This whole Viceroy / Capitec scandal is a market disruption that South Africa really didn’t need right now.

We had hardly surfaced from the Steinhoff scandal when Viceroy Research released a damning report that described Capitec as a “wolf in sheep’s clothing”, saying that it’s more of a loan shark than a bank.

Read all about that here and here.

Viceroy is a firm that specialises in investment research dedicated to identifying short opportunities, and its 33-page document regarding the bank “knocked billions of rands off Capitec’s market value,” reports Fin24.

Thankfully, by the end of last week, part of the losses had been recovered.

Iraj Abedian, head of Pan-African Investments and Research Services and an associate of New York-based Global Source Partners Inc., who has advised the South African government on economic policy, explained that:

“Short-selling is not illegal, but pretending to be a research house while they’re a hedge-fund operator, making money in a predatory style, is breaching the codes of ethics.”

The report has since been accused of “jumping to conclusions” and described as “hot air”, among other accusations. It also attempted to show that shares last year had been sold at an “alarming pace”.

In December, Capitec chairperson Riaan Stassen sold shares worth at least R155 million. At the same time, the banks’ CEO Gerrie Fourie sold shares worth R13 million to “diversify his investments”.

At the time, the market cap was R121 468 466 585, and Capitec’s shares had just hit a value of R1 000:

In the view of Alec Hogg of Biznews “nobody offloads stock in your own company unless you believe it is fully valued. Or overpriced”.

“Perhaps the message the CEOs are sharing with us is that nothing rises forever in a straight line.”

Did they know something we didn’t? Perhaps, like, a possibly damning report would soon be published?

Now Capitec is refusing to hire another auditor, saying that PricewaterhouseCooper is a credible auditor, reports IOL:

Andre du Plessis, Capitec chief financial officer, in response to the call said: “We need only one auditor according to the Banks Act. Capitec uses PwC, which is a credible auditor. From previous experience I don’t believe dual auditors bring any more comfort or value.”

In the meantime, Viceroy founder Fraser Perring said “he would be revealing more evidence, in what he said were “Capitec’s dodgy dealings,” during the next week”:

“Since the publication of our report, the evidence has just got a bit louder and over the next five or six days you’ll see that evidence coming out,” Perring told the channel.

Okay, Perring, let’s do this.

[source:fin24&iol&biznews]