The equity value has decreased to less than one half of the paid-up portion of the company’s capital, a situation that requires that a general meeting must be held with shareholders to discuss measures taken to remedy the situation.
The equity value of the company now stands at negative €5.3-billion, or negative €1.24 per share.
The last published equity figure was €16-billion in 2016, before the restatements.
As such, management has made the decision to reduce the nominal value of the shares from the current €0.50 each, to €0.01 each.
“The outstanding value of the company will be €43-million once the revaluation takes place,” says Du Preez.
“There is still lots of uncertainty in the group and we must manage Steinhoff NV as an investment holding company in order to protect and maximise value for shareholders.”
https://www.dailymav...rt-cleaning-up/
Doesn't sound good to me - what am I missing?
Hey Nosh,
What you are missing is that this is a legal or regulatory requirement. Steinhoff has no option but to comply. In effect, they are saying the nominal share premium is so out of sync with reality that it grossly does not reflect the (net) asset value of the group.
However, it is a zero sum game for the total equity. It should have a zero impact in terms of the overall effect. However, releasing funds from a non-distributable (share Premium Reserve) to a distributable Reserve (like the Accumulated Profit of in Steinhoff's case the Accumulated Losses) is a very good thing indeed.
Steinhoff are cleaning up the balance sheet. Setting off the Accumlated losses against the reclassified Share Premium has no impact on the Equity. But the Balance Sheet looks a lot easier on the eye.
Without this, Steinhoff would have to have 5 years of E2b profits (after tax and after dividends have been paid) transferred to the Accumulated Losses reserves to extinguish the E10b amount. Steinhoff would never achieve this off their anemic revenue and diminishing ownership.
Regards
Captainfrom82
