Does Steinhoff Face Total Collapse?

Steinhoff’s wide global reach due to acquisition activity

Steinhoff International Holdings Ltd (“Steinhoff”) has performed impressively in recent years, surging from being the 39th ranked home and garden specialist retailer globally in 2009 to being ranked sixth in 2017. The company has retail operations in several regions, including Australasia, Eastern Europe, Western Europe, NorthAmerica and the Middle East and Africa, due to its acquisition activity.

Accounting investigation sends Steinhoff shares in to free fall

The resignation of its CEO (Markus Jooste), as well as the company’s decision to delay 2017 results and to launch an investigation into alleged accounting irregularities has sent Steinhoff’s share price into free fall, losing more than 80% of its value in a matter of days.

Lack of financial transparency adds more fuel to the fire

Steinhoff has released few details following the CEO’s exit, which has created further uncertainty. The company has stated that 2016 results will need to be restated; however, it has yet to confirm if this applies to both South African and international subsidiaries.

Negative conclusion to lenders meeting impacts share price again

Lenders were expecting clarity on whether only 2016 results need to be restated;however, Steinhoff’s failure to provide further information during the 19 December lenders meeting has exerted further pressure on the company’s share price.

Asset disposal a likely future scenario for Steinhoff

To avoid total collapse, Steinhoff may need to divest assets in order to stay afloat.However, Steinhoff is now tasked with proving that assets are correctly valued,therefore, asset disposal is unlikely to be a straightforward process.