South African billionaire Christo Wiese-linked retailer, Steinhoff, faces liquidation

Steinhoff International Holdings, the distressed South African retail conglomerate linked to billionaire retail magnate Christo Wiese, is set to undergo liquidation this week, marking the end of its corporate existence effective Oct. 13.

The decision, which follows a long and tumultuous financial history, will result in the delisting of Steinhoff from both the Johannesburg Stock Exchange and the Frankfurt Exchange.

At the time of drafting this report, Steinhoff’s shares were valued at R0.02 ($0.00105), leaving the financially distressed retailer with a market capitalization of R171 million ($9 million).

The retail group has faced a catastrophic decline since the start of the year, with the company’s shares declining by 96.15 percent, dropping from R0.5 ($0.0264) to R0.02 ($0.00105). Steinhoff traded at over $5 per share at its peak, boasting a market capitalization of $19 billion.

Steinhoff has been under scrutiny for its financial practices since 2014, with allegations of insider trading dating back to the company’s initial public offering in 1998, as revealed by insiders familiar with the group’s operations.

In March 2021, German prosecutors brought charges against Markus Jooste and three associates for balance sheet fraud. These charges stem from a deceptive transaction in 2010, wherein Jooste and his colleagues purportedly falsified “know-how” trading, artificially inflating revenues for a Steinhoff subsidiary.

The fallout from Jooste’s involvement in the Steinhoff scandal was devastating, leading to his resignation in December 2017. The company’s stock nosedived, causing significant losses for investors and employees.

Presently, Steinhoff finds itself encumbered with a debt exceeding $10 billion and has been granted a three-year debt repayment moratorium in exchange for delisting and ceding economic control to its creditors.

Wiese’s association with Steinhoff traces back to 2012, when he exchanged the historic Lanzerac wine estate for R220 million ($11 million) worth of Steinhoff shares. However, the value of these shares has since plummeted to less than $20,000.

Earlier this year, Wiese received the green light from the Western Cape High Court to proceed with his lawsuit against his former colleague, Jooste, aiming to regain control of the prestigious Lanzerac wine estate.

This approval comes almost two years after Wiese initiated legal proceedings against Jooste. Wiese, who briefly collaborated with Jooste at Steinhoff, is seeking to nullify the contract and reclaim ownership of the wine estate.

Alternatively, he seeks compensation from Jooste and Lanzerac Estate Investments, equivalent to the estate’s present value, offering to return the Steinhoff shares he initially received as payment.