South African tech stock whose share price increased by 136% in 9 months

iOCO’s share price has more than doubled in the past nine months, with its biggest gains coinciding with a shareholder-led takeover of the company’s board.

From lows of close to R1.00 per share, the price has increased to around R2.50, touching R2.74 in December.

Protea Capital Management CEO Jean Pierre Verster noted that the jump in the share price has coincided with the involvement of Milkwood Capital, headed up by Rhys Summerton (pictured).

Another investment analyst told MyBroadband that Summerton was highly rated by the market. However, he said another factor was that iOCO’s share was relatively cheap and benefited from the general rally in the South African market following last year’s elections.

Summerton was one of several shareholders who stepped in last year when the company’s share price was in freefall.

The boardroom drama became public knowledge on 10 May 2024, when iOCO (then still EOH) issued a cryptic cautionary announcement on the JSE News Service.

“Shareholders are advised that EOH has been approached by certain shareholders regarding the succession plan for the EOH Board. The EOH Board is engaging further with the shareholders,” it stated.

EOH also warned that shareholders should exercise caution while trading the company’s stock.

By the end of May, the company announced sweeping changes to the board. Three directors resigned, including the chairman and interim CEO.

In their place, Veronica Motloutsi, Dennis Venter, and Rhys Summerton were appointed to the board. iOCO CEO Marius de le Rey was appointed interim CEO of EOH.

At the time, iOCO South Africa was EOH’s largest segment. EOH only rebranded to iOCO in October.

Motloutsi is the founder and CEO of SmartDigital Solutions, a company specialising in digital transformation. She is also on the boards of Sentech, the .za Domain Name Authority, and VulaTel.

Summerton and Venter are direct and indirect shareholders in iOCO.

Venter founded Quarry Cats and Atoll, which offered services to the construction and mining industries, and oversees a diversified investment portfolio.

Summerton is the founder and investor at Milkwood Capital, a long-term, value-oriented, global investment company based in Windsor, United Kingdom.

He is on the Nasdaq-listed Nexxen International board and the boards of other unlisted investment companies.

Speaking to Business Day shortly after the boardroom shakeup, Venter said their goal was to “actually” turn the company around.

Venter and Summeron both said they believed EOH’s share price was undervalued.

“As shareholders, we don’t see a plan,” stated Venter, adding they were told every year that there was a plan to turn the company around, but nothing actually happened.

He said they took control of the board out of frustration and were embarking on a turnaround strategy to restructure the business and cut unnecessary costs.

“We’re not scared of changing people if we have to,” said Venter.

Summerton said they believed EOH needed a team that was highly focused on three key priorities: immediate cost-cutting, harnessing the group’s free cash flow to pay down debt, and strategic capital allocation for future investments.

Emphasising their shareholder-driven approach, Venter and Summerton said they would not take any board fees. Instead, their financial reward would come through the share price.

In its annual financial results for the period ended 31 July 2024, EOH (now iOCO) reported that Summerton was the only director with a direct or indirect interest in company shares.

At the time, Summerton held 1.46% directly and 2.60% indirectly.

In December and January, Summerton and his Milkwood Fund bought an additional 204,265 shares in iOCO, amounting to an additional 0.03% stake in the company.

This was in addition to the 6.5 million shares he bought in November, representing almost 1.02% of the company’s issued shares.

His latest investments in the company on 16 and 17 January 2025 included shares purchased for as much as R2.44 each.

To fully appreciate Venter’s remarks that their goal was to “actually” turn the company around, it is important to go back to 1 September 2018, when Stephen van Coller took the reins as CEO.

At the time, the EOH share price was already on a downward trend, trading at R40 per share — well below its highs of over R100 two years earlier.

Van Coller’s mandate was creating value by growing EOH and creating jobs. Shareholders were tired of losing money.

However, a group of former directors and executives said banks had parachuted in Van Coller, a former banker, to ensure they got back the money EOH owed them.

The company was under pressure because of its growing debt burden, reports of corruption and mismanagement, and poor corporate governance.

Van Coller took aim at corruption and poor corporate governance at EOH and focused on reducing debt.

He sold many of EOH’s business units, including Sybrin, CCS, and LSD, and used this money to repay the banks.

EOH also raised R600 million through a R500 million rights issue and a R100 million BBBEE deal in early 2023.

The proceeds of the February 2023 capital raise were used to settle the majority of EOH’s senior bridge facility.

The banks received their money through EOH selling businesses and the rights issue, and EOH’s debt was significantly reduced.

Van Coller said he was very proud that EOH never missed an interest payment and that the banks got all their money.

He added that the successful rights issue welcomes a new era for EOH, knowing that their strategy for EOH 2.0 has the backing of all their shareholders and lenders.

Shareholders, who saw over 90% of their wealth disappear since Van Coller took the reins, were ready to see the growth Van Coller promised.

Unfortunately, EOH 2.0 was a failure, and the promised growth never materialised.

When EOH announced its rights offer, it traded at R4.28 per share. Shareholders were offered 227 additional shares for every 100 held for R1.30 per share.

At the first announcement of the rights offer, the theoretical breakeven price after completing the rights offer would be R2.20 per share.

In February 2024, a year after the rights offer, the EOH share price declined to R1.05 per share.

EOH’s loss for the six months through January 2024 widened by over 1,600%. The company’s loss per share deepened from 3 cents to 15 cents.

The company’s problems went beyond its financials. Van Coller and EOH CFO Megan Pydigadu resigned and left the company.

Van Coller, with Pydigadu as his right-hand woman, ran a tight ship. Their departure left a leadership vacuum.

No clear succession plan was in place, so EOH appointed its chairman, Andrew Mthembu, as interim CEO.

However, this did not work out as expected, and EOH’s shareholders grew impatient. They wanted to start seeing the promised returns.

Mthembu resigned, and Jabu Moleketi was voted in as the new chairman. De le Rey replaced Mthembu as interim CEO.

While EOH did not post good annual results a few months after the board takeover, Summerton has put his money where his mouth is, buying over R11.2 million of the company’s shares since November last year.