NEPI Rockcastle calls for a market abuse investigation into Viceroy Research

NEPI Rockcastle fights back after Viceroy alleges the development company overstated its profit.

R9 billion was wiped off NEPI Rockcastle’s value on Wednesday after Viceroy Research accused it of overstating its profit. Its shares fell 14 percent to close at R99, pushing its decline in 2018 to more than 50 percent. 

Viceroy said NEPI’s Romanian subsidiaries, which account for about 57 percent of the group’s net rental and related income, had recorded a pre-tax loss of about €41 million in 2017, and not the €284.8 million profit reported by the company, leading to a discrepancy of about €325 million.

Viceroy said:

“This suggests company earnings figures are massively overstated for at least the last three years.” 

NEPI released the following statement in response: 

“While Viceroy states that the Report has been prepared for educational purposes only, and that the Report and any statements made within it are “not statements of fact”, it is clear that the issuance of the Report by Viceroy seeks to materially impact NEPI Rockcastle and its stakeholders. NEPI Rockcastle stakeholders are accordingly advised to consider the company’s response to the report as contained in this announcement and act prudently when reacting to the allegations set out in the report.” 

In an interview with Business Day, NEPI Rockcastle CEO Alex Morar said that the report was a “shocking piece of fiction”. 

"This is not a research report, it just forms a misguided view. Our most junior accountant here says the writers of this report have a shockingly poor understanding of accounting rules and policies in Romania. They have ignored inter-company transactions and made no attempt to speak to us or to understand the company in any way.”

This isn’t the first time that one of Viceroy’s reports has stirred controversy. They also released a critical report that led to a selloff in Capitec shares, which was subsequently been discredited. 

On Thursday, NEPI fired back by prompting the Financial Sector Conduct Authority to initiate a market abuse investigation against the organisation and to alert relevant overseas regulators to consider whether Viceroy was regulated appropriately and operating in line with market conduct and laws.

“The company echoes the February 2018 request of South African National Treasury, made following Viceroy’s report on Capitec Bank, that the Financial Sector Conduct Authority urgently consider whether it should initiate a market abuse investigation into the conduct of Viceroy, and to alert relevant overseas regulators to consider whether Viceroy is regulated appropriately and operating in line with their market conduct and market abuse laws.”  

NEPI also said it wanted Viceroy and its associates to declare any trading positions they may have on the company on the day the report was issued in order to facilitate a proper investigation.