SA Investing

Kganyago opens fire at Viceroy: Warns it’s a ‘hit squad’

Viceroy Research, a short-seller that has targeted two South African companies this year, is profiting unethically from its reports and has escaped sanctions from local regulators because it is domiciled elsewhere.
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EDINBURGH — Viceroy Research is a`hit squad,' South Africa's central bank governor Lesetja Kganyago has warned. He slammed the murky US research outfit, which is accused of market manipulation in Germany, for dirty tricks in South Africa. The company specialises in producing controversial reports about stock market darlings and is a short-seller. Viceroy Research has targeted a number of South African companies, including:

  • JSE-listed NEPI Rockcastle, which has a large real-estate investment portfolio in Eastern Europe and took a knock last week after a report by Viceroy Research;
  • Steinhoff, which it rightly identified as being the subject of financial jiggery-pokery; 
  • Capitec, which has denied Viceroy Research conclusions that it is not much more than an unsustainable loan shark; 
  • Aspen, Africa's biggest generics drugmaker – which called for an enquiry into market manipulation in January after its share price became a victim of Viceroy Research speculation; and 
  • Resilient Reit, the subject of scrutiny by other analysts who have pondered its business model.

Kganyago says Viceroy Research is hiding behind loopholes in global laws. Leading private asset manager Allan Gray has previously published a statement saying that long-term investors have no reason to fear Viceroy if they have done their own work to understand potential returns and that Viceroy is performing a useful function by making investors more aware of the risks. – Jackie Cameron

By Antony Sguazzin and Rene Vollgraaff

(Bloomberg) – Viceroy Research, a short-seller that has targeted two South African companies this year, is profiting unethically from its reports and has escaped sanctions from local regulators because it is domiciled elsewhere, the nation's central bank governor said.

Viceroy rose to prominence just over a year ago when it published research on Steinhoff International Holdings NV soon after the global retailer reported accounting irregularities that triggered a share-price collapse. That report detailed a number of third-party transactions that were used to inflate asset values – deals that are under investigation by auditors at PwC.

SA Reserve Bank Governor Lesetja Kganyago
SA Reserve Bank Governor Lesetja Kganyago

It then issued a report on Capitec Bank Holdings Ltd. in January, causing the lender's shares to fall as much as 25%, although the stock has since recovered all its losses. On Wednesday, it took aim at property firm NEPI Rockastle Plc, prompting a one-day drop of 14%, some of which has been regained. Both Capitec and NEPI refuted the Viceroy's reports as misleading, while regulators described Viceroy as "reckless" with the Capitec release.

"They generate a report and their disclaimer says that this is an educational report," Kganyago said at a lunch with editors in Johannesburg. "So you go and take a position on a stock and then you 'educate' people about the stock and you can get away with it. They are a hit squad."

Fraser Perring of Viceroy, who is based in London and New York, didn't immediately respond to a request for comment.

Viceroy is the subject of a market-manipulation investigation in Germany after its report on ProSiebenSat.1 Media SE caused a more than 8% decline in the stock.

A study released in July by Intellidex (Pty) Ltd., a researcher with offices in Johannesburg, London and Boston, accused Viceroy of copying an analysis done on Steinhoff six months earlier by a money manager. At the time, Viceroy said it receives data anonymously, which it then tests and includes in its research.

Lesetja Kganyago
BNT5
Viceroy Research
Fraser Perring

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