Ratings agency Moody's downgraded Steinhoff by four notches late on Thursday, placing the company on review for more downgrades, Fin24 reported.
In a statement, Moody's reportedly said the downgrade reflected the uncertainties and implications for Steinhoff's liquidity and debt capital structure.
On Tuesday, Steinhoff's CEO Markus Jooste resigned amid allegations of accounting fraud. This prompted the company to ask PwC to conduct an investigation.
Reuters reported that Steinhoff International did not tell investors about $1billion in transactions despite being legally obliged to do so.
The share price lost 40% on Thursday alone, Fin24 reported. Its market value loss in total is over R130-billion.
Director of investments at Sanlam Private Wealth, Alwyn van der Merwe, told Fin24: "The only trustworthy information is that the CEO has resigned and that an investigation into accounting irregularities has been launched."
In his resignation letter, Jooste said he had "made some mistakes" and apologised for the bad publicity he had caused the company.
Steinhoff's alleged fraud was uncovered by a German magazine in August this year. It was revealed that Jooste was among for employees under investigation by German authorities for alleged accounting fraud that occurred in 2015.
"Now I have caused the company further damage by not being able to finalise the year end audited numbers and I made some big mistakes and have now caused financial loss to many innocent people. It is time for me to move on and take the consequences of my behaviour like a man. Sorry that I have disappointed all of you and I never meant to cause any of you any harm," Jooste said.
Adrian Saville, CEO of Cannon Asset Managers explained Steinhoff's alleged modus operandi to MoneyWeb:
"There are two elements of Steinhoff that have stood out for a long time, and I don't think this is being expert after the fact. Each time they made an acquisition it tended to get bigger and bigger, which often is the nature of a type of sheltering where in order to hide historically rearranged financial furniture, you have to buy bigger and bigger rooms of furniture.
"But as the transactions got bigger, the return on invested capital fell increasingly below the cost of capital. This meant that they were either borrowing money or issuing equity, and inevitably they've been a furious equity issuer to fund transactions that were not particularly good transactions."