The abrupt departure of CEO David Hurwitz from Transaction Capital sent shockwaves through the market, resulting in a significant drop in the company’s share price, plummeting over 20%. The announcement, released after the market closed alongside a pre-close update, was remarkably brief, comprising a mere 138 words. The core statement regarding his departure was a mere 56 words, lacking the customary expressions of gratitude and well-wishing that typically accompany such CEO transitions. Moreover, the terminology used emphasized that he would “step down” rather than employing more generous descriptors such as “retirement” or “resignation,” even though Hurwitz is just 51 years old.
In a somewhat more generous tone, the press release acknowledged Hurwitz’s pivotal role in Transaction Capital’s growth and success since he joined the company in 2005. To fill the void left by his departure, one of the company’s founders, Jonathan Jawno, who also serves as an executive director, will assume the role of CEO. Notably, Jawno was appointed as the executive chair of Mobalyz (effectively SA Taxi) in June, a position of paramount importance within the group.
During this transition, Terry Kier, the former CEO of Mobalyz, will focus on “pursuing and managing certain key strategic relationships” and seek to “unlock strategic opportunities.” However, the role description for Kier’s new position remains somewhat vague.
The press release highlights the active involvement and ongoing investment of the founders of Transaction Capital in the group’s activities, particularly since the onset of the Covid-19 pandemic. Jonathan Jawno, in particular, has been appointed as the chairman of SA Taxi. Given the challenges the group has faced, including an 80% drop in its share price following a surprising trading update in March, the founders have redirected their focus from being an investment and operating company to maximizing shareholder value from the existing portfolio of companies. Consequently, it is deemed appropriate for one of the founders to steer the group’s strategic direction.
David Hurwitz will continue to lead the business until the end of the year and will present the company’s annual results in early December. However, skepticism abounds regarding the group’s ability to navigate these changes successfully.
The primary challenge facing Transaction Capital is the transformation of its SA Taxi unit, which requires support from debt funders to sustain its operations. The company’s pre-close update on Monday outlined seven key steps in the operational restructuring of SA Taxi, indicating progress in the restructuring of its balance sheet. Furthermore, a “Mobalyz Debt Sustainability Committee,” chaired by non-executive director and significant shareholder Chris Seabrooke, has been established to engage constructively with debt funders.
Hopes for a turnaround at WeBuyCars, following a lackluster first half of the financial year, have yet to materialize. In March, the company had projected a decrease in earnings “by not more than 20% for the half year,” citing a high comparator base in the prior year’s first half. However, it remained optimistic about full-year earnings growth for 2023. In the recent update, Transaction Capital warned that WeBuyCars’ FY2023 earnings were expected to be approximately 20% lower compared to the prior year.
Additionally, the company cautioned that Nutun, the group’s most reliable profit contributor, would achieve earnings growth relative to the previous year, albeit at a slower rate than previously communicated. It raises questions about the effectiveness of the turnaround initiatives implemented six months ago.
In light of these challenges, the founders, Jonathan Jawno, Michael Mendelowitz, and Roberto Rossi, have demonstrated their commitment by purchasing additional shares in March, bringing their total holding to 112 million shares, equivalent to approximately 15% of the group. This represents a considerable drop in value, as their holdings were previously worth nearly R5 billion before the share price collapse in March. Notably, the trio has publicly stated that they have not sold a single share since 2020.
David Hurwitz’s departure earlier in the year drew criticism due to the sale of around a third of his nearly four million shares in December. The sale was a result of his family trust, the Dovie Trust, being compelled to liquidate these securities, which had been pledged as collateral for debt obligations.
In conclusion, Transaction Capital’s CEO change announcement, marked by David Hurwitz’s departure and the appointment of Jonathan Jawno as his successor, has ignited significant interest and concern among investors. The company faces substantial challenges, particularly in revitalizing its SA Taxi unit and addressing issues within its subsidiary, WeBuyCars. The involvement of the founders and their increased focus on unlocking shareholder value signal a significant shift in the company’s strategy. The market’s response and the future trajectory of Transaction Capital remain uncertain in these turbulent times.
