The Foundation’s Purpose
Stichting Steinhoff International Compensation Claims (“Foundation”) has been established as a foundation under Article 3:305a of the Dutch Civil Code (“DCC”) in an initiative of institutional investors seeking a comprehensive, cross-jurisdictional recovery of losses suffered as a result of investments in various Steinhoff securities over the Relevant Period.
Investors (including nominee shareholder/custodians) are encouraged to join the Foundation, if they have purchased substantial amounts of any of the following Steinhoff securities (Stock: NL0011375019, ZAE000068367, ZAE000247995, ZAE000016176. Bonds: ZAG000147984) during the Relevant Period from June 26, 2013 to December 5, 2017, and either sold these after the various disclosures over the Relevant Period and thereafter or are holding those until now.
Steinhoff International Holdings Limited (“SIHL”) is a South African company which until December 7, 2015 was the holding company for more than 40 retail brands in over 30 countries, including MatressFirm in the United States, Poundland in England as well as Poco in Germany. It has been listed on the Johannesburg Stock Exchange since 1999 as SIHL but since December 7, 2015, it has its primary listing on the Frankfurt Stock Exchange as Steinhoff International Holdings N.V. (“SIHNV”), which became the Dutch holding company for the Steinhoff retail empire. Despite the legal company change, Steinhoff has maintained its headquarters and tax residence in Stellenbosch, South Africa, and most employees still work there under the new legal structure. Most of Steinhoff’s current and former directors are also residents of South Africa.Four Steinhoff subsidiaries issued bonds during the Relevant Period, including Steinhoff entities located in Austria, England, Germany and South Africa, but most of these bonds have been or are to be redeemed early. There are only four relevant bonds issued under English and German law, which have sustained substantial devaluation and may become relevant for investor compensation claims.
Steinhoff’s Accounting Irregularities
Since at least June 26, 2013, Steinhoff and its management, with the help of Deloitte South Africa, has been misinforming its investors about the true value of its assets, certain illegal off balance sheet transactions and the overall financial transparency of its business transactions, thereby depriving investors of the ability to properly value the affected Steinhoff securities and inflating their values. In June 2014, Steinhoff informed the public that it was planning to restructure itself to access European capital markets, but kept its improper accounting practices a secret and even denied various suspicions of accounting irregularities between December 2015 and December 2017 (including rumors about criminal investigations and improper accounting in December 2015, August 2017, September 2017 and November 2017).
On December 5, 2017, Steinhoff finally started to disclose its accounting problems and until February 28, 2018 has disclosed various details about improper asset valuations, insider dealings and off-balance sheet transactions, which have led to the delay in the publication of its 2017 financial results and the acknowledgment that it will have to restate at least its 2015 and 2016 financial statements, likely also 2014.
With the December 5, 2017 surprise disclosure which shocked the markets, long-standing CEO Markus Jooste announced that he was leaving the company with immediate effect.
Both news caused a dramatic decrease in the value of Steinhoff equity as well as debt securities. Particularly, the Steinhoff stock price dropped from €3.10 on December 5 to €0.47 on December 8, 2017, a decrease of almost 85%, eliminating more than €10 billion of Steinhoff’s market value. Moreover, as of December 14, 2017, Steinhoff had outstanding liabilities of €10.7 billion, causing market concerns about its financial viability considering that €2 billion of debt was to mature in 2018. In the meantime, Steinhoff has raised over €2 billion in capital from the sale of certain assets and has been negotiating with its creditors to renegotiate terms of its debt obligations. As of March 19, 2018, Steinhoff also considered selling other assets to shore up further funds to redeem certain convertible bonds and to have cash for operational needs.
On January 2, 2018, Steinhoff announced that its 2017 accounts would be accompanied by restated financials for 2015 and 2016, and that its previous figures for those years can “no longer be relied upon.”
On February 19, 2018, the Dutch Enterprise Chamber ordered that Steinhoff must restate its financial statements for extended book year 2015-2016 because of the inclusion of the value of certain assets belonging to a former business partner.
In the meantime, various regulators and enforcement agencies in Germany, the Netherlands and South Africa are investigating not only the two major Steinhoff entities, but also Deloitte South Africa and various former board members for a conspiracy to defraud the market and engage in illegal accounting practices since at least 2013.