THE BOTTOM LINE
It ditched the Steinhoff name, but Pepkor’s still in the dwang
The former Steinhoff Africa Retail is battling to regain the trust of investors who've punished the share price
Having successfully convinced investors that the numerous corporate governance failings of its parent was not a feature of its own business, Steinhoff Africa Retail (Star) – since renamed Pepkor Holdings – has been thrown in the spotlight because of an antagonistic fallout between itself and the previous founder and executives of Tekkie Town.
Following Steinhoff’s implosion in December, the Pepkor share price took a beating as investors may have deemed it guilty by association. The share price sank from R25 to as low as R15. However, in the absence of any material financial restatements and allegations of fraud, Pepkor slowly won back the confidence of investors and its share price recovered to above R20 per share.
Since then, disagreements with the founders and former executives of Tekkie Town, a business that it had acquired from Steinhoff, have resulted in plenty of dirty laundry being aired. This included the contentious investment scheme undertaken by Pepkor executives with borrowed money. The scheme found itself underwater when the Steinhoff share price collapsed and shareholders in Pepkor were informed the company would be providing a guarantee.
These developments may have highlighted concerns regarding transparency, and it would seem the market punished the share price, sending it to levels last seen in December. It remains at about R16 per share, equating to a discount of about 20% from where it was trading before details of the litigation involving Tekkie Town became public. This discount may reflect a corporate governance discount. If this is the case, the company should move to improve transparency and disclosure.