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Viceroy targets Nepi Rockcastle

This is the second time this year that warning flags have been raised on the property company.
Nepi Rockcastle owns and manages a portfolio of retail properties in a number of Eastern European countries, including Poland. Picture: Shutterstock.

JSE-listed Nepi Rockcastle fell 14% on Wednesday following the publication of a research report by short-seller Viceroy, which alleges among other things, that the management has enriched itself through merger and acquisition activity, that international earnings are irreconcilable, and that an established financial fraud has taken place.

This is the second time that a warning flag has been waved about accounting practices at Nepi. In February two reports found their way into the public domain, one by independent sell-side research house Arqaam Capital, the other by 36One Asset Management, which questioned why the Resilient Group of companies has such a high premium to net asset value.

While Nepi is an independent company listed on the JSE and Euronext Amsterday, its shareholders include Resilient Reit with 13% and Fortress Reit with 24%.  

Nepi, Resilient and Fortress

Cy Jacobs, director of 36One, noted on Twitter that the company was still in the process of analysing the Viceroy Report on Nepi. “Our initial view is that the report is compelling as the conclusions drawn appear to be justified. The report echoes the concerns we had and continue to have about the entire Resilient Group.”

In a statement released on Wednesday at 3.15pm, Nepi management noted that Viceroy had not approached the company for comment and thus they had not been able to respond to the allegations prior to the release of the Viceroy report.

The company added that the report is based on numerous factual errors, misleading information, and false claims; and that it is considering taking measures to hold any parties accountable for presenting misleading information.

While every asset manager will now be asking questions, ripples will be felt immediately across the property sector. As Ian Stiglingh pointed out in an article on Sharenet Nepi Rockcastle (NRP) is one of the largest constituents in the FTSE/JSE SA Listed Property Index, with a 13.70% weight in the index.

“Passive funds tracking the index are also being impacted. Looking at end of September holdings data: Sygnia’s Listed Property Index holds 13.10% NRP while the Satrix Property ETF has 9.48% exposure to NRP. Satrix has a 10% cap on the weight of each underlying share and this clearly benefits the fund by keeping the concentration of its positions in any single share to a palatable weight.”

More to follow.



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If the allegations ‘among other things, that the management has enriched itself through merger and acquisition activity, that international earnings are irreconcilable, and that an established financial fraud has taken place’, then does that make the sponsor liable for fraud as well??

When writing a damning report, be factually correct, or otherwise run the risk of being a false witness yourself. Viceroy’s words “believe”, “believes” and “belief” appear > 40x in report, and “assume” 5x. Can one conclusively infer/deduce what Viceroy states as “fact”? No, you can’t. Asking for a Logic 101 friend.

Please investigate whether Viceroy was paid by other short sellers to publish its report.

Viceroy’s report (pp. 14-17) on Nepi & ROC merger: Does Viceroy not know this was a paper deal, subject to a scheme of arrangement, approved by a court, etc.? Yes, ROC traded > NAV, so goodwill arose. But Nepi traded at larger premium to its NAV. Focusing on only one side of deal is (euphemistically put) not clever. Viceroy is completely wrong about this. These pages (14-17) of the report is plain garbage.

Viceroy did not ask NRP to show consolidation accounts for its Romanian subsidiaries. This allows Viceroy to go short prior to the publication of its report. Viceroy’s obvious bias is plain for anyone with eyes to see.

NRP can consolidate its subsidiaries to satisfaction of auditors, but sadly, Viceroy can’t. Why MUST it follow that Viceroy is correct – so much so that it can made numerous allegations? Viceroy even admits (p.8) it hasn’t got all subsidiaries’ accounts, so it CAN’T possibly complete the consolidation? The arrogance of Viceroy to then blithely assume foul play is astounding.

While carefully worded, it appears Viceroy accepts the valuations of Cushman & Wakefield. Make up your own mind what Viceroy writes on the bottom of p. 8. IF you accept the valuation of C&W, then you implicitly ACCEPT the cash flow projections used in valuation. You do. (Except of course Viceroy.)

