Steinhoff investors will not recoup their losses
• Coronation Fund Managers also says it has sold its ‘remaining position’ in retailer
Investors who lost billions of rand when Steinhoff International’s shares collapsed amid one of SA’s worst accounting scandals have very little chance of recouping their losses, according to one of the country’s largest fund managers.
Excluding Steinhoff Africa Retail (Star), which is in the process of changing its name to Pepkor as its seeks to distance itself from its scandal-hit parent, the businesses are “heavily lossmaking” and “there’s little probability of material upside in the equity once Steinhoff repays its creditors and settles any potential legal claims”, Coronation Fund Managers said.
In a letter to clients seen by Business Day, Kirshni Totaram, global head of institutional business at Coronation, said the company had sold its “remaining position in Steinhoff”, prompted by an adjustment of the investment case to reflect additional information that had come to light since January. The extent of the overstatement of the historical profitability of Steinhoff was far worse than expected, she said.
It is a blow for Steinhoff, which is struggling to stay in business after the accounting scandal wiped out more than 90% of its value. The company has more than 40 local brands in more than 30 countries, according to its website.
On Thursday, a spokesperson for the fund manager referred Business Day to a Bloomberg screen grab revealing that the fund manager had sold off a substantial chunk of its shares, leaving it with 2.62% of the scandal-hit retail group. The company would give no further information.
It is unclear whether the “remaining position” referred only to Steinhoff shares held on behalf of Coronation’s institutional clients or to all of its clients. Business Day was unable to speak to Totaram about the letter. CEO Anton Pillay and chief investment
THE FUND MANAGER HAS SOLD OFF A SUBSTANTIAL CHUNK OF ITS SHARES
officer Karl Leinberger did not respond to requests for comment on Thursday.
Coronation, which had one of the largest institutional exposures to Steinhoff, lost an estimated R14bn in the months after the December disclosure of “accounting irregularities”.
In January, Leinberger wrote a detailed account of why Coronation had built up a hefty investment in Steinhoff. At that stage he wrote that stakeholders were in an information vacuum.
He said possible outcomes ranged from best-case scenario of tax evasion and inadequate disclosure of related-party transactions to a worst-case scenario of sophisticated fraud orchestrated by the CEO.
“The stock could just as easily be worth more than the current market price as it could be less. At current prices, we are therefore likely to retain our equity holding in the company until more information has been made available publicly,” wrote Leinberger.
At that stage the share price had already slid to about R7. On Thursday it closed at R1.26.
Totaram told clients this week that the decision to sell would not prevent them from participating in any group legal action against Steinhoff.
“It is our intention to take appropriate legal action against Steinhoff on behalf of all clients who wish us to do so, and to the extent legally possible, against any other parties that were complicit in any wrongdoing.” The information that contributed to Coronation’s reassessment of its Steinhoff exposure included Christo Wiese’s decision to sue the company for about R59bn.
“The sale of 6% of Steinhoff’s stake in Star through an accelerated book build for a consideration far below our assessment of fair value” had contributed to the reassessment, she said
This week the Steinhoff crisis spread wider as Dutch shareholder association VEB announced it had issued summons against Deloitte for its audit work at Steinhoff.