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Four questions that Viceroy hasn’t answered

What it doesn’t say in its response to the Intellidex report.

The Intellidex report on activist short selling in general and Viceroy Research in particular raised some serious questions about both the quality and the source of Viceroy’s research. Neither of these are new concerns, but they have not been explored as thoroughly as they were by Intellidex.

The report makes the point that: “Prior to Viceroy’s research report on Steinhoff, its research received little media attention internationally. The Steinhoff report, however, received significant coverage and thereafter there was extensive mention of Viceroy in the media.”

This is important because Intellidex argues that Viceroy’s reputation was built on research that was, in fact, ‘substantially plagiarised’ from somewhere else. The firm’s report on Steinhoff bears striking similarities to a report released by hedge fund manager Portsea Asset Management six months earlier.

This calls Viceroy’s credibility as a whole into question. Particularly since, as Intellidex argues: “Viceroy’s quality of research, which was already patchy, appears to us to have deteriorated after the Steinhoff report”.

It is therefore not surprising that Viceroy responded sharply to the Intellidex report. On Twitter, Viceroy’s head of research, Fraser Perring, called it “shockingly poor report writing” and “an unfortunate failed smear piece”.

Viceroy also released a statement in which it argued that Intellidex did “not disprove any of our published work”.

Viceroy’s response did not however answer four important questions:

1. Was the Steinhoff report plagiarised?

This is one of the key findings of the Intellidex research. Viceroy does not however rebut it.

Its response notes that it receives “significant amounts of anonymous data” and it incorporates “independently verifiable data” into its reports, and this was the case with Steinhoff. However, it does not explain why it claimed that the data that came from Portsea was its own, or why there is no acknowledgement of Portsea anywhere in the report.

2. Who is actually conducting its research?

Intellidex notes that some of Viceroy’s research is too technical or scientific to conceivably have been conducted by the three individuals in the firm alone. Its output is also too prolific to come from a single, small team.

Viceroy argued in response that it “has a network of industry consultants which are utilized on a case-by-case basis under strict non-disclosure agreements”.

However, while it is common for the industry to use outside specialists, Intellidex points out that it is “not commonplace to then use this work without attribution or any description of the expertise that contributed to the report”, as Viceroy has done. The firm fails to explain why it avoids doing so.

3. What is Viceroy’s business model?

A key concern that Viceroy has to answer is how it makes enough money to afford the costs of its research. It states that its work is “funded internally”, but doesn’t explain what that means.

Does it have a huge balance sheet thanks to the largesse of a mysterious benefactor, or is it making money somehow? If so, how?

Intellidex notes that Viceroy has “never provided details on its business model”, and particularly whether it is rewarded by institutional short sellers if stock prices are affected by its reports. This is obviously critical in understanding its motivations.

4. What is Viceroy’s relationship with regulators?

Intellidex makes the point that, as far as it can tell, Viceroy is not a regulated entity in any jurisdiction.

In its response, however, the firm argued that it “is currently a key witness to regulators internationally. We have never shied away from regulators and are actively assisting them in their pursuit of criminal prosecutions. It is ironic given these circumstances that Intellidex – directly or indirectly – claim that we are somehow hiding away from regulators. We are regulated, as is any other player in financial markets: any assertion otherwise is ridiculous”.

It does not, however, produce any evidence of its regulated status. It is therefore unclear what it means by this.

Perring did not respond to requests from Moneyweb for comment.

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None of this changes the fact that there was something seriously wrong with the Steinhoff set up – fraud and cover up at worst, greed and ego at best. And that normal shareholders were duped in the dark.

No it does not, but that is not what this article is all about. A an ordinary Joe soap I cannot understand why some people are so strongly defending short sellers’ reputations. Or is it ok to shift morals to the side if there is money to be made? Take Steinhoff out of the picture for a moment….an unregulated organisation plagiarise information and use it to gain financial reward through short selling. How can that be acceptable?

