Trader's Loss in SportPesa Global Ownership Case in London

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Legal Battle Over Share Dilution in SportPesa Global Holdings

Kenyan businessman Paul Wanderi Ndung’u has faced a significant setback in his legal efforts to reclaim his 17 percent stake in SportPesa Global Holdings Limited (SGHL). A London court recently dismissed his claims of unfair prejudice and harm to minority shareholders, citing a lack of evidence that the company’s directors or majority shareholders acted against his interests. This ruling marks a major blow to Ndung’u’s ongoing battle for control over the SportPesa brand.

Ndung’u had filed a lawsuit against SGHL, along with some of his co-directors, following the dilution of his shareholding from 17 percent to just 0.85 percent between 2019 and 2022. This occurred as a result of three rights issues totaling £1.9 million (Sh325.5 million). He alleged that the company’s directors orchestrated a scheme involving forgery and equity fund-raising to weaken his ownership. His legal demands included the restoration of his original stake, rectification of the share register, damages for financial losses, wrongful dismissal as a director, and reimbursement of legal costs.

However, the London court ruled that there was insufficient evidence to support his claims. The judge emphasized that Ndung’u failed to demonstrate that the affairs of the company were conducted in a manner that caused him prejudice as a shareholder. Additionally, the court found no evidence of forgery or falsification of board communications, which were central to his allegations.

The Context of the Rights Issues

The legal dispute arose after Sportpesa, operating under Pevans, ceased operations in Kenya in September 2019 due to a sharp increase in taxes on betting stakes. This led to a financial crisis for SGHL, prompting three capital injections: £500,000 in October 2019, £500,000 in December 2019, and £900,000 in December 2021. These raises were authorized by SGHL directors Ivaylo Bozoukov and Kalina Karadzhova to keep the company solvent.

Ndung’u and other Kenyan shareholders, including Asenath Wacera, did not participate in the rights issues, resulting in a significant dilution of their stakes. Ndung’u’s stake dropped from 17 percent to 1.5 percent after he missed the first two offers. Meanwhile, Bulgarian investor Guerassim Nikolov saw his stake rise from 21 percent to 46 percent, while U.S. shareholder Gene Grand’s stake increased from 21 percent to 29.88 percent.

Ndung’u argued that the board minutes approving the first rights issue were falsified. He claimed he was not informed of the October and November 2019 board meetings and that the notice of the first offer arrived after its deadline. He also stated that the letter was sent to an address he had not specified, causing him to miss the opportunity to participate.

Legal Proceedings and Court Rulings

In his case, Ndung’u accused Bozoukov and Karadzhova of conspiring to sideline Kenyan shareholders and withhold critical financial information. He alleged that meeting minutes were falsified to justify share dilution and that his shareholder rights were ignored. However, the court found no credible evidence of such actions.

Under UK law, unfair prejudice occurs when a company is run in a way that harms minority shareholders, leading to share dilution, exclusion, or breakdowns of trust. Section 561 of the Companies Act requires firms to offer new equity shares to existing shareholders proportionally before offering them to others. Section 562 governs the communication of pre-emption offers, requiring them to be sent in hard copy or electronic form with a minimum 14-day acceptance period.

The court acknowledged that SGHL breached these sections but ruled that the breaches were inadvertent and not intentional. It found no evidence that the company deliberately sent the first rights issue offer to the wrong address or that there was a scheme to dilute Ndung’u’s stake.

Ongoing Disputes and Ownership Structure

The court also dismissed the unfair prejudice claim under Section 994 of the Companies Act, stating there was no evidence that SGHL acted in a way that unfairly harmed Ndung’u as a shareholder. The judge noted that Ndung’u had not been actively involved in the company’s management before the dispute and had raised no objections until after the first capital raise.

The conflict between the factions began earlier, particularly during the troubles at Pevans East Africa, which owned the SportPesa brand before its transfer to SGHL. In October 2022, a general meeting in Dar es Salaam was held to expel Ndung’u and Ms. Wacera, leading to further legal battles over the company’s assets.

The SportPesa brand returned in October 2020 through Milestone Games, triggering a court fight for key assets such as the trademark and web domains. Online sports betting companies like SportPesa had experienced rapid growth in Kenya, driven by enthusiasm for sports. However, government concerns about the social impact of betting led to tax hikes and stricter regulations.

Founders of Pevans East Africa earned substantial dividends over the years, creating new billionaires and expanding the fortunes of others. Despite this, the company eventually ceased operations in 2019 due to alleged non-payment of taxes.