Steinhoff’s drive to become the African Ikea has been halted by allegations of corruption.
German authorities are investigating the furniture retailer for allegedly inflating its balance sheet in recent years. The investigation has been a blow to the company and cost its main shareholder and one of the richest South Africans, Christo Wiese, his billionaire status.
The scandal wiped more than $12 billion from Steinhoff’s value and an estimated $2.8 billion off Wiese’s personal fortune. Steinhoff stock was decimated by a record 62% on Wednesday after German prosecutors confirmed they were investigating four senior executives for fraud and irregular accounting. Steinhoff shares lost a further 43% on Thursday, going from a Dec. 6 price of 46,25 rand (around $3) on the Johannesburg Stock Exchange to less than 10 rand (73c) on Dec. 8.
In 48 hours, Wiese went from one of the richest South Africans (vying for second place on other lists) with an estimated fortune of $5.8 billion to an estimated $728 million. He was forced to return to day-to-day operations, stepping in as interim CEO after veteran chief executive Markus Jooste resigned as news broke.
The 76-year-old probably has a better buffer than the tens of thousands of South Africans whose pensions are exposed to the Steinhoff shock. The group’s second largest shareholder is the Public Investment Corporation, the state-owned investment firm that administers the pension funds of public servants. South Africa’s finance minister has asked the country’s regulator, the Financial Services Board, for a report on how the scandal may affect retirement funds.
The turn of events is in stark contrast to this time last year, when Steinhoff was trying to acquire Africa’s largest grocery chain Shoprite, bringing together two of Wiese’s investments to create a behemoth known as Retail Africa. In the same year the furniture retail chain entered the US market when it acquired Mattress Firm Holdings Corp, and spread further by acquiring the discount British retailer Poundland.
The Steinhoff/Shoprite merger fell through in February this year after investor jitters. Steinhoff was started in Germany in the 1960s and moved its headquarters to South Africa in 1998 when it was acquired by the local Gommagomma furnishings chain. A global company with South African roots, Steinhoff’s primary listing is in Frankfurt, where it also lost around 40% of its share value.