Purple Group CEO Charles Savage hit back at EasyEquities critics, saying the platform has achieved more for clients than any stockbroker before.
Last week, Purple Group released its financial results for the six months ended 28 February 2023, which revealed the company was struggling.
It experienced a 158% deterioration in earnings, swinging from a net profit of R17.7 million to a net loss of R10.6 million over the reporting period.
It sent the share price plummeting, adding further pain to Purple Group shareholders, who saw 66% of their value disappear since its peak in January 2022.
The company’s poor performance attracted criticism, with people questioning the company’s prospects and management’s share tactics.
36ONE Asset Management founder and CEO Cy Jacobs also expressed concern about Purple Group CEO Charles Savage’s share sales.
He said, “It always concerned me listening to Charles Savage at the fourth Biznews Conference. So bullish but selling shares while on stage.”
Jacobs argued EasyEquities is not a unique product and that the complexities and costs of administrating so many clients are not a slam dunk.
AltVest Capital chairman and BankerX founder Koshiek Karan said EasyEquities executives dumped R100 million in stock across the past 18 months while retail investors burned.
“While you were hustling to buy stock for close to R3.50, Purple Group executives were exercising their options to buy more stock at roughly 30 cents,” he said.
Savage hit back at accusations that Purple Group executives were dumping their stock before the share price bloodbath.
“99.9% placed with institutions who wanted and hold the shares today. Personally, I was a net buyer, as was the CFO,” Savage said.
Purple Group chief enablement officer Carel Nolte added that Savage and FO Gary van Dyk sold shares at the time to enable them to exercise options.
“Crudely put, they didn’t sell in Purple to take money to buy flashy cars but to largely invest more in the company,” he said.
On Wednesday, 26 April, Savage took aim at EasyEquities critics, especially Karan and AltVest Capital, through a post on Twitter.
He said it was interesting to note the rhetoric that EasyEquities is easily replicable and has no defensive moat.
An economic moat refers to a competitive advantage over the company’s competition to preserve market share and profits.
Savage said most of the criticism came from an “alternative competitor whose best efforts have yielded almost no clients and the sale of a game farm”.
He said EasyEquities had achieved more for clients than any stockbroker before it and that it was just the start.
Savage deleted the tweet after some Twitter users questioned the value of engaging in such a matter.
“Deleting tweet, fair comments, time to stay focused on what we are doing not anyone else. Cheers guys see you later,” Savage explained.
A day later, he posted, “A tough but fair week. Incredibly grateful for all the support and factual coverage”.
“We will not be distracted from our purpose, enabling financial freedom for more South Africans every day will change the economic fabric of the country and reward all stakeholders in time.”
Daily Investor asked Purple Group about Savage’s comments and claims, but the company preferred not to comment.
Koshiek Karan responds
Daily Investor asked Karan for feedback about Savage’s comments, and he was complimentary towards what EasyEquities has achieved.
“EasyEquities has done an incredible job of democratising access to stocks and creating a channel of accessibility that did not previously exist. It’s a brilliant solution to a burning problem,” he said.
However, he said capital markets are unforgiving, and great solutions aren’t always great businesses.
He said Purple Group’s valuation was driven to eye-watering levels because of a confluence of factors in the past.
“You had retail euphoria, a surge in meme stocks, indulgent levels of stimulus, historic low-interest rates, the last gasps of a bull market, elevated stay-at-home trading activity, and the adrenalin fuel of a community raging off speculation,” Karan said.
He added that Robinhood’s stock price decline had been a great predictor of the EasyEquities collapse. “The greed/fear pendulum is universal.”
“The equity market bubble popped with consumers drowning in an avalanche of debt and battling steep energy prices and drained by exorbitant costs of living,” he said.
“EasyEquities, at its peak, relied heavily on discretionary spending. Choosing between food stocks and actual food is a pretty easy choice.”
Karan said if the price is what you pay and value is what you get, the price shareholders paid for Purple Group, and therefore EasyEquities, a year ago was pretty steep.
“It’s a sobering lesson in the inevitable gravity of fundamental valuations. Whether you’re Tesla, Amazon or Purple Group, the fundamental valuation will always act as a magnet,” he said.
“Sometimes it takes months or even years, but it will happen. Massive valuations bake in a ton of good news and lofty expectations, which are often difficult to deliver.”
