National Treasury to Viceroy – living by the sword can also mean dying by it

By Alec Hogg

From available evidence, short-selling research house Viceroy might be a one-trick pony. The timing of its Steinhoff inquisition was perfect, shining searchlights where there were none to expose malfeasance on a grand scale. But its much anticipated follow-up on Capitec is proving to be a damp squib. One that might even backfire spectacularly.

Yesterday South Africa’s National Treasury issued as powerful a condemnation of Viceroy as you’ll see from a national authority. Referring twice to the firm as reckless, Treasury condemned the Capitec report as acting against SA’s national interest. It has formally requested the Financial Services Board, the JSE and their equivalents in the US and UK to investigate whether Viceroy “transgressed any of market conduct and market abuse laws.”

Although Capitec’s share price has settled around R850, down from over R1,000 pre the Viceroy report, a correction was probably overdue. Even at this level Capitec’s price:book ratio (6.2 times) is almost double that of the next best rated bank FirstRand (3.5 times). On relative growth rates, that’s still asking a lot of the Stellenbosch headquartered operation.

What the saga has certainly done, though, is provide a corporate template for how to react to serious threats. Capitec’s CEO Gerrie Fourie and his top team acted soon after the report went public, dropping everything to focus their full attention on responding to the allegations. From the clients to the media, investors to the regulator, they’ve left out no opportunity to communicate. Says a great deal about the professionalism of the outfit, doesn’t it?

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