How did Markus Jooste fool Steinhoff investors so easily?
What happened to all the “science” and the “experts” that helped inform their decision to invest in Steinhoff?
So asked RE:CM’s Piet Viljoen in an article on Monday.
Jooste, said Viljoen, has been described as “the ultimate con artist”, and the best conmen understand full well that the trick is to sell what their targets want.
Greed. And fear. It blinds.
The more debt and equity Steinhoff issued, the more the market applauded and asked for more, says Viljoen.
Instead of the increased levels of due diligence that should normally accompany such frenetic activity, it seems the “excitement of the deal”, coupled with an incessant promotion of Steinhoff’s "excellence" by the protagonists, caused the market to suspend its disbelief and relax its underwriting standards.
Viljoen points to research which proves that South Africans are consistently too negative about South Africa’s investment prospects.
In the Ipsos Perils of Perception 2017 survey, South Africa ranked as the most needlessly pessimistic nation out of 38 countries surveyed.
This unrealistic pessimism may explain why local investors may systematically relax their underwriting standards when it comes to offshore investments, empowering unscrupulous salespeople.
When Steinhoff’s listing was moved to Europe, Jooste effectively took full advantage of this inherent bias, with investors cheering him on, says Viljoen.
Markus Jooste sold what the market wanted, and fooled even the smartest investors.
Viljoen shares the lessons he has learned:
Steinhoff didn’t implode due to a poor regulatory environment. Instead, it happened due to a strong appeal to incentives which caused otherwise smart people to suspend their disbelief.
It pays to understand not only the numbers that represent the activities of a business, but also the human beings behind the companies. Who are they, what are their reputations, and what are their incentives? These soft issues are as important – if not more important – than the hard numbers.
- Never ignore the outside view. Our tendency as humans is to favour the inside view.
Listen to the interview in the audio below.
Get the 10 most-read articles of the week from Bruce Whitfield’s The Money Show, emailed to you every Friday morning:
Recommendedby NEWSROOM AI
SA missing in action. Trump vs Thunberg. Stakeholder capitalism. A wrap of our coverage of this year’s World Economic Forum.
The Money Show’s Bruce Whitfield conducts a shocking interview with CNN’s Richard Quest at the World Economic Forum in Davos.
Positioning your business for success - what does this phrase even mean?
Business Day’s Warren Thompson on Steinhoff's share price, which soared after the company announced a lifeline from creditors.
The Money Show’s Bruce Whitfield interviews Jayendra Naidoo, Chairperson at Steinhoff Africa Retail.
Markus Jooste was his “friend” and business partner. The Money Show’s Bruce Whitfield interviews Van Huyssteen.
Raeesah Noor-Mahomed has joined schoolkids around the world by embarking on a Friday school boycott over climate inaction.
Greg Gamble and Philippe van der Merwe join Refiloe Mpakanyane in studio.
Mapule Ndhlovu opens up about her life journey and how exercise changed not only her body, but her mindset for the better.
Anton Harber and Thandeka Gqubule won their defamation case over Mbuyiseni Ndlozi's party statement implying links to Stratcom.
WEF youth climate delegate Vanessa Nakate was cropped out of a group pic with her white peers, also featuring Greta Thunberg.
Nikki Bush has valuable tips on preparing not only your school-leaver but yourself for the journey into adulthood ahead.
Right to Sight trustee Dr Matt Young says they get donations at the most time but now need big sponsors.
The Cato Manor 9 were hanged in 1961 by the apartheid after taking part in an uprising on 24 January 1960.
The musician says he never writes songs about his personal life but this latest single is too personal for him.
Unisa acting director of communications Lusani Netshitomboni says they encourage students to register online.