Registered users can save articles to their personal articles list. Login here or sign up here

Faceless men upend SA stocks on fears of Steinhoff 2.0

Viceroy Research spurs panic on which company could be next.

The name is enough to spread mayhem among South African traders. And all Viceroy Research is willing to disclose is that they’re three people working out of New York to protect investors.

Stocks including Africa’s largest generics drugmaker and biggest real estate investment trusts were sent reeling this week on speculation that they were in Viceroy’s sights. More than $3 billion was wiped off the value of property stocks alone in just four days, prompting South African regulators to scrutinize trades to determine whether a formal probe is warranted.

Viceroy became known overnight in South Africa after releasing a damning report detailing oddities in Steinhoff International Holdings NV’s financials a day after the retailer unexpectedly admitted to accounting irregularities. The group only started publishing reports in December 2016, covering five other companies in Australia, Israel and the US, and hasn’t released anything related to the South African market since the Steinhoff analysis.

“There are no faces behind the reports,” said David Shapiro, the deputy chairman of Sasfin Wealth in Johannesburg, who has been trading stocks in the city since 1972. “I’ve been watching markets for ages and have never heard anyone other than South Africa giving credibility to a house that has no face. It’s very sinister. Dark.”

It’s not the first time that Viceroy — which on its website describes itself only as “a group of individuals that see the world differently” — has been caught in the crossfire. Marietta, Georgia-based biotech firm MiMedx Group filed a lawsuit in October to try identify who was behind negative Twitter comments that drove down its share price, citing Viceroy as one of the defendants. The Viceroy Twitter handle leads you to its website, which is hosted by WordPress.com, a low-price site offering blogs and domains.

Q&A with Viceroy

Viceroy sent an emailed response to Bloomberg from a Gmail account on Friday. Here is a summary of some of their answers:

Which city do you operate from? New York.

Is it correct that there are three staff members? Yes and we also use consultants where needed.

What are their names? We are anonymous.

Viceroy has said it keeps names under wraps out of security concerns, but activist shareholders and investigative journalists disclose their details publicly, why doesn’t Viceroy do the same? We prefer to avoid the distraction altogether; our belief is the research should do the talking.

How much money does Viceroy have in assets under management? We do not discuss this.

South African regulators are investigating the role of rumors around Viceroy and subsequent share movements, what’s your comment on this? We welcome any investigation into impropriety. Viceroy does not speculate or gossip about its research, and thus encourage people not to speculate on the identity of any companies we are researching and advise caution in trading on gossip. Viceroy complies with the laws and has not released research or discussed our focus prior to publication.

Did Viceroy set up a short position in Aspen and/or the listed property stocks before the rumours began? We do not set up positions to benefit off rumors, our positions are both long and short are based on our research.

To stop the rumours, could Viceroy not just say which company it’s looking into? That would be unprofessional, as our work is based on thorough analysis and publicly auditable. Naming the company may actually constitute market manipulation as this de-facto opinion would be baseless without our report. The speculation of widespread fraud on the JSE is reflective of a system where regulators are struggling with a lack of funding, allowing bad people to abuse the system, abuse the people and take advantage of underfunding in the government. We are most willing to assist regulators in this regard where we can.

Is Viceroy a registered company? Is it a hedge fund? We maintain our structure confidentially.

If Viceroy is a legitimate business, why does it use WordPress and Gmail? To preserve our anonymity. We are not a marketing machine — we are a small team of professionals, and we use the most efficient tools possible to convey our message securely. This gives us more time to focus on our core work: investigative research.

How much money has Viceroy made by shorting Steinhoff? We will not disclose this figure. Our ethos is protecting consumers, investors and integrity by making sure all the facts are known. We are not only about financial gain — we consulted with analysts in relation to Steinhoff post the release of our report, with all fees paid into South African charities.

Icons toppled

“There is nothing wrong with making money out of shorting stocks,” said Magda Wierzycka, chief executive officer of Sygnia. “However, I am beginning to be concerned that they are now using public relations to generate volatility.”

