By Loni Prinsloo, Janice Kew and Renee Bonorchis, Bloomberg News
11 October 2018
Steinhoff International Holdings NV’s former Chief Executive Officer Markus Jooste advised friends to sell the South African retailer’s shares days before the stock collapsed, according to a mobile phone text message seen by Bloomberg.
The message, sent around Nov. 30 to at least two people, told recipients there was impending, unspecified bad news coming. At the time, Steinhoff was in discussions with Deloitte LLP about the viability of its accounts. On Dec. 5, the company said it had uncovered accounting irregularities and that Jooste had quit, causing the shares to plunge 63 percent in a single session.
South Africa’s financial regulator has been made aware of the message, two people familiar with the situation said, asking not to be identified.
Jooste didn’t respond to a phone call and message seeking comment. Callie Albertyn, a lawyer for the former Steinhoff CEO, didn’t respond to emailed requests for comment. Steinhoff declined to comment.
“The Financial Sector Conduct Authority is conducting comprehensive investigations into possible market abuse offenses regarding Steinhoff International Holdings NV,” Solly Keetse, head of market abuse, said in an emailed statement on Wednesday. “All information regarding these investigations are confidential. The investigations are ongoing.”
Speaking to lawmakers in Cape Town last month, Jooste, 57, said he wasn’t aware of any financial irregularities on the day he resigned. He instead blamed the crisis on a protracted dispute with Austrian business partner Andreas Seifert, which triggered investigations into Steinhoff by European regulators and tax authorities, which are ongoing. Steinhoff largely settled the impasse with Seifert by selling half its German furniture chain POCO to Seifert, who had filed lawsuits against the retailer in three countries.
Steinhoff’s shares have lost more than 95 percent since December, and the owner of Conforama in France and Poundland in the U.K. has restructured about 10 billion euros ($11.5 billion) of debt to stave off collapse. Last week, the company’s U.S. bedding chain Mattress Firm filed for bankruptcy and announced a plan to close as many as 700 stores, the culmination of financial difficulties that predate the Steinhoff crisis.
115 Percent Premium
Jooste referred to trouble with Steinhoff’s business in the U.S. in his text message. Steinhoff expanded there with the purchase of Mattress Firm for $3.8 billion in 2016, a 115 percent premium, part of an aggressive expansion plan overseen by the ex-CEO.
It’s not clear whether anyone who got the text acted on its contents. On Nov. 30, 14.4 million shares changed hands, compared with a 15-day simple moving average of 13.9 million in 2017 up until Dec. 6. The figure soared to 33.4 million shares on Dec. 5, just before the irregularities were announced, but by then Deloitte had refused to sign off on Steinhoff’s accounts and this had been disclosed to the market.
South Africa’s FSCA is investigating Steinhoff share movements last year for possible insider trading. Steinhoff hasn’t commented on that probe.
In the hours before Steinhoff’s shock announcement, Jooste wrote other messages to some former colleagues and friends asking for forgiveness for his role in the scandal and named four fellow executives that he said had nothing to do with any of his mistakes, said a third person, who declined to be identified.
When asked in the South African parliamentary hearing what mistakes he was referring to, Jooste highlighted the 2007 decision to partner with Seifert. That move “cost the company since 2015 all the drama that it went through, the fights, the financial losses and also that lead to this perception of accounting irregularities,” he told the lawmakers.
Steinhoff has hired auditors at PwC to probe its accounts, and unpublished findings from the ongoing investigation has prompted the company to report Jooste to a South African police unit known as the Hawks, although the law enforcement agency says it doesn’t have enough information to pursue a case.
The company is also being sued by investors including billionaire ex-Chairman Christo Wiese, and is being investigated by regulators in Europe and South Africa. Steinhoff has acknowledged the lawsuits and investigations.