Steinhoff's market cap a mere R20bn as shares drop another 30%

Cape Town - A day after its senior executives met with global lenders to try and assure them it is fundamentally a sound company, the share price of beleaguered Stellenbosch-based retail giant Steinhoff dropped some 30% in early trade on Wednesday, reaching levels last seen about 17 years ago. 

When trading started on the JSE at 09:00, Steinhoff [JSE:SNH] shares were changing hands at R6.36.

By 11:33 they were trading at R4.86 (-30.57%), from an intraday low of R4.50.  This took the company's market value to R20.9bn, a shadow of the close to R200bn it was just two weeks ago.

On Tuesday Steinhoff met with lenders, including major banks, to give them an overview of its debt structure, an outline of the actions it has taken since its former CEO Markus Jooste abruptly quit under a cloud, and a summary of its Australasian, South African, European and American businesses.

Before the meeting took place, Steinhoff uploaded a 58-page briefing overview to its website.

READ: Investors punish Steinhoff over audit uncertainty

The document states that the group has total debt of €10.7bn, or about R161bn at Tuesday’s exchange rates. 

This includes €8.5bn worth of debt in Europe, €1.986m of debt (including redeemable preference shares) in South Africa, and €169m worth of debt in the US. 

It is also working with US-based turnaround specialists AlixPartners, who are assisting with cash flow analysis from all its operating companies.

The €10.7bn debt is about double the debt level of €5.2bn included in Steinhoff’s 2016 audited financial results. But the company has now warned that these results cannot be relied upon, and will have to be restated.

Its 2017 audited financials have also been delayed.

Uncertainty about irregularities

Tuesday's briefing documents stated that Steinhoff could not provide details on the “magnitude of the accounting irregularities that are under scrutiny”.

These irregularities, first flagged earlier this month, were followed by the immediate resignation of Jooste, and later by the Dutch-registered group's largest shareholder and former board chair Christo Wiese. 

Wednesday morning's share price drop brings the price of Steinhoff equities to its lowest point since the departure of Jooste. 

The precipitous share price fall has wiped billions off Steinhoff's market capitalisation. 

While Steinhoff has not yet provided an update on Tuesday’s meeting, it had hoped to convince lenders that its fundamentals are strong and that the action it has taken – including the resignation of Jooste and Wiese, the launch of a probe by PwC and the hiring of turnaround specialists AlixPartners - means it is serious about improving corporate governance.  

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