THE BOTTOM LINE
Another boss’s bet on bullish stock prices goes kaput
Invicta CEO Arnold Goldstone was forced to sell R12-million of the company’s shares to fund a loan facility
There’s nothing quite like a sustained bear market to make the idea of using shares to guarantee a loan to buy the same shares seem like a poorly conceived idea. For years as share prices moved inexorably upwards it looked like a winning tactic for both the lender and the borrower.
It must have looked like money for old rope for investors with a high tolerance for risk, a category that included Christo Wiese and many of his associates. For years it worked very well, until it didn’t.Last year Wiese and his banks took a multibillion-rand knock when a margin call on some of his Steinhoff shares forced him to offload them at a huge loss in order to repay the banks.Earlier this month Steinhoff Africa Retail, soon to be renamed Pepkor, revealed a R500-million gap in a loan facility that had been provided to its executives back in 2011. The loan was to cover the purchase of Pepkor shares and the deal must have looked a no-brainer for much of the first six or seven years. At one stage the executives were showing a five-fold return on their borrowings. And then it all collapsed.
The latest casualty is Invicta’s CEO Arnold Goldstone who was forced to sell R4.9-million of Invicta shares in the first week of June. The transaction was described as “an involuntary sale of shares by funders under security arrangements”. The Wiese family owns 48% of the company.
Goldstone confirmed the sale was to fund a margin call on a loan for which Invicta stock had been pledged as collateral. A few days later Invicta announced Goldstone had sold an additional R7-million worth. Again the transaction was described as an “involuntary sale of shares by funders under security arrangements”.
A combination of tough trading conditions and the Wiese connection has seen the share price move steadily weaker since February.