Short sellers tap into anxiety over Steinhoff
The Steinhoff share price continued its downward spiral on Tuesday, wiping tens of billions of rand off the company’s market capitalisation in heavy trade.
By the close, it was down 9.15% to R45.65, with short sellers believed to be hitting the share ahead of the release of results on Wednesday. According to a Reuters report, a staggering 40% of Steinhoff’s JSElisted shares are out on loan. This is double the August level and the second-highest loan rate of any JSE-listed company.
On Monday, the shares tumbled 10% after Steinhoff announced that its full-year results would not be audited. The announcement, which evidently spooked the market, said Steinhoff’s supervisory board and its auditors had not yet finalised their review of “certain matters and circumstances” that were raised by the criminal and tax investigation in Germany.
The investigation, which relates to allegations of improper arm’s-length valuations at one of the group’s German subsidiaries, has been hanging over the company for a number of years. In August 2017, it was propelled into the spotlight after the release of a detailed article in a leading German business magazine, which alleged that senior executives of the company had been dishonest.
Steinhoff promptly issued a statement rejecting the allegations and saying a source of some of the allegations was a former joint venture partner in litigation with Steinhoff. The August statement said the company had appointed legal and audit firms to investigate the matter independently. At that stage, Steinhoff said the experts had concluded there was no evidence of wrongdoing.
Monday’s announcement that the supervisory board and auditors had not completed their review suggests the situation is a bit more complex than the company would have us believe.
Cigarette giant British American Tobacco (BAT) declared a second interim dividend for the year to endDecember of 43.6p per share. The payout will drop into shareholders’ accounts in February, but the event has more significance than just a windfall.
The second interim payout unofficially kicks off BAT’s new quarterly dividend regime announced earlier in 2017.
The official 2018 dividend schedule pencils in payments in May, August and November 2018 as well as February 2019. Investors on the JSE are not that familiar with quarterly dividend payments, save for the odd real estate counter that followed this distribution regime. Back in the late eighties and early nineties, the old Morkels Retail Group initially managed a quarterly schedule. These days microcap TeleMasters (whose payouts are now fractional) and technology group MiX Telematics are just two JSE stocks that reward shareholders every quarter.
BAT’s decision to adopt quarterly payouts makes sense since the company is a powerful cash generator with a paucity of opportunities in the tobacco sector. Operational diversification — at least while the newgeneration tobacco products are developed and rolled out — also seems unlikely.
There was a time, not too long ago, when BAT hardly went a day without buying back a parcel of own shares. The time may come when share buybacks are again a prudent option, but for now local shareholders can sit back and enjoy regular dividend flows backed by hard currencies and smouldering emerging market growth.