Capitec 'not worried' about its shares
Bank says short positions are normal and don't necessarily originate from Viceroy report
The number of shares sold short in Capitec has remained the same, proving resistant to the bank’s detailed responses to Viceroy Research’s allegations that its books were not in order and that setting them right would require that the Reserve Bank place it under curatorship.
By Friday morning, between 1% and just under 5% of Capitec’s 115.6-million issued shares were out on loan to investors who then sold them on, betting on a plunge in the bank’s share price. At the top end of this range the short positions were worth R4.8bn at Friday’s market prices.
Capitec financial director André du Plessis said the short positions were normal and did not necessarily originate from Viceroy’s report.
“Most companies have short investors, always or at least at some points in time, without a Viceroy report on them,” he said.
“Short positions can be taken at any moment and will always be present in the market. People differ in their outlook on the future and [on] market players.”
Juan Breytenbach, a trader at Capilis Asset Managers in Johannesburg, said not every market participant buys shares in the hope that they will increase in value, or shorts them betting they will lose value.“You get guys in hedge funds who trade pairs – so, long FirstRand and short Nedbank for example – and they are playing the spread between the two shares,” he said.
“So irrespective of what happens to the market or currency they are effectively market-neutral and they run their own strategies on that.”
Market-neutral strategies are usually found in equity long-short funds, which aim to deliver returns from good stock selections while minimising losses from bad bets.
Breytenbach said the short position in Capitec could be due to people who had bought (or were long) PSG shares and were bullish on its prospects; and short Capitec due to factors such as market risk.On Thursday evening, Capitec released what it said was its last statement on the Viceroy matter, which mainly placed all of its responses to the Viceroy report, a letter from Benguela Global Fund Managers questioning its rescheduling practices, and a letter from Viceroy to the Reserve Bank motivating for Capitec to be placed under curatorship.
Benguela chief investment officer Zwelakhe Mnguni has expressed satisfaction with Capitec’s explanations, while the Reserve Bank has not responded to Viceroy’s letter questioning its “support” of the bank based on the financial statements.
Viceroy has promised a further letter responding to Capitec’s explanations. Its analysts did not respond to Business Day’s questions on the timing of the second letter, as well as whether it was still shorting Capitec given the bank’s detailed responses.
The bank is not too worried.
“We speak to many portfolio managers, private individuals and analysts about Capitec,” said Du Plessis. “Most of these support the business model and principles, and would therefore invest in us. Some may, however, be short sellers. Our job is to explain and share the company fundamentals and opportunities. From that, the investors will make their decisions.
“Some analysts are well regarded in the market, so if investors value their opinions, they will take it into consideration in their investment decisions. If investors still regard Viceroy, after Capitec refuted their opinions and exposed their misleading and wrong conclusions, they might short us as a result.”