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Steinhoff International Holdings, a South African-based global retail company linked to billionaire retail tycoon Christo Wiese, experienced a significant drop in its market capitalization, losing over $38 million in a week’s time. The company’s shares reached a historic low on Fri., Jan. 10, reflecting the growing concerns of investors in the market.
Steinhoff shares have experienced a sharp decline of more than 25 percent in value since the start of trading activities on the Johannesburg Stock Exchange (JSE) this week, going from R0.52 ($0.0291) on Jan. 6 to the current value of R0.36 ($0.0202).
The sharp decrease can be attributed to the retailer’s announcement of further asset sales.
The recent slump in its shares has resulted in a significant decrease in the company’s market capitalization, plummeting from R2.22 billion ($124.39 million) at the opening of the JSE this week to R1.54 billion ($86.11 million) at the time of drafting this report, representing a drop of R683.14 million ($38.27 million).
The recent placement of Pepco and Pepkor shares has enabled Steinhoff to raise a significant amount of R10 billion ($560 million), but it is not sufficient to turn around the company’s financial struggles since the 2017 accounting scandal.
This scandal resulted in the resignation of CEO Markus Jooste and former largest shareholder Christo Wiese, the South African billionaire and retail magnate behind the growth of Shoprite, Africa’s largest retailer with over $9 billion in annual sales and 142,000 employees across the continent.
Steinhoff’s recent placement generated impressive results, with the sale of Pepco and Pepkor shares yielding €315 million ($336.9 million) and €257 million ($274.8 million), respectively. Despite this, the company’s corporate net debt remains at a staggering $10.8 billion.
Despite previous optimism from management, it seems that Steinhoff’s underlying operating companies are not performing as well as expected, resulting in declining hope that their share prices will rise fast enough to offset the corporate debt.
