CAPE TOWN -Embattled retail holdings company, Steinhoff, lost R1.5 billion to hedge funds, as a result of the collapse of its International share price in December last year.
The acquisition that the hedge funds earned, dates back to March 2016, when Steinhoff received capitalisation of R351.2 billion.
Notably, US hedge fund, Och-Ziff Management held only a small short position in the retailer.
The month prior to Och-Ziff shorting Steinhoff, Germany’s Manager Magazin publication added more detail about a story in the Handelsblatt, published on December 2015. This perhaps was a tip off to Och-Ziff that Steinhoff wasin trouble.
Moreover details about tax authorities raiding Steinhoff’s headquarters on suspicion of accounting fraud further added to the shorfall.
When information came in about a power struggle between Steinhoff and a joint venture partner over subsidiary, Conforama the writing was on the wall so to speak.
Steinhoff’s former chairman, Christo Wiese initially dismissed the allegations as nonsense at the time.
Yet, the market did not buy into Wiese’s claims and Och-Ziff increased its short position and joined other hedge funds, such as the UK’s TCI Fund Management.
TCI has since disclosed its short position to authorities in the Netherlands.
An Och-Ziff employee has however been prosecuted in the US for allegedly bribing officials in several African countries, according to Public filings in Germany, where Steinhoff has its primary listing.
Och-Ziff’s position do now no longer appear in Germany’s public registry of short positions.
What this means is that the company either covered its position or the position of the threshold is not worth reporting on.
If the company has covered its entire position, Och-Ziff would have raked in R1.3 billion in profit.
This hefty profit would be the outcome of a 95% decline in Steinhoff’s share, from its last reported position, to the company shares lowest point.
Och-Ziff meanwhile has refused to comment on its trades.
However, TCI disclosed its earlier short position between November and December which resulted in a 75% profit of R62.2 million.
Other data sources show that less than 5% of Steinhoff was shorted on the Deutsche Börse.
This, while between 15% and 20% of the retailer’s shares were lent to short-sellers on the JSE.
Had short-sellers in both Germany and South African taken their positions on November 15 at €5.60 and R52.17 per share, they would have made more than €1bn in Germany and between R30.1bn and R40.2bn in SA.
These profits would have been made, based on price up to 95% of price declines.
The JSE differs from other markets which fall under the scope of the European Securities and Markets Authority such as the Netherlands and Germany.
These markets have a public registry of short positions in shares, excluding the JSE.
“Accurate short data is extremely hard to find”, said portfolio manager at Fairtree Capital, who also shorted Steinhoff on behalf of his funds, Jean-Pierre Verster.
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Meanwhile, crime investigating unit, the Hawks has met with Steinhoff leadership regarding fraud committed by its former CEO, Markus Jooste.
However, no charges have yet been laid against the embattled businessman.
The directorate had allegedly met with the chairperson of Steinhoff’s audit committee and director Steven Booysen on Friday to discuss a Steinhoff document that indicated the firm’s suspicions about Jooste.
The document details Jooste's committed offences under the Prevention and Combating of Corrupt Activities Act.
“No charges have been laid, it’s just a report that they gave us…dockets have been opened which are still under investigation”, said Hawks spokesperson, Hangwani Mulaudzi.
Before any further developments can take place, the National Prosecuting Authority will need to conduct a preliminary investigation.