PSG to probe Viceroy motives with Capitec report

Cape Town - Viceroy Research’s report on Capitec contains "irresponsible statements" creating unwarranted market turmoil, PSG Group warned on Tuesday.

In a note to shareholders issued late on Tuesday the investment holding company said it was greatly concerned about Viceroy’s intentions with and the way in which the US-based research group published its report without prior consultation with Capitec’s management to gain a  proper understanding of their business.

PSG Group will consequently ensure that an investigation be launched into such conduct, including trading in both PSG Group and Capitec shares in the period leading up to the release of Viceroy’s report.

Earlier on Tuesday, Capitec lashed out at the report by US short sellers Viceroy Research, saying that it was filled with “factual errors.”

Capitec's share price tanked more than 20% on Tuesday before it clawed back losses to tradedown 4.12% at R904.99 by 16:51 on te JSE.

In a market report the SA bank said that its "corporate governance was strong" and its "communications and disclosures are, and always have been transparent, clear and to the point”.

Viceroy came to prominence for SA investors after it released a report into embattled retailer Steinhoff, shortly after the Stellenbsoch-headquartered firm’s share price tanked amid an accounting scandal. 

In its new 33-page report uploaded to its website at about 10:00 on Tuesday, Viceroy alleged that Capitec was using new loans to repay existing loans. 

It said Capitec may have to write off a total of R11bn in bad loans, and called for the bank to be placed under curatorship by the SA Reserve Bank. 

The central bank, however, on Tuesday said that Capitec "is solvent, well capitalised and has adequate liquidity".

In a separate media statement on Tuesday, the bank's CEO Gerrie Fourie said he strongly refuted Viceroy's allegations, adding that Capitec was "in the process of gathering information to respond to the claims made in the report with facts".

The bank's management is currently briefing the media following a conference call with analysts in Cape Town.

"We are committed to providing clear and transparent information that will show that these claims are baseless," said Fourie. 

Capitec advised shareholders that it had not been approached by Viceroy for insight into its business and "none of their allegations have been discussed, tested or verified with management".

The group said the report was, on the face of it, “filled with factual errors, material omissions in respect of legal proceedings against Capitec and opinions that are not supported by accurate information”. 

It its note to shareholders, PSG Group said it fully supports the Capitec management team and business model.

"Capitec’s corporate governance is undoubtedly world class. Its continued transparency and ability to release its audited year-end financial results within a month after the reporting date, bear testimony thereto," said PSG.

"Capitec continues to follow a prudent approach to capital and liquidity management, and to the granting of credit and related write-offs and provisioning."

PSG is Capitec’s largest shareholder, with a stake of more than 30%.

PSG's share price also took a beating and by 16:58 on the JSE the shares were changing hands 7.06% weaker at R237.92.

“PSG has a significant shareholding in Capitec, when Capitec was on the way up, PSG was rising in part because of that,” Simon Brown, founder and director of investment website JustOneLap.com told Fin24 via the phone.

Kokkie Kooyman, portfolio manager at Denker Capital warned that the share prices of PSG and Capitec might not recover entirely from the shock.

“As the price of Capitec soared [there were] fears that PSG was getting expensive. Capitec share price (R857.22) is still expensive and overvalued. It could still drop by 20%, if it’s to find a reasonable valuation,"he said

Capitec makes up just over 46% of PSG’s R51.84bn market cap and Kooyman says the PSG share price is “simply a sum of the parts”, of the companies it invests in. 

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