The freefall in the price was prompted by the news that the company had reached an agreement to defer its debt of around €10-billion, originally due next year, to be repaid in 2026. Ryan Woods, head of trading at Independent Securities, says if shareholders don’t agree to this deferred debt transaction, they will effectively be handing everything over to the creditors. “If the shareholders do approve it, they end up holding 20% of the company. However, bearing in mind that Steinhoff’s debt is roughly €10-billion, the creditors hold all the cards in this case,” he says.

“One could argue that it’s a damp squib since the company is technically insolvent and the whole listing is likely to come to an end anyway,” Woods says. Steinhoff has a primary listing on the Frankfurt stock exchange and a primary listing on the JSE locally.

“Pepco and Pepkor share prices haven’t exactly shot the lights out so the liabilities on Steinhoff’s balance sheet far outweigh its assets,” Woods says. Holding on to a 20% stake would keep the door open for shareholders to receive some kind of settlement or money in the liquidation process, but Woods says shareholders are being taken out on a stretcher and likely to receive next to nothing even if they hold out.

Management scores

While it seems increasingly unlikely that shareholders will receive any compensation for their ill-advised investment, that doesn’t seem to be the case for executive management that stepped in after Jooste fled the coop.

According to the company’s annual report for the year to end September, executive directors Theodore de Klerk and Louis du Preez earned R52.6-million and R60.6-million respectively for the period. This includes long-term and short-term incentives, although one does wonder what long-term means when applied to a technically insolvent company.

Du Preez was paid a long-term incentive of R16-million and a short-term incentive of R18-million. A remuneration footnote clarifies that these incentives are based on key performance indicators on which fulfilment and subsequent approval by Steinhoff’s remuneration committee results in performance bonuses.

The long-term incentive is awarded annually and paid out in three equal tranches over three years on the anniversary of the award, subject to fulfilment of the KPIs and subsequent approval by Steinhoff’s remuneration committee.

‘Jooste chickens coming home to roost’

Woods says if anything, the company has had a five-year grace period.

“People thought there was a chance the company could restructure and move forward, particularly with Pepco and Pepkor in its stable. I don’t think anyone realised how much damage was actually done under Markus Jooste’s control and the chickens are now coming home to roost”.

Jooste has a great deal to answer for, although justice seems to be dragging its heels. Earlier this month, his insider trading fine was slashed from almost R162-million to R20-million, although Gerard van Deventer, divisional executive of enforcement at the Financial Sector Conduct Authority, says it is important to note that the fine was just one part of a much larger case.

“The investigation into the false financial statements is ongoing and we are also actively assisting the National Prosecuting Authority,” he told Business Maverick. Two months ago, the South African Reserve Bank moved to seize Jooste’s assets of around R1.4-billion or more. BM/DM