More probes into embattled Steinhoff as shares continue partial recovery
Steinhoff’s share price gained another 26% to close at R11.76 on Tuesday even as more investigations into alleged fraud at the embattled global retailer were launched.
The Department of Trade and Industry and the Companies and Intellectual Property Commission said they would investigate whether Steinhoff had breached the Companies Act "and regulations".
The retailer’s shares plummeted to R6 last week after CEO Markus Jooste resigned when Steinhoff delayed the release of its financial statements due to "accounting irregularities".
On Monday, the stock rose 56%, albeit off a low base.
Shaun Murison, senior market analyst at IG, said this "might provide some evidence of a market that is reassured by the [newly appointed board] subcommittee’s ability to restore better corporate governance".
"However the real test will be about the team’s ability to secure support and confidence from lenders to ensure help in maintaining operational liquidity."
Vestact said in a note to clients that the mini recovery in Steinhoff’s share price on Tuesday came as the European Central Bank reported that it had held on to its Steinhoff bonds despite them being downgraded to junk status by Moody’s.
Ashburton Investments portfolio manager Wayne McCurrie said "the share price can do anything — it can double or halve until we get more information out of the company".
Until that time, the stock would remain volatile as short positions were closed or as investors tried to buy at the bottom, for instance. The market was waiting for information about Steinhoff’s liquidity position and about whether the accounting issue involved inflated asset values or inflated profits. The latter would be "far more dangerous" given that share prices are evaluated relative to earnings.
"You can’t make a substantiated evaluation of what the share’s actually worth. It could be worth R20 or R30 or zero."
McCurrie said if Steinhoff did not raise sufficient liquidity, the underlying businesses could be crippled as they would not be able to pay their bills and would find themselves in a debt spiral.
Meanwhile, PSG Group on Tuesday distanced its founder and chairman, Jannie Mouton, from partial shareholder Steinhoff. PSG’s stock extended losses on Tuesday as Reuters reported that Steinhoff was considering selling stakes in PSG and KAP Industrial to shore up liquidity. Steinhoff holds 25.5% of PSG’s shares.
After reaching R297.03 a week before, PSG’s share price closed at R242.30 on Tuesday, despite the group publishing two separate statements in recent days assuring investors of its independence from Steinhoff. In response to "misleading reports", PSG said on Tuesday Mouton had sold all of his shares in Steinhoff after stepping down as a nonexecutive director of the company in May 2016.
The entity through which Mouton held his stake in the retailer had disposed of its 7-million shares by June 2017, and the proceeds were used to settle debt and to fund the Jannie Mouton Foundation.
PSG said in a separate announcement on Friday last week that "Steinhoff exercises no operational or investment control over PSG Group whatsoever". The two companies also had no interrelated transactions or ventures.