Such is the magnitude of the allegations made in the US against Zia Chishti, CEO of TRG Pakistan, that its aftershocks have been felt halfway across the world. The share price of the company, listed on the Pakistan Stock Exchange (PSX) and in which he holds 15.3% voting interest, has plunged 14.4% in two days since. This is the maximum the price could have gone down in two days.

On Tuesday, a 23-year-old former employee of Afiniti – a US company that still accounts for 57% of TRG Pakistan’s value and is also founded by Chishti – detailed a string of allegations against the chief executive to members of Congress in the US, according to The New York Times.

Tatiana Spottiswoode accused him of sexual assault during testimony to a hearing into how forced arbitration clauses signed with companies have been used to prevent survivors of sexual harassment and sexual violence from pursuing cases through the courts.

Chishti denies the accusations.

However, that has not stopped investors from dumping his Pakistan company’s share as the price hit the lower limit for the second successive day on November 18.

The company's share price was at Rs130.45 at close on November 16 (Tuesday), the day when the KSE-100, a benchmark for market performance, also gained a sharp 1.8%.

However, after the accusations, the share price has plummeted over the course of two sessions. It closed at Rs111.62 on Thursday, a fall of over 14%.

In its notice to the PSX, TRG Pakistan said on Thursday that “it has come to the attention of the company that there are various articles being circulated in the electronic media in relation to the CEO, which is potentially affecting the market price”.

“While we understand that the CEO of the Company strongly disputes the accusations levelled against him, the matter involves the laws and procedures of a foreign jurisdiction and not of Pakistan.

“As such, as and when the company is made aware of any material development on the matter, the shareholders shall be informed accordingly.”

Multiple traders Business Recorder reached out to said the price could still go lower as off-market transactions that took place on Thursday suggested a difference of 15-20%, indicating high willingness on part of sellers to get rid of the stock. Data revealed broker-to-broker transactions of as low as Rs89 were conducted on November 18.

During normal trading, however, TRG Pakistan hit its second successive lower limit at a volume of 340,413. In comparison, 9.2 million shares were traded on Tuesday, when TRG Pakistan rose, followed by 15.97 million when the allegations first surfaced. As news spread, Thursday saw a meagre volume of less than half-a-million as investors dumped, but faced an unwillingness to buy.

Karachi-based KASB Securities, in a note, said it was “suspending coverage of TRG Pakistan until there was more clarity on governance”.

“These are very serious allegations,” it said. “In recent years, many influential and powerful people … have had to leave their roles.

“Given the severity of this issue, we are suspending our recommendation and price target on the stock, until there is greater clarity.

“Issues such as these also highlight why corporate governance is so important.”

The note added that after Thursday’s decline in the share price, Afiniti still accounts for 57% of TRG Pakistan’s value.

Ismail Iqbal Securities said it was too premature to comment with any degree of confidence on how these allegations will impact Afiniti.

“It looks likely that the potential fallout of this episode will not remain restricted to the founder," said the brokerage house in a note.

"David Cameron (ex-prime minister of UK), who was the chairman of Afiniti’s Advisory board, has already announced his resignation and parted ways with the company. More high profile names might follow his lead. It is also unclear how these allegations will impact Afiniti’s current and future revenue. A possible Afiniti listing can also be derailed for some time.”

Names on the high-profile Afiniti’s board of directors, where Chishti is chairman, include president of Verizon and the 73rd US Treasury Secretary.

Allegations and denial

Zia Chishti was accused of sexual harassment by Tatiana Spottiswoode, reported The New York Times on November 16.

Natalie Cerny, a spokeswoman for Afiniti, said “Zia Chishti strongly disputes all accusations against him”.

Spottiswoode was among one of the witnesses, which included former employees of broadcaster CBS and luxury giant LVMH, who shared experiences they said they had been required to keep quiet because they had signed contracts with “forced arbitration” clauses, added The New York Times.

The testimony, which implicated executives at the companies, came as the House Judiciary Committee was considering legislation that would abolish forced arbitration for victims of sexual assault and harassment, said the report.

The witnesses were all women who worked in different fields and described a range of experiences of misconduct, from verbal harassment to outright assault.

This article was first published on Nov 19 2021 in Business Recorder.