Another boss’s bet on bullish stock prices goes kaput

Business

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

Marc Hasenfuss

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.

This article is reserved for Times Select subscribers.
A subscription gives you full digital access to all Times Select content.

Times Select

Already subscribed? Simply sign in below.

Questions or problems?
Email helpdesk@timeslive.co.za or call 0860 52 52 00.