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Steven Nathan joins BizNews founder Alec Hogg to talk on an array of topical investment related news with ‘the great Steinhoff debate’ between Bernard Mostert and Piet Viljoen taking centre stage. Rational as always, Steven looks at both arguments from an objective perspective. He also adds his thoughts on the R50m fine handed down by the FSCA to Viceroy Research, who’s scathing short-sell report on Capitec in 2018 was deemed ‘false, misleading and deceptive’ by South Africa’s financial market watchdog. Lastly, Steven looks at both Capitec and Steinhoff as investment propositions. – Justin Rowe-Roberts
Steven Nathan on Steinhoff as an investment proposition:
I think if you’ve seen some of the volatility – we haven’t seen as much volatility lately, there has been a little bit, but it wasn’t that long ago where Steinhoff could go up or down 30% or 40% in a day. And that just tells you, the market doesn’t have visibility into the litigation and then the brain damage. And what does this business look like once all the litigation is sorted out? Well, we don’t know the quantum of the litigation. So you’ve got a big, big unknown there. There’s enormous debt in this business as well. So it’s definitely on the speculative side of investing. This is not a stable blue chip company where we have visibility of earnings. It really is a high risk investment. That’s why we’re seeing the volatility in the share price. And as you say, you’ve got a lot of litigation and lots of vested interests that have different views on how this should be unraveled or resolved. And obviously, I think Tekkie Town wants to get their business back. That would be a great trade if they could do that. The debt holders don’t want that because there’s value in that business and that’s sort of a liquidation dividend. So there’s lots of vested interests. We just don’t know how this is going to play out.
On the FSCA’s R50m fine handed to Viceroy Research:
I can’t recollect in the history of South Africa this ever happening. Investors can say positive things and they can say negative things. When you say positive things about a company because you own the share. They were a lot of fund managers that, for example, said positive things about Steinhoff and they owned that share. Then that investment fell maybe 90% or 95%. There was no ramifications for them. It’s always much riskier when you take the other side and you say negative things about a company in the hope that the share price will fall. I think what’s really interesting over here – firstly, there seems to be the first time in South Africa that this has ever happened. Also, Viceroy is not a South African company. It’s not domiciled in South Africa. It’s not subject to any South African regulation. They don’t pay tax in South Africa. So the regulator has no direct impact or say. Normally a regulator would find you. And if you can’t pay the fine, then we would withdraw your license and you wouldn’t be able to operate. They don’t have that over Viceroy. But in terms of the Financial Markets Act, they are able to successfully prosecute them, even though I think that domiciled in Delaware in the US. It’s very, very interesting.
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