THE BOTTOM LINE
Do you feel a twinge of pity for Steinhoff Retail Africa execs?
An asset that must have seemed as good as money in the bank has gone up in a puff of accounting smoke
It is difficult, but not impossible, to feel sorry for the guys at Steinhoff Retail Africa (Star) especially the 44 or so executives who, only a year ago, looked to be onto a winner with their investment in Business Ventures Investments (BVI).
If former Steinhoff CEO Markus Jooste had managed to delay what now seems like the inevitable collapse of Steinhoff by just 12 months these executives would have had the opportunity to take up all the Steinhoff shares held in BVI on their behalf, pay off the accompanying debt and run. All the shares were due to vest after seven years, which happened to be 2018.That of course did not happen. Now an asset that must have seemed as good as money in the bank has gone up in a puff of accounting smoke and all that’s left is the large debt used to buy the shares back in 2011.
The loss of the asset must be a shock to the executives, as is the possibility they will have to make good on some of the debt underlying the original purchase of the Pepkor shares.
Star shareholders must be wondering why this related-party liability was never disclosed and why it was not hedged. As one analyst remarked, the decisions to disclose and hedge are based on the likely consequences of an event not on the probability of it.
Perhaps in a year or so investors’ memories of the Star nightmare will have dimmed and the renamed Pepkor will have assumed its old glory.