Exactly, crucifying Viceroy isn’t going to make any of the pain go away or the money return

”If you steal from one author, it’s plagiarism ;if you steal from many, it’s research”

Wilson Wizner (1876-1933)

So SA Capital is in full force in it’s plan to discredit Viceroy.

The guy’s that can’t tell us why Steinhoff has seen recent surge in share price because they don’t have a clue are discrediting Viceroy.

The guys that can’t control information because they are biased themselves are trying to discredit short-sellers who act on facts most of the time.

There is so much information sharing in the community that the community can overlook plagiarism, it works for all at the very least.

Thing is, you can’t discredit facts and you can’t deface Viceroy. It’s pointless to us those that vote with our money and knowledge/information.

Huh? Who is SA capital? What on gods green earth have they got to do with this? It is a piece published by a journalist, Patrick Cairns that is normally quite critical of the fund management industry – which I guess is part of SA capital.

It is also rubbish that the market never suspected anything was wrong with Steinhoff. There are plenty of fund managers who refused to touch Steinhoff with a 10 foot barge pole. That is the reason why Steinhoff always traded at a steep discount to its peers.

Did you read the report that the Steinhoff information had been in the public domain for SIX MONTHS before Viceroy released it? Viceroy didn’t come up with the information, they stole it. That doesn’t make the information suspect, it makes them suspect.

Something is fishy in the makeup of Viceroy, the way they do research and how they obtain their information and data. A disbarred social worker (disbarred due to unethical reasons) with two 24year olds with limited financial market experience. And they hit the jackpot with Steinhoff? Sounds to good to be true? Where were they before? There has to be something behind Viceroy.

I have long believed that they are merely a front for a local hedge fund/group of hedge funds that had short positions in Steinhoff and other business targeted by Viceroy.

Your comment is spot on- Benguela, 36one are alleged to be implicated.

Viceroy have been spot on as regards Steinhoff, and Capitec.
Who gives a damn if they have a business model or if they make money on shorting, where shorting is warranted.
Executives hold WAY TOO MUCH POWER – they are the manipulators for long selling, and Viceroy is unseating them for their bulldust.
Seems the business model of most businesses today is reward execs (for their clever manipulation of the organisation for their benefit) and nail the shareholders and employees.
In essence: GREED.
Long live and love Viceroy. Truth is truth. You don’t need a business model.

Ja well no fine, but your quest for the truth and the fight against greed, as you put it, should work both ways, i.e. lets interrogate the Viceroy model also, right ?

How have they been correct about Capitec?

I would also like4 him to give some facts and statistics to back up his wild allegations.

Give it time – we all know deep down that Viceroy is correct about Capitec but are too scared to face the reality just yet…

Agree with you – funny how we still like to shoot the messenger, isn’t it?

I agree, SA’s top 10 CEO’s each get paid a minimum of 2 million rand a month, so for that type of money if they, their Mangement, Board, Accountants, Auditors, cannot have a concise, clean, up to date, set of “books” to satisfy the Market, then let Viceroy keep them honest. Long live the Viceroy’s until these CEO’s start justifying these exorbitant numbers!! The next MJ is just around the corner, but he’ll be thinking twice about it now!

Without Viceroy. The E.U will have helped with more of the stuff called Euro. And Jooste advising us how to run a business. Blowers of a whistler are known for spoiling fun from others. They, blowers, have a motif to. One of them is receiving/making money, so unnatural.

One needs to take the commentary of an organization which generates profits from short selling with a large dollop of suspicion as there is no way one can prove that there is no axe to grind. Unfortunately many would not be aware that Viceroy exists or who they even are, but the first time they would become aware is if the share price suddenly tanks through short selling pressure. It reminds one of the time Sterling came under shorting pressure which nearly sank the currency. Short selling should always be a reportable action!

We must not forget that steinhoff auditor refuse to signed the financial before jooste resigned
Viceroy is just an opportunist

Does that make Steinhoff any less of a mess? Why would Viceroy choose Capitec, for example, before any other huge amount of companies? Do you really think it’s just a random shot in the dark?

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