Just four weeks into the new year and the Steinhoff share price has already almost doubled.
It is the strongest and most sustained run in the share price since the group’s implosion a little over three years ago; an implosion that saw the share price plunge from around R56 in late November 2017 to a mere R5 a month later.
It will be of little comfort to those who suffered in the R200 billion-plus value wipeout to know that the current R2.10 is the strongest it’s been since early 2019. In January that year it edged above R2, but only briefly.
Which way the share price will go from here is anyone’s guess, but it’s significant that it has held above R2 despite some relatively heavy selling midway through January. The only certainty is that it will never return to anything like its previous inflated levels.
The share’s performance has little to do with the performance of its underlying businesses; many would reckon this is as it’s always been with Steinhoff – a share price previously pumped with the hot air of exaggerated promises from mergers and acquisitions.
Currently investors are looking closely for signs of progress with the board’s long drawn-out battle to avoid liquidation while occasionally glancing at the operations.
A key part of the battle against liquidation is the proposed global settlement with the multiple parties that have launched billions of rands of legal claims against Steinhoff. The claims poured in after Steinhoff admitted it had overstated its financial position by more than R100 billion in the years leading up to the December 2017 implosion.
In 2020 the Steinhoff board announced a proposed block settlement valued at a combined $1 billion, comprising cash and Pepkor shares. However shortly after that announcement US-registered company Conservatorium entered the fray, lodging legal action against the proposed R9.5 billion payout to Christo Wiese-related entities. Conservatorium claims it is the legal successor to a group of financial institutions that had extended funds to Wiese to enable him to acquire the Steinhoff shares underpinning his R59 billion claim against Steinhoff.
Conservatorium contends the bulk of the money is now due to it and not the Wiese-entities.
Conservatorium’s battle over the proposed settlement, which is far from resolved, is considered the greatest risk to an orderly liquidation-free resolution to Steinhoff’s troubles.
Meanwhile investors seem to have taken heart from the group’s recent announcement that it had resumed the “evaluation process” that would determine the strategic future of Europe-based Pepco Group.
In November 2019 Steinhoff said Pepco’s options included a potential public listing; however, subsequent Covid-related issues put the process on hold.
In a Sens statement issued earlier this week the group said: “The evaluation process has now resumed, with a range of strategic options under consideration. The process remains in its early stages and no definitive decision has been taken with respect to any specific course of action or timing at this point.”
Pepco, whose brands include Pepco, Poundland and Dealz, has 2 800 stores in 14 European countries. A trading update released on Wednesday stated that the group “continued to trade resiliently and to make strong progress in the first quarter [to December 2020] despite the impact of significant Covid-related lockdown restrictions on consumer behaviour impacting many key operating territories”.
An issue unlikely to have affected the Steinhoff share price was the announcement that former Pepkor chair Jayendra Naidoo, a once-close ally of Wiese, was resigning from the board with effect from February 1. Naidoo, who had received funding for his investment firm Lancaster 101 from the Public Investment Corporation, had been Pepkor’s chair since September 2017 until his resignation at the end of November 2020. Lancaster currently owns 8.4% of Pepkor.
In November Naidoo explained: “Given the current state of litigation involving Pepkor’s major shareholder and a company related to myself, I believe it is appropriate for the next term of three years that the company is led by an independent chairman.” At the time it seemed Naidoo, who had launched legal action against Steinhoff in 2019, planned to remain on as a Pepkor non-executive director.
This week, in its Sens announcement informing shareholders of Naidoo’s resignation from Pepkor, the board repeated Naidoo’s earlier explanation. It said Naidoo stated the reason for his resignation was that litigation between himself and Steinhoff, which holds 70% of Pepkor, which had made his role as a board member untenable. One of the few analysts who’ve continued to watch Steinhoff says his latest move suggests there may have been ongoing tension between Naidoo and his board colleagues.
Naidoo’s resignation comes just weeks after Wiese’s son Jacob informed Pepkor that he would retire from the Pepkor board on March 10.
Naidoo’s departure means the Pepkor board is now dominated by directors with long-term relationships with Pepkor and Steinhoff. Fagmeedah Petersen-Cook who was appointed in April 2018 and Wendy Luhabe, appointed January 2019, are the only two directors without long-term ties with Pepkor and/or Steinhoff.
A spokesman for Pepkor told Moneyweb this week that Naidoo’s departure “is not expected to have a material impact on Pepkor’s B-BBEE contributor level”.
And as though to prove just how complicated and multi-faceted the long-running Steinhoff saga is, on Wednesday the former owners and management of Tekkie Town issued a press statement in which they made passing reference to Naidoo’s resignation.
“It is not immediately clear why it took Naidoo three years and R5.8 million in directors’ fees to come to the realisation that his legal advance on Pepkor’s parent company is a significant conflict of interest.”
Tekkie Town battle
However the main purpose of the statement from the former Tekkie Town executives was to provide an update on its prolonged battle with Steinhoff and Pepkor, which had assumed control of the Tekkie Town business.
“Duped into swapping their equity in a highly profitable, cash-generative business for shares in Steinhoff in 2016, the Tekkie Town team has marched slowly and steadily towards their day in court,” said the statement. Their continued focus, says the statement, is to restore their controlling interest in a business they built, one store at a time. That business was injected into Pepkor ahead of its separate listing, as Steinhoff Africa Retail, on the JSE in October 2017.
Last year the Supreme Court of Appeal overturned a high court order in Tekkie Town’s favour that banned Steinhoff and Pepkor from selling or even issuing shares in the Tekkie Town chain. The SCA said the Tekkie Town team had failed to prove fraud by former Steinhoff CEO Markus Jooste.
This week former CEO Bernard Mostert said that his Tekkie Town team has now successfully joined Pepkor to their legal proceedings and is set to claim restitution and further damages directly against Pepkor.
“On Wednesday, the honourable Justice Lee Bozalek ruled that the Tekkie Town claimants have 20 days in which to amend their restitution and unjustified enrichment claim against Pepkor and its subsidiaries.”
However Pepkor described the statement issued by the former Tekkie Town executives as “scurrilous and inaccurate” and urged the media to treat it with extreme caution “as it is written to deliberately muddy the facts”.
Pepkor said that Justice Bozalek’s ruling was in favour of Pepkor. “The ruling states that the ex-owners of Tekkie Town failed to make out a factual or legal basis for their case against Pepkor. Pepkor is a separate legal entity and as such, cannot be held accountable for the alleged irregularities that happened at Steinhoff.”
However Mostert noted that the judge had not dismissed the case entirely as requested by Pepkor. “If he allegedly found that there was no case and if indeed they won, then why would he not have dismissed the case. Instead he said we have 20 days to amend our claim, which we will now do.”
And so the Steinhoff saga looks set to drag on even as the share price picks up.