Investors dump Steinhoff on CEO fraud report | Fin24

Investors dump Steinhoff on CEO fraud report

Aug 24 2017 17:40
Alexander Kell, Janice Kew and Karin Matussek, Bloomberg

Frankfurt - Steinhoff International shares have slumped the most on record after Manager-Magazin reported that chief executive officer Markus Jooste is among employees being investigated by German prosecutors in a 2015 case tied to possible accounting fraud.

The clothing and food retailer’s stock dropped as much as 14% in Frankfurt and traded 7.8% lower at 3.90 euros in afternoon trade. About 33 million shares traded, more than eight times the three-month daily average. The company’s Johannesburg-listed shares declined the most in nine years, closing 9.81% lower at R59.59.

The report in Manager-Magazin relates to a case which began in late 2015, just before Steinhoff moved its primary listing to Frankfurt from Johannesburg. In November of that year, German authorities searched Steinhoff offices in the town of Westerstede and visited private homes as part of an investigation by prosecutors in the German town of Oldenburg into four current and former managers.

Steinhoff said at the time it was “fully committed” to support the probe.

Mariza Nel, Cape Town-based director of corporate services, couldn’t immediately comment on the report or make Jooste available for interview. Oldenburg prosecutors couldn’t immediately be reached for comment.

Prosecutors suspect inflated revenue was reported on the balance sheets of units owned by the discount retailer, according to Manager-Magazin, which attributed the information to unidentified people at the prosecutor’s office. The sums involved are in the three-digit-million euro range, the magazine said.

Steinhoff has expanded aggressively over the past three years and has completed acquisitions in South Africa, the UK and the US The company’s brands include low-cost sub-Saharan Africa chain Pep, Conforama in France and The Mattress Firm in the US The company will announce third-quarter earnings on August 31.

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