Jooste advised friends to sell Steinhoff stock before collapse

accreditation

Steinhoff International Holdings [JSE:SNH] former Chief Executive Officer Markus Jooste advised friends to sell the the retailer’s shares days before the stock collapsed, according to a mobile phone text message seen by Bloomberg.

The message, sent in November to at least two people, told recipients there was impending, unspecified bad news coming.

At the time, Steinhoff was in discussions with Deloitte about the viability of its accounts. In December, the company said it had uncovered accounting irregularities and that Jooste had quit, causing the shares to plunge 63% in a single session.

South Africa’s financial regulator has been made aware of the message, two people familiar with the situation said, asking not to be identified.

Jooste didn’t respond to a phone call and message seeking comment. Callie Albertyn, a lawyer for the former Steinhoff CEO, didn’t respond to emailed requests for comment. Steinhoff declined to comment.

"The Financial Sector Conduct Authority is conducting comprehensive investigations into possible market abuse offenses regarding Steinhoff International Holdings NV," Solly Keetse, head of market abuse, said in an emailed statement on Wednesday.

"All information regarding these investigations are confidential. The investigations are ongoing."

Austria dispute

Speaking to lawmakers in Cape Town last month, Jooste, 57, said he wasn’t aware of any financial irregularities on the day he resigned.

He instead blamed the crisis on a protracted dispute with Austrian business partner Andreas Seifert, which triggered investigations into Steinhoff by European regulators and tax authorities, which are ongoing.

Steinhoff largely settled the impasse with Seifert by selling half its German furniture chain POCO to Seifert, who had filed lawsuits against the retailer in three countries.

Steinhoff’s shares have lost more than 95% since December, and the owner of Conforama in France and Poundland in the UK has restructured about $11.5bn (R168bn) of debt to stave off collapse.

Last week, the company’s U.S. bedding chain Mattress Firm filed for bankruptcy and announced a plan to close as many as 700 stores, the culmination of financial difficulties that predate the Steinhoff crisis.

115% premium

Jooste referred to trouble with Steinhoff’s business in the U.S. in his text message. Steinhoff expanded there with the purchase of Mattress Firm for $3.8bn (R55.7bn) in 2016, a 115% premium, part of an aggressive expansion plan overseen by the ex-CEO.

It’s not clear whether anyone who got the text acted on its contents. In November, 14.4 million shares changed hands, compared with a 15-day simple moving average of 13.9 million in 2017 up until December.

The figure soared to 33.4 million shares in December, just before the irregularities were announced, but by then Deloitte had refused to sign off on Steinhoff’s accounts and this had been disclosed to the market.

South Africa’s FSCA is investigating Steinhoff share movements last year for possible insider trading. Steinhoff hasn’t commented on that probe.

In the hours before Steinhoff’s shock announcement, Jooste wrote other messages to some former colleagues and friends asking for forgiveness for his role in the scandal and named four fellow executives that he said had nothing to do with any of his mistakes, said a third person, who declined to be identified.

When asked in the South African parliamentary hearing what mistakes he was referring to, Jooste highlighted the 2007 decision to partner with Seifert.

That move "cost the company since 2015 all the drama that it went through, the fights, the financial losses and also that lead to this perception of accounting irregularities," he told the lawmakers.

Steinhoff has hired auditors at PwC to probe its accounts, and unpublished findings from the ongoing investigation has prompted the company to report Jooste to a South African police unit known as the Hawks, although the law enforcement agency says it doesn’t have enough information to pursue a case.

The company is also being sued by investors including billionaire ex-Chairman Christo Wiese, and is being investigated by regulators in Europe and South Africa. Steinhoff has acknowledged the lawsuits and investigations.

We live in a world where facts and fiction get blurred
In times of uncertainty you need journalism you can trust. For only R75 per month, you have access to a world of in-depth analyses, investigative journalism, top opinions and a range of features. Journalism strengthens democracy. Invest in the future today.
Subscribe to News24
Rand - Dollar
14.68
+0.6%
Rand - Pound
20.18
+0.3%
Rand - Euro
17.06
+0.2%
Rand - Aus dollar
10.89
-0.1%
Rand - Yen
0.13
+0.5%
Gold
1,775.17
+0.6%
Silver
23.49
+1.4%
Palladium
2,044.00
+0.9%
Platinum
1,053.50
+1.4%
Brent Crude
84.33
-0.6%
Top 40
60,221
0.0%
All Share
66,792
0.0%
Resource 10
63,626
0.0%
Industrial 25
84,496
0.0%
Financial 15
14,073
0.0%
All JSE data delayed by at least 15 minutes Iress logo
Company Snapshot
Voting Booth
Facebook is facing a fresh crisis after a former employee turned whistle-blower leaked internal company research . Do you still use Facebook?
Please select an option Oops! Something went wrong, please try again later.
Results
Yes, the benefits outweigh the risk for me
23% - 126 votes
No, I have deleted it
48% - 266 votes
Yes, but I am considering deleting it
30% - 166 votes
Vote