In new details that could potentially nail Markus Jooste for insider trading, court papers show that the former Steinhoff CEO advised his associate to sell the global retailer’s stock six days before the company revealed what later turned out to be a multibillion-rand fraud that sent its shares crashing.
Once a must-have in fund managers’ portfolios, Steinhoff is in the middle of rebuilding its reputation and cleaning up its balance sheet after finding a €7.4bn (about R124bn) hole in its accounts, which all but wiped out shareholder equity and left it scrambling for working capital.
Jooste, an instrumental figure in the transformation of Steinhoff from a small local outfit into a multinational retailer, has been named in a report by PwC as the mastermind behind the fraud, and is being sued by both the company and associate Jaap du Toit, on behalf of a trust, for misleading him about the financial health of the company.
In an SMS sent to Du Toit at the end of November 2017,
Jooste said: “Steinhoff is going to struggle to process all the bad news in America for a long time, so there are better places to invest your money, immediately take the current price and delete this SMS and don’t call anyone.”
It is unclear what bad news he is referring to.
Details of the SMS were included in court papers relating to a R740m claim for damages launched in August 2018 by Du Toit on behalf of the Le Toit Trust against Jooste, Steinhoff and the group’s former chief financial officer, Ben la Grange. The high court in Cape Town heard the first arguments last week.
The text message is the most solid evidence in the public domain of possible insider trading in the lead-up to the collapse of Steinhoff’s share price on December 5 2017, and is most likely to pile pressure on the Financial Sector Conduct Authority (FSCA) to finalise its investigation.
“We are still investigating possible insider trading in the Steinhoff share. We anticipate to have completed a few of these investigations by the end of September 2019,” Brandon Topham, divisional executive of the investigations and enforcement division of the FSCA, told Business Day. In April 2019 the FSCA said it had found no evidence of insider trading in Steinhoff shares but said it still had some trading accounts to check. In the week before the collapse about 30.7-million shares were traded.
On the day the SMS was sent Steinhoff was trading at R55 and the board was battling to persuade its auditor Deloitte to sign off on the 2017 financial statements.
By December 6, following the announcement of an investigation into accounting irregularities, the share had plunged to R17.61. By the end of the month it was down to R5.
Steinhoff declined to comment. Jooste did not immediately respond to a request for comment. He has previously denied any wrongdoing.
Du Toit’s claim relates to losses the trust suffered as a result of Jooste and La Grange misrepresenting Steinhoff’s true financial position in June 2015 and persuading it to exchange shares in Stellenbosch-based investment holding company PSG for Steinhoff shares.
The SENS announcement released in the weeks before the December 2017 share price collapse reveal that the only company-related individual to sell shares was director Thierry Louis Joseph Guibert. He disposed of 300,000 shares on October 2 for €3.70 each.
In the first week of November La Grange purchased 66,000 shares at R60.17 each and former chairman Christo Wiese bought 2-million shares at R61.46 each.
Just more than one month later on December 14, Wiese was forced, as a result of bank funding arrangements, to sell 98.4-million Steinhoff shares on the Frankfurt Stock Exchange at €0.4935 (about R8) each.