SHAREHOLDERS of iCreate Limited are pondering their next move following the company’s suspension from trading on the Jamaica Stock Exchange (JSE) on Monday, less than a week after a director sold shares in the company and following the resignation of its founder and CEO Tyrone Wilson last week.

The suspension of iCreate has drawn several queries from shareholders and members of the public as to what’s next for the company amidst the limitation from trading in its shares. A company’s securities being suspended from trading means that nobody can buy or sell any units of the listed security, but itdoesn’t mean the actual company has stopped operating as a business.

This leaves current shareholders in limbo as it relates to their ownership in iCreate which can’t be converted to cash or leveraged in a margin loan. While the suspension doesn’t dissipate ownership in iCreate, some shareholders will likely face margin calls on their loans because of the stock’s suspension.

“The Jamaica Stock Exchange (JSE) wishes to advise the investing public that in keeping with JSE’s Junior Market Rule Appendix 2, part 4 (2), it has taken the decision to immediately suspend trading in the shares of iCreate Limited (iCreate) pending the submission of its 2022 audited financial statements. The company has advised that it expects to publish its audited financial statements no later than September 30, 2023,” the JSE release stated.

iCreate’s audited financials were due on March 30 but have yet to be submitted. The company gave an original timeline for submission by May 31, before updating the market last Tuesday with a new deadline. iCreate cited complex mergers and acquisitions, transactions, and extensive internal auditing for the delay in its accounts, which are still being audited.

iCreate also announced last Monday that its second-quarter report which was due on the same day was delayed due to the acquisition of Visual Vibe.com Limited, which was completed on May 31. It gave a new timeline for submission by August 31.

These delays have not only gotten iCreate in the cross hairs of the JSE’s Regulatory Market & Oversight Division (RMOD) but have left several shareholders furious at the state of affairs with the company. Last week different parties sent in complaints to the JSE’s RMOD, which has also had to process a complaint made against Wilson and iCreate by a group called JSE Investors United on June 14. That email was also directed towards the Financial Services Commission (FSC) and had different media houses copied on the complaint.

iCreate’s stock closed Friday at $1.03, which leaves it down 42 per cent year to date and gives it a market capitalisation of $978.18 million.

When will the suspension

Different companies have been suspended by the JSE in the past for having delayed quarterly reports and audited financials beyond the stipulated periods, however several firms resumed trading once they submitted the reports to the exchange. Examples include Pulse Investments in 1997 and 2015, Seprod Limited in July 2007, Salada Foods Jamaica Limited in 1999, and Ciboney Group Limited in 1997.

Sweet River Abattoir and Supplies Company Limited was suspended in August 2019 before it was ultimately delisted in February 2020 due to it not remedying the board level and financial requirement breaches. It’s the only Junior Market firm to be delisted since it was formed in April 2009.

The delisting meant that persons who wanted to dispose of their interest in Sweet River would have had to find another party willing to buy the ordinary shares, pay stamp duty and transfer tax, and go through the Companies Office of Jamaica to register the transaction. Transactions on the JSE are exempt from those fees and establish a space for people to buy and sell ownership in companies.

Although the iCreate suspension hinges on the submission of its audited numbers, if the auditor expresses no opinion or gives a qualified opinion for the same figures, the JSE can maintain the suspension and request that the company continue to work on getting an unqualified audit opinion or meeting other deliverables.

An example of this scenario occurred in June 2019 with SSL Venture Capital Limited (SSLVC), now MFS Capital Partners Limited, wherein their auditors expressed no opinion after not being provided with adequate evidence to satisfy the existence of revenues, inventories, payables, and goodwill for the 2018 audited financial statements. SSLVC requested a suspension of trading after the JSE raised concerns regarding that auditor’s report and asked for a modified or restated report to be submitted that was in compliance with International Financial Reporting Standards and JSE Junior Market rules.

An August 14 timeline that was set for the suspension to end came but the JSE referenced different breaches for the continued suspension of trading in the ordinary shares. Trading only resumed in SSLVC shares by October 2019.

iCreate’s suspension in trading is not the first time the company has been in breach of JSE rules. iCreate submitted its 2021 annual report in November 2022 — which was seven months after the report was due. iCreate’s third-quarter 2021 report was removed by the JSE as it sought additional information from the company. The company is currently in breach of the JSE’s Junior Market $500-million share capital limit.

The JSE still has the power to delist any voting shares or admitted securities of any Junior Market company under Rule 505 – ongoing requirements Part 14 (a) (ii) if the firm has engaged in conduct that has adversely affected the reputation of the Junior Market.

The last listed company to be suspended for breaches of rules was Canadian firm Tree of Knowledge International Corporation (TOKI), now Optima Medical Innovations Corporation, in October 2020 over delays relating to its overdue quarterly reports beyond the 45-day mark post the due date. TOKI eventually delisted from the JSE in February 2021.

Potential director breach

Whilst interim Chairman Ivan Carter and interim President and Chief Executive Officer (CEO) Arlene Martin try to navigate iCreate through these tumultuous times, a director might have committed a breach of the JSE rules when that person sold 20,000 shares of iCreate on August 16 for a price of between $0.94 to $0.99. The sale came just days after iCreate informed the market of delays in their second-quarter and 2022 numbers, which would have extended the timeline that company directors, senior officers, and connected parties would have been limited from trading in iCreate’s stock.

Under part 7 of the Junior Market rules, directors and senior officers are not supposed to deal in the company’s securities during closed periods, which include 30 days prior and up to the announcement of the company’s quarterly results; the timeline is 60 days prior to the due date for the company’s annual results. These affected persons may deal in a company’s securities during the closed period, subject to several conditions such as informing the company’s chairman and receiving acknowledgement, and the company keeping an appropriate record of all notices received on these dealings.

iCreate’s board members include Ricardo Allen, Dainya-Joy Wint, Larren Peart, Stephen Hector and Adrian Smith. Tyrone Wilson, who was the founder, chief executive officer and director, stepped down from the company on Thursday. Only Wilson and Peart had shares listed against their name as per iCreate’s March 2023 shareholding report, with Smith’s interest visibly absent. Wilson’s interest in iCreate through connected parties Kintyre Holdings and Emedia Interactive Group is 52.40 per cent.

Peart made a post on Twitter yesterday in which he stated, “Tyrone stepped down because he is not well; he was not asked by the board to do so. He has been ill for most of this year and I, as his friend and director, supported his decision to put his health first fully.”

Wilson replied to the tweet subsequently afterwards.

When the Jamaica Observer contacted Wilson on his departure from iCreate, he declined to comment.

It was announced on Monday that Wilson had resigned from the board of directors of One-on-One Educational Services Limited effective August 21, after serving on the board since August 2013.

iCreate was brought to market by Sagicor Investments Jamaica Limited in January 2019. VM Wealth Management Limited was the company’s arranger, leading it through the process of a potential rights issue last year and subsequent convertible debt raise to finance the acquisition of Visual Vibe. The JPS Co. Ltd. Employee pension plan, PAM pooled equity fund, VMPM pooled private equity, and VM Investments Limited were part of the $516.51-million convertible debt raise and are in the top 20 shareholder list of iCreate.

VM Wealth’s latest stock pick report lists iCreate as zeroweight which is defined as, “This security is substantially distressed or at risk of a shock which may significantly impair value.”