How SportPesa Outfoxed Paul Ndung’u Of His Stakes With A Wrong Address Letter

NAIROBI, Kenya – In what reads like a corporate thriller, Kenyan businessman Paul Wanderi Ndung’u has lost a dramatic legal battle in London after his multimillion-shilling stake in SportPesa Global Holdings evaporated when a crucial offer letter was delivered to the wrong address.

The trader, once holding a commanding 17 percent stake in the global betting giant, watched helplessly as his ownership crumbled to a paltry 0.85 percent following three rights issues that he claims were designed to sideline him and other Kenyan shareholders.

At the heart of the controversy lies a seemingly innocent administrative error that proved catastrophically expensive. In October 2019, as SportPesa Global Holdings desperately needed cash after its Kenyan operations collapsed under punishing tax hikes, directors authorized an emergency rights issue of 500,000 pounds.

The offer letter, sent via DHL courier, arrived at an address Ndung’u had never specified for receiving company communications. By the time he discovered the letter, the deadline had passed. His stake immediately plummeted from 17 percent to 2.83 percent.

What followed was a corporate chess game that would make Wall Street blush. When second and third rights issues came knocking, Ndung’u was ready to participate and protect his shareholding. But there was a problem. The company insisted he could only subscribe based on his diluted 2.83 percent holding, not his original 17 percent stake.

Ndung’u fired back with an acceptance letter dated January 3, 2022, offering to pay 323,000 pounds to cover all three rights issues. He calculated the figures based on maintaining his original 17 percent stake, demanding 85,000 pounds for the first capital raise, 85,000 pounds for the second, and 153,000 pounds for the third.

The company and its Bulgarian directors, Ivaylo Bozoukov and Kalina Karadzhova, refused to budge. They maintained that Ndung’u could only subscribe for shares proportional to his reduced stake. It was a corporate Catch-22 that left the Kenyan businessman effectively locked out of protecting his investment.

By the time the dust settled after the three capital raises totaling 1.9 million pounds, Ndung’u’s once substantial holding had been diluted to microscopic 0.85 percent. Meanwhile, Bulgarian investor Guerassim Nikolov’s stake ballooned from 21 percent to 46 percent, and American shareholder Gene Grand’s portion grew from 21 percent to nearly 30 percent.

Ndung’u cried foul, alleging in London’s High Court that the entire exercise was a calculated scheme involving forgery, falsified board minutes, and deliberate exclusion of Kenyan shareholders from critical meetings. He claimed directors conspired to weaken Kenyan influence in the company and accused them of withholding vital financial information.

The London court, however, was having none of it. In a ruling that effectively endorsed the dilution, the judge found no evidence of intentional wrongdoing. The court acknowledged that SportPesa Global Holdings had breached sections 561 and 562 of the UK Companies Act, which require companies to offer new shares to existing shareholders proportionally before offering them to others, with proper notice periods.

But crucially, the judge ruled these breaches were inadvertent, not malicious. The court found no credible evidence that meeting minutes had been falsified or that directors deliberately engineered a scheme to sideline Ndung’u.

“The breaches which occurred in relation to the first offer letter were inadvertent. There was no deliberate conduct and no scheme to dilute the claimant’s shareholding in the company,” the judge declared, adding that the alleged conspiracy simply never existed.

The court was particularly unimpressed with Ndung’u’s claims of unfair prejudice under Section 994 of the Companies Act. The judge noted that the businessman had not been actively involved in company management before the dispute and had raised no objections to this arrangement until discovering the first capital raise.

“I have difficulty in seeing how this lack of involvement can be said to have constituted unfairly prejudicial conduct,” the judge observed, effectively dismissing arguments that Ndung’u had been deliberately excluded.

The ruling reveals that tensions between Kenyan and foreign shareholders had been simmering long before the rights issue debacle. The court noted that a fundamental lack of trust existed between the two factions by 2019, stemming from earlier disputes at Pevans East Africa, the company that originally owned the SportPesa brand before transferring it to the global holding company.

The bitter ownership battle became public in October 2022 when a controversial general meeting held in Dar es Salaam saw Ndung’u and fellow Kenyan shareholder Asenath Wacera expelled from Pevans. Directors subsequently sought court orders preventing the pair from filing cases on behalf of the company, arguing they lacked authority after their expulsion.

The stakes in this corporate drama are astronomical. Before SportPesa’s Kenyan operations ground to a halt in September 2019, the company had minted billionaires. Pevans East Africa paid out a staggering 7.6 billion shillings in dividends over four and a half years to June 2019. Wacera and Nikolov each pocketed 1.6 billion shillings based on their 21 percent stakes.

The company enjoyed a banner year in 2016 when it distributed a record 4.3 billion shillings to shareholders, riding a betting boom that saw Kenyans embrace sports gambling with unprecedented enthusiasm. The government estimated the gaming industry achieved combined revenue exceeding 250 billion shillings in 2018 alone.

But the golden goose was slaughtered when authorities, concerned about the social impact of gambling, imposed drastic tax hikes and restrictive advertising regulations. SportPesa and rival Betin Kenya both shut down Kenyan operations in 2019, triggering the financial crisis that necessitated the emergency capital raises.

The brand made a comeback in October 2020 through Milestone Games, but by then the ownership structure had been fundamentally altered. The court battle over SportPesa’s key assets, including trademarks and web domains, continues to rage in Kenyan courts even as the London judgment closes one chapter of this corporate saga.

For Ndung’u, the London ruling represents a devastating blow. His quest to restore his original 17 percent stake, rectify the share register, and claim damages for financial losses and wrongful dismissal as a director has ended in comprehensive defeat. The court ordered no remedies, finding he had failed to prove unfair prejudice in his capacity as a shareholder.

The case serves as a cautionary tale about the importance of maintaining proper communication channels with companies in which one holds shares. A single misdirected letter, whether by accident or design, proved sufficient to trigger a cascade of events that cost Ndung’u hundreds of millions of shillings in shareholding value.

As Kenyans continue placing an average 274.37 million shillings in daily bets, winning just 87.83 million back according to recent government figures, the bitter irony is not lost. While ordinary punters gamble on uncertain outcomes, one of SportPesa’s original stakeholders lost his own high stakes gamble in a London courtroom, outfoxed by a wrong address and what the court termed inadvertent corporate housekeeping.