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The Tekkie Town tug-of-war continues

But court hands founders a symbolic victory as it restrains Steinhoff from selling or bonding its shares in Tekkie Town.
Pepkor has no intention of disposing of Tekkie Town and plans to open more stores this year. Picture: Bloomberg

The Cape Town High Court has issued an order preventing disgraced global retailer Steinhoff from selling its shares in Tekkie Town, or from using the shares as any form of collateral whatsoever.

Tekkie Town is part of Pepkor, which in turn, is majority owned by Steinhoff.

The former owners and management of Tekkie Town launched the urgent application in the Western Cape High Court last week out of fear that Steinhoff may attempt to sell its shares in Tekkie Town to defray certain of its own expenses.

“This judgment provides a measure of safety for us in our ongoing effort to get our company back,” says former Tekkie Town CEO Bernard Mostert. “Recent revelations and actions by Steinhoff – including an increased velocity in selling assets – suggest to us that Steinhoff’s shareholding in Pepkor itself or the integrity of Pepkor’s controversial shareholding in Tekkie Town may be at risk, be it through attempts to sell the business or efforts to raise debt against the business and its assets,” he says.

In 2017 Tekkie Town was sold to Steinhoff – before Steinhoff unbundled its South African retail assets – in exchange for shares. When Steinhoff collapsed in December that year, following revelations of accounting irregularities, founder Braam Van Huyssteen and others were left holding worthless paper.

Financial gerrymandering

Steinhoff maintains that the transaction was above board. However, a cursory glance at the report released by auditors PwC, following a lengthy forensic investigation, suggests financial gerrymandering of epic proportions. According to the report Steinhoff executives led by Markus Jooste were responsible for adjusting Steinhoff’s actual financial position by about R106 billion.

Steinhoff is yet to publish its long-delayed 2017 audited financials or other restatements that should fully reflect the extent of what the company itself has labelled “non-compliance with laws and regulations, and misappropriations.”

The Tekkie Town founders did not wait for the report, however. They were among the first to institute legal proceedings against Steinhoff NV, having launched a restitution action in the Western Cape High Court in May 2018 seeking the return of their shareholding and, with it, the Tekkie Town business.

“At the same time we approached Steinhoff and Pepkor asking for undertakings that the shares would not be impeded in any way,” says Mostert. “We did not want the shares to be ceded to some other entity in which case our company would move further and further away from us. They batted us away, forcing us to take this step.”

The court has not only restrained Steinhoff from dealing in the shares in any way that might affect the former executives’ claim over the company, but has ruled that Tekkie Town may not issue new shares (which would be dilutive to the former owners). The order holds until such time as the court case referred to above is finalised.

Pepkor unfazed

On the other side, Pepkor management was seemingly unmoved by the judgment. “Today’s interim ruling has no impact on the day-to-day operations of Pepkor,” the company said in a statement. “Similarly, it has absolutely no effect on the operations and stores of the Tekkie Town business.”

Pepkor has no intention of disposing of Tekkie Town. To the contrary, the company says, the plan is to open another 30 stores during this financial year.

“We shall continue to grow the business and make decisions that are in the best interest of Pepkor,” the statement says. “We are confident that the legal process to follow will validate the investment we have made in this business.”

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Why are they not suing the auditors as well? And Pepkor is unfazed by all of this. How is that even possible?

Pepkor is unfazed about it because their executives can hind behind the Steinhoff fraud whilst helping themselves to bail-outs, bonusses and other extravaganzas. The Pepkor top brass launched a suit against Steinhoff (their controlling shareholder) in March and yet NO SENS WHATSOEVER from either party to alert the market to this massive conflict of interest and terrain fraught with danger.

Agree – scandalous – but then, Wiese always gets away with a lot – it is as if the JSE and Regulators are all scared of him!!

Unfortunately the PIC also have a lot to lose so possibly they wish to enable Weise and company so as to protect their fund. Also, Pepkor is an asset with huge bargaining potential. I wouldn’t be surprised to see this sold off as soon as the Trekkie town issue is resolved. If the Trekkie town connections are re imbursed in anyway,this would be good news for ALL shareholders. After all everyone took the same risk when investing in Steinhoff, so we all lose or gain together. No one or no entity should have preference when it comes to settlement.

Markus Jooste followed the business model of the Federal Reserve Bank or any Reserve Bank for that matter. He created assets out of thin air and hid the bad assets on “the balance sheet”. When the governor of a Reserve Bank does this, they call it Modern Monetary Policy. When the CEO of a company does the exact same thing, they call it fraud.

Therefore, either Modern Monetary Policy is a fraud, or Markus Jooste is a saint.

Bad analogy. Steinhoff’s executives knew that they were paying with worthless paper therefore “male fide” intentions which makes the deal reversible.

The Fed also knows they are paying with worthless paper. In the Steinhoff case, the shares were backed by assets and revenue, which did not exist. In the case of Fiat money, the value of the currency is supposed to be backed by assets like gold. Now after the “Nixon shock” there is zero backing for fiat currency. Money is backed by debt. Money is a claim on liability, not a clam on an asset.

Then, the fractional reserve banking system takes it another step further. They take the worthless paper and create ten times more without any deposits as backing to inflate the supply of worthless paper even further. Here we have a monetary system based on bouncing cheques.

How bad is the analogy now after you received a tutorial on MMT?

“Money, Bank Credit and Economic Cycles” – Huerta do Sotho

Surely, ALL claimants (Weise, VEB, Lancaster 101, etc) should be obtaining the same Court Order against Steinhoff and Pepkor.

Secondly, why has no claims been lodged against ALL execs and non execs of Steinhoff board who where members prior to 5 December 2017?

Sue the “bloody” lot …..

Pepkor was unbundled from Steinhoff International and listed on the JSE late last year, just a few months before Steinhoff’s implosion. … Steinhoff bought Tekkie Town in September 2016 and settled the transaction with Steinhoff shares; the chain was later transferred to Pepkor. As Pepkor is no longer linked to Steinhoff, being an independant holding company, the legal arguments in the forthcoming court case will be interesting.( and the judgement and inevitable appeals). I have an idea the only happy guys are going to be the legal eagles.

End of comments.

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