Enough said. If numerous allegations made by Viceroy are proven to be false, then surely the least one can expect is a very public apology by Viceroy. We’ll see. To me it should be clear to impartial observers that reports by various short sellers contain not incontrovertible facts, but at best suspicions, questions – and many logical errors.

If one considers the continuous mess at Resilient, the Report om Nepi RC as a bed-partner do not surprise at all.

What mess exactly Fransie? Hearsay, short-seller reports with a vested interest. Short sellers are seriously crossing the line here, but JSE, FSCA, etc are useless in regulating this free-for-all short selling frenzy. JSE is captured by short sellers.

I don’t think Viceroy is credible enough to be taken this serious

still waiting for Capitec to sue them….or is Viceroy correct.

Here’s my two cents’ worth on this issue: fark Viceroy.

I hope Capitec can sue their arses.

Just a side question: what is the FCSA/SARB/JSE doing with Viceroy and their efforts to destroy SA companies with inaccurate and badly-researched reports?

My friend has just walked off for another finger. I think his theory is seriously far fetched…

You have my attention. Tell me more.

So who looks the fool here? Cy Jacobs, Warren Thomson (Warren Thompson
Warren Thompson
Nov 28
#NEPIROCKCASTLE falls 14% intraday following publication of the
report which on my first reading looks very balanced and credible. More to follow.

Mergence Brad, Viceroy, 36One, Visio, Laurium, The Greg?

Just asking for my weird friend who has wondered off again to harvest some goodies. I still think he is barking upnthe wrong tree.

Quoting Cy Jacobs, the shadiest market manipulator, does no credit to moneyweb. Remember when it was a serious business news platform.

Viceroy has not been doing well lately with their shortselling business, disguised as investing, and overt manipulation of markets through questionable and often ‘leaked’ analysis. Their latest venture with a smallish USA company resulted in massive losses.( They shorted at $10 after disseminating negative reports, but the co. has strengthened to $30. The only real success they had was Steinhoff, and the analysis was not theirs but was purloined from a Jersey company.One would think that they have learned their lesson after the Capitec fiasco.

not a fiasco at all..Capitec and Nepi fell…they could have closed their positions within the day the reports were publisehd

I have taken the trouble to actually read the allegations and Nepi’s response to them. It should be clear to somebody with first year accounting that most of Viceroy’s allegations are the result of having no understanding of basic accounting principles like the difference between IFRS and Romanian GAAP, the impact of deferred taxes and accounting for M&A transactions. More shockingly the “analysts” at Viceroy have no understanding of the concept of consolidation. You cannot simply add together financial statements of a holding company, subsidiaries that it controls outright and companies that it has non-controlling stakes in, disregard differences in accounting standards and intergroup transactions and expect it to add up.

I am not saying that there are nothing wrong at Nepi – I do not know the company well enough to express an opinion. The “research” of Viceroy is however a load of twaddle and it does not say much for the SA market that it is moved by such rubbish.

The most insightful paragraph is the one where Viceroy denies that it has any relantionship with 36one – just puzzling that Cy Jacobs and 36one – prominent short sellers in the SA market – pipes up every time Viceroy release a report

Yet Cy labelled the report as “Our initial view is that the report is compelling as the conclusions drawn appear to be justified”. You serious???

And Moneyweb obviously didn’t like my completely harmless, weed smoking friend’s far-fetched conspiracy theory about Viceroy, 36One, Mergence, Laurium, Visio and some Greg guy – deleted the post. My friend is a bit delusional and I think it is a crazy theory. Anyway.

I have also heard the rumour that Viceroy is merely a front for some local hedgies. Problem is even if it could be proved that is the case it is probably still not illegal. Fund managers often publish their views on companies, but long only guys have to disclose their holdings so one can see if they are merely talking to their book. JSE apparently looking to publicly disclose short sellers, cannot come soon enough to my mind then it should be clear to all and sundry that it is the same group that goes short before one of these hit pieces goes out.

PS Not sure if Visio would be involved – Steinhoff was their biggest holding, their performance completely tanked due to that one

End of comments.





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