All taken too early…..

With news that one of our portfolio stocks, Link Administration (LNK.ASX) received a takeover bid (from Pacific Equity Partners and Carlyle Group) for A$2.8 billion, I am reinforced by the large amount of capital scouring the world for investment opportunities.

Link’s stock price rose 24% today.

This type of good news is often more frustrating that rewarding as it reminds me of the other ASX listed stocks (which client portfolios have owned) whom have been ‘taken’ far too young.

Some of those companies were SAI Global, Mantra Group, Goodman Fielder, Scottish Pacific, APN Outdoor, Healthscope, Toll Holdings and AWE.

After all, it is the business of private equity and the like, to buy companies ‘early’ to they can improve them (see ‘dress up’) and on-sell them either in a new IPO or as a trade sale.

Look out for some of these names re-appearing on the market in a coming IPO wave which I’ll call “re-equitisation”.

October 12, 2020
by Rob Zdravevski
rob@karriasset.com.au

This Is How Director’s & Board’s Protect Their Salaries

The stock price of Australian surf retailer, Billabong (BBG.AX) has declined from $10, two years ago to its current price of $1.83. Excuses for it’s woes have been blamed on slow economic conditions and weak consumer demand. The blame should be placed on management.

Whether it has been ill-conceived ideas to expand into their own branded stores or a belief that consumers will continue to buy T-shirts for $60 simply ’cause the word “Billabong” appears across the chest should have been a warning to investors. Management should have occasionally wandered from the warmth of their offices to see what their market looked like.

When 45 year old dad’s make up the majority of the people wearing your clothes, something is wrong.

What else is wrong is……..is how, in mid-February 2012, whilst the stock price is trading around $1.45, Billabong rejected an unsolicited cash takeover bid from private equity firm, TPG, for $3.30 per share.

Today, Billabong’s is nearly doubling its shares on issue by selling 221 million more shares at a price of $1.02!!!

Have the director’s and board acted in the best interest of their shareholders?
Are they responsible and competent stewards of the company and it’s shareholder’s money?
The regulatory bodies should get busy with some investigating!

Somebody, please, throw in the use of brilliant phrases such as “best practices” and “corporate governance” before shareholders launch a class action lawsuit.

I wonder if board members were paid in shares, (rather than cash) if they would have made a different decision?

Not to be lost in my critique, we should also consider how bad TPG is at valuing this investment at $3.30 per share, only 4 months ago.

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