The resignation this week of leading South African and international owner and breeder Markus Jooste as CEO of Steinhoff International and from the board of local racing operator Phumelela Gaming & Leisure Ltd has led to speculation and uncertainty.
Biznews.com founder Alec Hogg writes from London that much of the past few days was spent trying to unpack the truth behind the spectacular implosion of Steinhoff’s share price.
Here is his view…
There were powerful vested interests to do so, including that it is one of the stocks we hold in the Biznews SA Champions portfolio where hundreds of Easy Equities clients have invested their hard-earned savings alongside mine.
But it gets even more personal.
I have known and respected Steinhoff’s now departed CEO Markus Jooste for decades. During this time he built a global giant by executing on Steinhoff’s vertically integrated business model and applying strict financial disciplines both internally and when considering acquisitions.
In dozens of interviews, during spats in the RA and Phumelela boardrooms, and over many private cups of tea, our interaction has always been direct and honest. It’s like having woken up in a parallel universe seeing him mercilessly pilloried on social media and widely labelled a crook.
Those who know him are not the only ones in shock. Jooste himself has gone so far underground that every line of communication seems broken.
All we have from his side is a text message apparently sent to a few members of his team at Steinhoff. I say apparently, because he hasn’t yet confirmed to anyone whether he actually sent it. But it does sound very much like the man I know – apologising to his team, accepting responsibility for his mistakes and encouraging those he has left behind to keep living their dream.
My engagement with those closer to the fire and other research is throwing up all kinds of interesting but sometimes conflicting information.
But here’s what we do know for sure.
At board level, Jooste has been under pressure for the way he has handled a tax investigation by the German authorities and allegations of accounting impropriety made by the group’s previous partner in its POCO subsidiary. This I can “get” – PR has never been a Jooste strength. His binary brain is simply not wired for such nuances.
But he seemed to be riding that storm well enough as most believed his strong responses that there was nothing to the allegations. What has proved Jooste’s undoing, though, was when Deloitte refused to sign off on annual financial results to end September that were due for release earlier this week.
Jooste, himself a chartered accountant, disagreed with their interpretation and wanted the board to release the results as unaudited. An already irritated Steinhoff board took the side of the auditors against its CEO. A standoff occurred and Jooste resigned with immediate effect.
Chairman Christo Wiese, Steinhoff’s biggest single shareholder, has taken charge. Big Four auditing firm PWC was immediately assigned to double check Deloitte. And the group’s highly rated former CFO Ben la Grange has been moved back to his old post running the global finances to apply the required attention to getting to the truth. He thus relinquished his position as CEO at the recently listed Steinhoff Africa, a move that wasn’t immediately appreciated.
Those are the facts as we have been aware of them thus far. Something else we know is there is nothing more powerful than the truth. And Steinhoff has one of the strongest and most independently minded boards of any South African company. Each director’s personal credibility depends on the truth being aired.
While the social media mobs are screaming, spurred on by “research reports” being circulated by short-selling hedge funds enjoying a massive payday, it is all too easy to get caught up in the drama. But investment rewards discipline and rationality. Not emotional or knee-jerk reactions.
So what to do now?
I’ll be spending the next few days speaking to those who can help me get a better handle on all this. Fortuitously, we have a webinar scheduled for Tuesday night at 8pm SA time for Biznews Premium subscribers, providing the ideal opportunity to feed this back to you. As always, it is live and interactive. And by then we are sure to have a lot more clarity.
Tuesday night’s webinar is billed as our monthly update on the Biznews SA Champions portfolio. But given the circumstances, it will be dedicated to a rational discussion on what we need to do with the Steinhoff shares we hold.
It’s no easy decision. We have learnt from Warren Buffett to dump shares in companies affected by scandal. But the Oracle of Omaha also teaches us to be greedy when everyone else is fearful – and right now Steinhoff is to fear what Bitcoin is to greed.
My advice, then, is to keep a cool head. And if you’re a Biznews Premium subscriber, please make a date to join me in the webinar on Tuesday. If you haven’t already signed up, reserve a seat by taking advantage of the free 30 day trial to Biznews Premium by clicking here.
Look forward to engaging on Tuesday. Have a peaceful weekend. This too shall pass.