THE BOTTOM LINE
Plucky punters ramp up the Steinhoff share price by 34%
Despite €12.8-billion being wiped off the balance sheet, investors seem to reckon the company can be salvaged
The Steinhoff share price enjoyed one of its strongest days in months on Tuesday as investors seemed to take comfort from the recently released March 2018 interim figures.
Despite €12.8-billion being wiped off the balance sheet and the previous interim’s hefty operating profit converted to a loss, investors appear to believe there is some salvage value in the company.
The members of Steinhoff’s supervisory and management boards certainly can’t be accused of encouraging optimism.That Steinhoff even qualifies as a going concern requires assuming that the litigation piling up against the company will be drawn out over years. This is probably a reasonable assumption given the slow pace at which legal battles generally proceed and does speak to the R5-million or so “professional fees” the company paid out every day between December 2017 and end-March 2018.
Included in the 90-page interim report are the curious details of a PSG derivative contract. It seems some “select” investors with PSG shares were “encouraged” to swap them for Steinhoff shares in a bid to lift Steinhoff’s stake in PSG above 25%. Not all the “select” PSG shareholders were happy about the proposal and so Steinhoff provided them with a guarantee to nudge them along.
This sort of derivative transaction is apparently fairly common but the critical issue in this instance is that in terms of the Companies Act it must be approved by the board and needs a shareholder resolution.
That the Steinhoff board has chosen to disclose details of the contract, which in the grand scheme of things is not significant in value, suggests it is concerned about some of the implications. The party on the other side of the transaction must also be concerned about being tagged as a Steinhoff “insider”.