36ONE co-founder and CEO Cy Jacobs said he confronted former Steinhoff CEO Markus Jooste about JD Group’s fictitious numbers, resulting in him being blackballed.
Jacobs founded 36ONE Asset Management with Steven Liptz in 2004, offering hedge funds and unit trusts.
Speaking to Biznews, he said he always loved shorting stocks. “I love the idea of finding companies whose share price was not going to go up and make profits on a declining share price,” Jacobs said.
36ONE looked for companies which were overvalued or where there was something wrong which would cause the share price to decline.
One such company was JD Group, which included retail brands like Russells, Bradlows, HiFiCorp, and Incredible Connection.
In 2009, 36ONE shorted JD Group because of its deteriorating performance – similar to Protea Furnishers, which “hit the wall”.
“We believed JD Group was going the same way as Protea Furnishers, and we took a short position on it,” Jacobs said.
However, shortly before JD Group was set to report its 2009 results, Steinhoff bought a controlling stake in the retailer.
When JD Group’s results came out, they were magnificent. “They capitalised their IT costs, and they changed their method of provisioning for debt,” he said.
Jacobs, who previously audited JD Group and Protea Furnishers, immediately knew something was wrong.
He met then Steinhoff CEO Markus Jooste on the day of the JD Group results for the first time.
“I confronted Jooste, and I told him that these were not true results,” he said. “However, I was so naïve that I believed the JD Group CEO at the time, David Sussman, had pulled one over Markus.”
After the engagement, Jacobs and 36ONE’s relationship with Steinhoff soured. “We were not invited to company functions, and we were not spoken about in a good light with brokers,” he said.
He was not the only person who felt the wrath of Markus Jooste for questioning the accuracy of JD Group’s financial report.
An analyst at a big bank wrote a report pointing to fictitious numbers in JD Groups’ annual financial data.
“It was one of the first true analyst reports which were willing to say a stock was only worth 20% of its price,” Jacobs said.
However, the following day, the report was retracted by the bank. “Obviously, Markus has caused that,” he said.
“The analyst left the bank and was never allowed to tell their story,” he said.