Public Investment Corporation (representing the Government Employees Pension Fund) and a Chinese state consortium.

They co-funded his acquisition and development of Independent Newspapers – which he bought from the Irish O’Reillys at the end of 2013. Sekunjalo Independent Media owns 55 percent of Independent Media. Independent is the rump of the old Argus newspaper group, and was sold to Sekunjalo in 2013 for R2 billion. It was mainly debt-funded.  On 2nd November 2018 Finance Minister Tito Mboweni revealed to parliament that Independent Media did not meet its obligation to the PIC to repay its R253m loan in August, as was required. The loan matured in August 18th and now stands at R408m.

"Truthfully, the valuation was absolutely a stretch at best, at more than 100 times sales," Mr Brown of Lap One says.He says Sagarmatha’s prelisting statement reminded him of initial public offerings on the eve of the dot-com bubble."Back in those days, you could cobble almost anything together and slap big valuations on it." And with respect to Sagarmatha, it made some of those 1999/2000 listings look tame by comparison.

Sagarmatha’s international investors that have committed and who were part of the R4bn in commitments, were disgusted and it damaged the South African investor environment irreparably with some of the world’s most savvy and successful billionaires and investors.

The Black Business Council said that articles in non-Independent Media publications questioning the valuation of the new firm and the debt it would take on, were "concerted attacks against a black owned business". 

The South African Clothing and Textile Workers Union (Sactwu)  came out in strong support of Sagarmatha Technologies (ST), saying its investment in the media and e-commerce venture would benefit workers greatly as SA fashion would be showcased locally and beyond the country's borders. The Black Business Council secretary-general, George Sebulela, in an opinion piece published last week, also pledged support for Sagarmatha Technologies’ listing.

Federation of Unions of South Africa (Fedusa) general secretary, Dennis George, also complimented Sagarmatha. "Sagarmatha is great for Africa, great for the youth and is in line with the YES Campaign under the leadership of President Cyril Ramaphosa. Sagarmatha will train thousands of young black engineers in the areas of artificial intelligence, data science, and software development”.

Multi Sided Platform companies (MSPs) are very different to non-technology platform companies. MSPs run at huge losses, but have an inverse relationship to value, especially in their first few years. The greater the loss, the higher the value. For example, Amazon which became the world’s second trillion dollar company after Apple, increased its losses for more than 15 years and is only recently profitable and trades at a stupendous multiple of earnings.

The above examples demonstrate that MSP companies have higher values with increased losses. This model, however, is not commonly understood by investors in South Africa. Until South African investors embrace loss making technology companies, MSP platforms used by our consumers and businesses, will be owned by American companies.  This is virtual colonisation which is ironic considering Africa’s fight against colonisation in the past.

Sagarmatha is a wonderful opportunity for the country to benefit from inward investment, for asset managers to participate in a technology platform company and for us to skill our young people in the areas of artificial intelligence, data science and robotics so that they play a meaningful role in the economy of the future (some would argue the economy of the present).

Sagarmatha was a victim of this brazen manipulation of the public narrative and the JSE using a small technicality, wrote to the company four days before it was to list, to withdraw the listing. If we treat our entrepreneurs in the manner in which Sagarmatha has been treated, it will send a signal that only foreign companies should invest in and own, our technology platforms.

Africa will be colonised all over again, except this time it will be a virtual colonisation, with all profits remaining outside the country, no taxes being paid and more opportunities being created for non-Africans. It is regrettable that, at the time when the country needs significant investment, that corporate detractors can act in a criminal way to undermine a legitimate listing.