DURBAN - The share price of Steinhoff International rallied by more than 30 percent yesterday, the highest in three months, as the company works to shore up the troubled retailer.
Later in the day, the share closed 27.43 percent higher at R2.88.
The stock’s rally started last week when it announced that it had declared a preference share dividend for the six months to March and gained further after it said on Wednesday that it had started a consent process with creditors to finalise a debt restructuring plan that would support the retailer’s balance sheet for three years and prevent a potential collapse.
However, the share rally is off a low base. Francois du Plessis, an independent stock broker analyst, said it was difficult to quantify the amount the fund managers have lost so far. ''
“The independent investigation currently under way, which is conducted by PwC, will be the one that will give us a clear picture about the losses suffered by the company and the money invested by fund managers in the company,” Du Plessis said.
Steinhoff said in April in its annual general meeting that PwC had studied more than 320 000 documents and gathered 4.4 million records on Steinhoff International in the four months since the accounting irregularities were reported in December.
The group expects the investigation by PwC to be completed at the end of the year.
Ron Klipin, a senior analyst at Cratos Capital, said the company needed to pay a preference dividend before it could satisfy other creditors.
“The preference dividend is cumulative, so payments must be made in order not to default on this instrument,” Klipin added.
Analyst Ryk de Klerk said while the preference shares might be worth next to nothing, the institutional shareholders who held the preference shares probably shorted the Steinhoff shares to protect their capital. “So, in fact, they did not lose as much as the eye can see or what certain people believe.
Also, although the preference shares trading is suspended, the holders of the preference shares could cover themselves by borrowing Steinhoff shares and selling them in the market.
I still question: From whom did they borrow the shares – hopefully not from other funds under their management,” De Klerk said