From penny stock to blue-chip to penny stock? That seems to be the trajectory of the world’s second-largest furniture group, Steinhoff. Shares in the notoriously opaque German-South African company have gone into a free fall after it announced that new accounting irregularities had come to light, in effect warning investors not to trust its results or its shares.
Yes, that is literally what the company said: “Shareholders and other investors in Steinhoff are advised to exercise caution when dealing in the securities of the group,” read a statement late Tuesday night, following a long board meeting at its headquarters in Stellenbosch, around an hour’s drive from Cape Town. In an update Wednesday, it said that nearly one-fifth of its total €32 billion ($37.7 billion) in assets are now under suspicion. Chief Executive Markus Jooste resigned and handed the reins to Christo Wiese, who was already Steinhoff’s chairman, largest shareholder and one of South Africa’s richest men.
It was the culmination of drama that is fast turning into a full-blown accounting scandal at Steinhoff, a behemoth that employs 130,000 people and has expanded over the past few years into dozens of subsidiaries in 32 countries. And it’s a case that serves to prove, yet again, that no investment is without risk.