SHOCKED Steinhoff shareholders have wiped more than $12bn (R151bn) off its value since it revealed “accounting irregularities” and parted ways with its chief executive, in a dramatic fall from grace for the South African retailer.
Once a must-have for investors who backed its reinvention as a retail empire, including brands such as Mattress Firm and Poundland under veteran CEO Markus Jooste, Steinhoff shares fell by 43%, compounding the previous losses of more than a 60% fall.
This collapse leaves South African tycoon Christoffel Wiese, Steinhoff’s biggest shareholder and chairperson, seriously out of pocket, eroding more than about $2.8bn of his net worth.
It also prompted an urgent call by Finance Minister Malusi Gigaba for pension fund managers to report back on their exposures to the sudden sell-off, saying that the accounting issue was a “grave concern”. Deputy President Cyril Ramaphosa said the Steinhoff scandal was “catastrophic”.
“What is catastrophic is that it destroys trust, it destroys confidence in the corporate sector,” Ramaphosa said. The Public Investment Corporation (PIC), the retailer’s second-largest shareholder, said the allegations against Steinhoff were “serious concerns”.
The PIC, which manages civil servants’ pension funds, said in a statement it holds around 10% of Steinhoff’s stock. The shares closed down 43% at R10 before the Christmas break last week and were down more than 40% in Frankfurt, where it has had its primary listing since 2015.
Steinhoff has responded by putting 76-year-old Wiese, one of the most respected business leaders in South Africa, in charge for now and calling in PwC to investigate the accounting problems, while also seeking to reassure investors by saying it has enough liquidity to fund its existing operations.
Wiese, who describes himself as a “realist, pragmatist”, was one of the early executives of budget clothing retailer Pepkor, which was co-founded by his parents in the 1960s in Upington on the southern edges of the Kalahari desert. Steinhoff has been on shopping sprees since 2011 when it took over French furniture retailer Conforama.
Last year’s string of acquisitions included Mattress Firm and Poundland, thrusting it firmly on to investors’ radar screens. “Whether Steinhoff’s zealous expansion tactics amount to a winning or losing strategy really does depend on the outcome of the investigation,” Erika Sirimanne, Head of Home and Garden Research, Euromonitor International said.
Steinhoff has been under investigation for suspected accounting irregularities by the state prosecutor in Oldenburg, Germany since 2015. Four current and former managers are under suspicion of having overstated revenues at subsidiaries, German prosecutors said this week. Steinhoff has previously said that move related to whether revenues were booked properly, and whether taxable profit was correctly declared.