Short-seller Viceroy strikes again – sends SA fund crashing

 ·28 Nov 2018

NEPI Rockcastle has hit back at short-seller Viceroy, after the group published a new research document claiming the real estate fund was overstating profits.

In a statement published on the JSE on Wednesday, NEPI said that it had noted the report and was working on a comprehensive response to the allegations contained in it.

The group’s shares slumped the most in nine months in Johannesburg after short sellers Viceroy Research accused the Johannesburg and Amsterdam-listed real estate fund of overstating its profits from Romania.

Viceroy said in a report published Wednesday that it had uncovered “numerous inconsistencies within NEPI Rockcastle’s financial reporting.” Even without taking those into account, the Isle of Man-based investor is “fundamentally overpriced when compared with peers,” it wrote.

“The report is misrepresenting the figures,” NEPI Chief Financial Officer Mirela Covasa said by phone. “We are not overstating profits, there are specific accounting reasons for the numbers.”

NEPI’s Romanian portfolio generated pre-tax profit of 284.9 million euros ($323 million) in 2017, according to its financial statements. Yet the assets really operate at annual losses of more than 40 million euros, according to Viceroy, citing local account filings.

Romania is the company’s largest market and makes up almost half of its rental income.

According to NEPI:

  • Viceroy has not approached the company for comment and the company has not had an opportunity to respond to the allegations prior to the release of the Viceroy report;
  • The report is based on numerous factual errors, misleading information and false claims;
  • The company considers that it has consistently proven transparency towards stakeholders and its disclosures are prepared in accordance with the legal requirements and best practices; and
  • The company is considering taking measures to hold any parties accountable for presenting misleading information.

Viceory rose to prominence just over a year ago when it published a report on South African retailer Steinhoff International Holdings NV just after the company reported accounting irregularities that triggered a share-price collapse.

That report detailed a number of third-party transactions that were used to inflate asset values, deals that are under investigation by auditors at PwC.

The short-seller is also targeted banking group Capitec in a series of reports, claiming the bank was a loan shark and also manipulating its loan books. The claims sent Capitec’s share price crashing, however, it has since recovered.

Viceroy itself has faced accusations of plagiarism, with an Intellidex investigation alleging that the group had copied most of its work in the Steinhoff saga which made investors take note of it in the first place.

NEPI shares declined 9.5% to R104.40 as of 12h20 in Johannesburg, extending the drop for the year to 51%. Fortress REIT Ltd., another Johannesburg-listed property firm that owns a 24% stake in NEPI, fell 15%.

With Bloomberg

Read: Short seller Viceroy targets mining firm in new report

Show comments
Subscribe to our daily newsletter