Whoa … are Steinhoff shares heading for zero?

Steinhoff shares have been quietly losing a cent or two every day after shareholders voted against all the resolutions to implement a debt restructuring plan at its AGM on 22 March 2022.

None of the experts Moneyweb spoke to wanted to warrant a guess as to why the share is still trading at 22 cents, or why it is trading at all. Image: Supplied

The plan offered shareholders an interest of 20% in a new unlisted holding company that would own all the underlying operational assets and all the debt, with the 80% owned by major creditors.

Before and during the meeting, management warned that voting against the proposals would mean that most of the restructuring plan would still go ahead, but that creditors would then get to own 100% of the new holding company. Shareholders would end up with nothing.

Shareholders who bothered to vote opted for the certainty of the nothing.

Curiously, the share is still trading at 22 cents.

There is no apparent reason why it has not crashed to zero, or for buyers to still be bidding to buy shares.

At the time of writing, buyers were bidding 22 cents for an aggregate of more than 2.5 million shares, while sellers were offering approximately 450 000 shares at 24 cents.

Nothing for shareholders

An announcement published by Steinhoff a few days after the AGM made the situation clear: “The transaction was not approved at the AGM and none of the resolutions proposed to the Steinhoff shareholders were passed by the requisite majority of votes cast by shareholders present or represented at the AGM.”

If approved, the shareholders would have had something.

“Steinhoff offered the shareholders contractual ‘contingent value rights’ (the shareholder CVRs) to be issued by New Topco. These shareholder CVRs would entitle the holders to, in aggregate and as at the effective date of the transaction as proposed to the AGM, 20% of the aggregate economic interest in the post-closing equity of New Topco and, indirectly, its interest in the group.

“Creditors would become entitled to the remaining 80% of the economic interest through the Dutch Trust Foundations.

“Steinhoff communicated to the shareholders in the 15 December 2022 announcement and as set out in the shareholder circular that, if the transaction resolutions were not approved at the AGM, any subsequent restructuring proposal would not include the issuance of shareholder CVRs to shareholders,” according to different documents.

Plan B.…

When shareholders voted against the resolutions, management decided to go ahead with an alternative plan, dubbed the Whoa restructuring

‘Whoa’ is from ‘Wet Homologatie Onderhands Akkoord’ – Dutch Court-Approved Restructuring Plan Act.

“After careful consideration and taking into account the concerns raised by its stakeholders, Steinhoff maintains that the implementation of the transaction is on the whole in the best interests of the group and its stakeholders.”

A ream of documents, including a draft circular to push the deal forward, were published within days of the AGM mess, telling shareholders that they were losing everything.

“Steinhoff International Holdings NV will, through a series of steps, ultimately transfer all or substantially all of its assets and liabilities to a newly incorporated subsidiary of Steinhoff (New Topco), a Dutch unlisted private limited liability company that will replace Steinhoff as the ultimate parent company of the restructured group.

“All shares in the capital of New Topco will be transferred to Dutch special purpose trust foundations.

“The transaction … will ultimately result in Steinhoff shareholders losing their majority interests in Steinhoff without any compensation and the Dutch Trust Foundations holding the simple majority of the shares in Steinhoff and all shares in New Topco and, indirectly, the group,” according to documentation.

It states that the “new” transaction would not require shareholder approval, but only need to be approved by Dutch courts.

No investment case

It seems analyst and investment managers have given up on Steinhoff.

One analyst says it is not worthwhile looking at. “Why waste time? There is no investment case,” he says.

Another says he reads media articles, just “for interest” and hasn’t looked at any of the formal announcements in years.

None of the experts wanted to warrant a guess to why the share is still trading at 22 cents, or why it is trading at all.

Several unit trusts are still stuck with Steinhoff shares.

This is probably from before its meltdown when Steinhoff was one of the most popular shares on the JSE, was featured in several of the JSE’s major indices, and when former CEO Markus Jooste was still sharing anecdotes of his unique business acumen with analysts.

Three Nedgroup unit trusts were still sitting with more than two million shares as at the end of December 2022.

Different Old Mutual unit trusts own approximately 300 000 shares, and the 1nvest Index Fund holds more than 258 000 shares, according to Profile Media’s data base. Absa unit trusts still have 150 000 shares.

Management maintains that the “orderly, expeditious and value enhancing monetisation” of its assets to repay the €10 billion debt is still possible, but adds that there is no certainty that regulators and courts will give the necessary consents and confirmation before the current maturity date of 30 June. Then, creditors “may enforce their rights”, meaning that a quick liquidation is still an option too.

Stakeholders can still submit their views on the new plan, up until Tuesday 11 April.

The purpose of this exercise is unclear, as shareholders have already dismissed the earlier version of the plan.

It all still does not explain why people are willing to pay 22 cents for Steinhoff shares. Maybe they know a secret, or maybe they are just wildly optimistic?

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