Steinhoff Admit To “Accounting Irregularities”
One of the biggest Top 10 Shares JSE listed companies in South Africa has been hit by a shares collapse to mirror what happened with African Bank back in 2014. Steinhoff has been one of the worlds biggest household goods retailers for around 20 years. Many will know its familiar local brands: Pep stores, Ackermans, Tekkie Town, HiFi Corp, Incredible Connection, Dunns, ShoeCity and Shoprite.
Steinhoff International shares took a nosedive after it finally admitted to “accounting irregularities” this month. This came after speculation that the company had been inflating it’s value and hiding it’s financially distressed position for years. Recently the firm had reported a 48% increase in revenue which had seen some express doubt at such profitability and others rush to acquire shares.
‘a German magazine published an expose on the topic’
Doubts Since 2015
The whole matter was sparked off by a 2015 investigation by German authorities into possible accounting fraud. The matter was blown wide open when a German magazine published an expose on the topic. When Steinhoff’s CEO, Markus Jooste suddenly left the firm (much like what happened at African Bank) a huge warning signal went up to those fast enough to react. The shares value tumble was soon to follow.
Was It Just Another Pyramid Scheme?
Over the years Steinhoff has repeatedly bought out smaller poor performing businesses and tried to turn them around. They have progressively been taking on bigger and bigger loss makers which some say is a way to hide cashflow issues and losses.
Other large firms have, in the past, used similar means to hide financial distress for many years but came crashing down due to whistleblowers. For example, Enron in the USA.
‘its shares plummeted more than 60% in one days’ trading on the JSE’
Some Quick Cash To Try Right The Boat
Steinhoff have announced that they are selling off around R160 Billion worth of non core assets in an effort to increase the firms liquidity. Since the firm recently lost around R100 Billion as its shares plummeted more than 60% in one days’ trading on the JSE this amount is actually the absolute bare minimum needed to keep things even remotely rescuable.