Revelations that Steinhoff may have cooked its books and the resignation of CEO Markus Jooste and billionaire Chairman  Christo Wiese spooked investors, giving Viceroy more significance than they would’ve normally had, she said.

“There was a huge cult built around Christo Wiese and Markus Jooste,” Wierzycka said. “The icons of South African business have been brought down.”

Nonetheless, Viceroy isn’t the problem, said Jean Pierre Verster, a fund manager at Fairtree Capital. It’s the way people are responding to rumours, with social media only fanning speculation, he said.

“The attention given to Viceroy is disproportionate and is driven by fear and panic after their Steinhoff expose,” Verster said. “Viceroy’s influence is very dependent on their next report. If it is a damp squib, their influence will be much diminished.”
 
© 2018 Bloomberg L.P

COMMENTS   11

To comment, you must be registered and logged in.

LOGIN HERE

Don't have an account?
Sign up for FREE

Out of NY things may look bleak, out of SA this is part of our new abnormal.

Go back to fundamentals. From far afield as SA, the US’s currency looks overvalued and backed up by insufficient fundamentals.

Viceroy is probably the work tasked to it by certain money lenders, who want to buy SA cheaply.

According to Magda W – the self-appointed champion of Ethics SA – she saw through Steinhoff in no time, long before Viceroy did. How about telling us what you know about Resilient, Magda?

Our work is based on thorough analysis and publicly auditable. Naming the company may actually constitute market manipulation as this de-facto opinion would be baseless without our report. The speculation of widespread fraud on the JSE is reflective of a system where regulators are struggling with a lack of funding, allowing bad people to abuse the system….

That answer in a nutshell, along with the inept, toothless S.A regulators (FSB,JSE,NPA) and Auditors who also take no responsibility. Explains the ability of these guys to exploit our market.

>>
Q Did Viceroy set up a short position in Aspen and/or the listed property stocks before the rumours began?
A We do not set up positions to benefit off rumors, our positions are both long and short are based on our research.
<<

So they did take a short position, based on their research.

Thus the answer is actually yes, although given in a highly misleading and evasive way.

Why are people going after the messengers? Would you have shot down the persons unknown that let Gupta emails out the bag??? I suspect a bunch of professionals do not like the message poking holes in what the professionals have been telling their own clients.

Either accept or reject the premise of their research / analysis / queries. Everything else is irrelevant.

If they were a fund manager / investment banker / asset manager performing work for a big fat fee, of course their identities should be known. They charge nobody any fees and owe nobody an explanation.

I get exactly why they choose to stay anonymous. In the hallowed circles of the South African finance industry suburbia, your kids will not get into the right schools if their parent dared make a fool out of a main peanut. I doubt these guys are really in NY in any event. Likely posting from a beach anywhere.

100% correct …. the rules only specify that they cannot manipulate the market , after taking a position using false or misleading information. Its a fine line, but if the market panics
over speculative media reports it opens the door for these guys.

“How much money has Viceroy made by SHORTING Steinhoff”….as if Viceroy are the culprits…..the fraudsters of Steinhoff already fled….keep up the good work Viceroy.

all ze deflections und ze blame shaming…
how short was pic und ze directors( ex-za )?
why are ze auditors not fuckt?
ze system answers ze incorrect queries bru …

Well Jo’anna she runs a country
She runs in Durban and the Transvaal
She makes a few of her people happy oh
She don’t care about the rest at all
She’s got a system they call bee-compliance
It keeps a brother in subjection

I actually welcome the title of this article. It’s better than “Star Fund Managers” telling us what to buy/sell. It shouldn’t matter who tells you about a stock – what matters is that you make up your own mind and ask: “does that makes sense to me”? Also, please look at the charts. They’re so helpful. SA Fund Managers have a habit of bashing the “technicals”. Everything you need to know is in “the price”.

A country’s ethics and economics are only as strong as its leader!

Load All 11 Comments
No more Comments, leave a reply.

LATEST CURRENCIES  

ZAR / USD
ZAR / GBP
ZAR / Euro

Podcasts

GO TO SHOP CART

Follow us:

Search Articles:Advanced Search
Click a Company:
server: 172.17.0.2