“The apocalyptic EasyEquities meltdown and reset in valuations are signs of a healthy and functioning set of capital markets.”
Purple Group directors’ dealings
Daily Investor analysed Purple Group directors’ dealing since the start of 2021 to gain a better understanding of the concerns raised by some investors.
The analysis showed only two types of trades since January 2021 – selling shares or buying shares via options.
The table below shows all the non-option share trades by Purple Group directors over the last two years.
| Date | Director | Type of trade | Share price | Cashflow to director |
|---|---|---|---|---|
| 28-Jan-21 | Mark Barnes | Sell | R0.84 | R840,000.00 |
| 19-Feb-21 | Gary van Dyk | Sell | R0.86 | R427,700.00 |
| 26-Feb-21 | Mark Barnes | Sell | R0.84 | R840,000.00 |
| 22-Apr-21 | Mark Barnes | Sell | R1.35 | R1,209,477.34 |
| 01-Jun-21 | Mark Barnes through BVI | Sell | R1.10 | R164,999,848.20 |
| 17-Aug-21 | Gary van Dyk | Sell | R1.40 | R3,080,000.00 |
| 12-Nov-21 | Bonang Mohale through Serialong | Sell | R1.10 | R2,750,000.00 |
| 08-Dec-21 | Bonang Mohale through Serialong | Sell | R1.10 | R5,500,000.00 |
| 22-Nov-21 | Gary van Dyk | Sell | R2.47 | R145,730.00 |
| 23-Nov-21 | Gary van Dyk | Sell | R2.40 | R601,420.10 |
| 24-Nov-21 | Gary van Dyk | Sell | R2.35 | R187,800.00 |
| 10-Dec-21 | Mark Barnes | Sell | R2.10 | R4,999,999.20 |
| 14-Dec-21 | Charles Savage | Sell | R0.98 | R245,000.00 |
| 04-Jan-22 | Gary van Dyk | Sell | R2.99 | R1,823,900.00 |
| 13-Apr-22 | Bonang Mohale through Serialong | Sell | R1.10 | R8,250,000.00 |
| 31-May-22 | Mark Barnes | Sell | R2.45 | R40,553,916.55 |
| 03-Aug-22 | Charles Savage | Sell | R2.06 | R102,900.00 |
| 31-Aug-22 | Charles Savage | Sell | R2.05 | R14,350,000.00 |
| 31-Aug-22 | Gary van Dyk | Sell | R2.15 | R2,150,000.00 |
| 31-Aug-22 | Gary van Dyk | Sell | R2.05 | R8,200,000.00 |
| 12-Dec-22 | Bonang Mohale through Serialong | Sell | R2.02 | R24,249,600.00 |
Purple Group explained that Savage and Van Dyk received options per the incentive share scheme rules. There was no obligation to exercise these options.
Delving into the details revealed that all the share options allowed directors to pay between 35c and 75c per Purple Group share. It is significantly lower than the prevailing market share price over the period.
It further showed that Purple Group directors and executives did not exercise all of their options, and many options were forfeited.
We could not find evidence that any Purple Group director bought stock in the company for over 76c per share since 2021.
The table below shows all the option share trades by Purple Group directors from January 2021.
| Date | Director | Type of trade | Share price | Cashflow to director |
|---|---|---|---|---|
| 10-Nov-21 | Charles Savage | Buy (Option) | R0.35 | -R702,000.00 |
| 10-Nov-21 | Gary van Dyk | Buy (Option) | R0.35 | -R702,000.00 |
| 10-Nov-21 | Mark Barnes | Buy (Option) | R0.35 | -R582,660.00 |
| 06-May-22 | Charles Savage | Buy (Option) | R0.75 | -R7,535,000.00 |
| 29-Aug-22 | Gary van Dyk | Buy (Option) | R0.75 | -R3,014,000.00 |
| 08-Dec-22 | Gary van Dyk | Buy (Option) | R0.75 | -R4,521,000.00 |
| 08-Dec-22 | Mark Barnes | Buy (Option) | R0.75 | -R3,767,500.00 |
Credit -Taken from – https://mybroadband.co.za/news/investing/489529-easyequities-boss-claps-back-at-critics.html#:~:text=Purple%20Group%20CEO%20Charles%20Savage,revealed%20the%20company%20was%20struggling.
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