Steinhoff International

Its now a "guilty unless you can prove otherwise' situation for Steinhoff.

On Monday the 4th of December it was announced that auditors were not ready to sign off on the company’s results spurring aggressive selling in the stock. Today (6 December) the suspicions of Steinhoff International Holding’s accounting irregularities became a realised truth sending the share price around 70% lower, erasing well over R100bn in market capitalisation. CEO Markus Jooste, has fallen on his sword resigning before the market had even opened. The scheduled results release (6 December) has now been abandoned as the unaudited report thereof carries no weight while the extent of fraudulent activity is being ascertained.

Steinhoff has been littered with allegations of misdoings this year, including avoidance of tax and irregular accounting practises as well as not disclosing loans issued to subsidiary companies practices. While some might have looked past the previous and current allegations of the above, adopting an innocent until proven guilty approach, we are now certainly in a guilty unless you can prove otherwise situation for Steinhoff.

The selloff in Steinhoff has extended into the listed equities in which the company has ownership including, Steinhoff Africa Retail and KAP International. The market has little information about the extent of wrong doing as of yet, however there is concerns that these companies to could have been infected with irregularities as well.

Unfortunately Steinhoff International, a former market darling has lost all the investor confidence it once had. Without all the information it is hard to find what is fair value for the company. Volatility in trading the company is expected to remain elevated and in turn the risk therein has exponentially increased. While traders will be tempted to try pick a bottom on this one, there is still a distant possibility that trade could be suspended or delisted in time. Trying to short at these levels presents a very real risk of being squeezed if the large volume of shorts currently in the market start to unwind. With this in mind, those not already committed to the stock might consider leaving it alone for the foreseeable future. 

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

Find articles by analysts

This information has been prepared by IG, a trading name of IG Markets Limited and IG Markets South Africa Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. International accounts are offered by IG Markets Limited in the UK (FCA Number 195355), a juristic representative of IG Markets South Africa Limited (FSP No 41393). South African residents are required to obtain the necessary tax clearance certificates in line with their foreign investment allowance and may not use credit or debit cards to fund their international account.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 79% of retail investor accounts lose money when trading CFDs with this provider.
You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage.