More pain for Al­lan Gray

But ‘Lucky Larry’ has an op­por­tu­nity to clam­ber in

Finweek English Edition - - Companies & Markets - Larry Lip­s­chitz MARC HASEN­FUSS

IT WOULD BE UN­DER­STAND­ABLE if seg­ments of Al­lan Gray’s port­fo­lios looked like some­one had driven a 10t truck through them. That lit­tle ac­ci­dent would be cour­tesy the trou­bled trans­port con­glom­er­ate Su­per Group, a com­pany with which Al­lan Gray seems cu­ri­ously en­am­oured.

A cou­ple of years ago Al­lan Gray pur­port­edly was the main re­sis­tance to a pri­vate eq­uity tilt at Su­per Group, which sup­pos­edly val­ued the group at more than 1500c/ share. That de­ci­sion proved fairly costly, as Su­per Group’s shares have plum­meted pre­car­i­ously since. But not only did Al­lan Gray fob off a pri­vate eq­uity pitch but the well-re­garded as­set man­ager also par­tic­i­pated in Su­per Group’s re­cent rights of­fer to raise around R487m in fresh cap­i­tal.

New shares were pitched at 400c/share. Al­though most in­sti­tu­tional share­hold­ers fol­lowed their rights, that vote of con­fi­dence has done noth­ing for Su­per Group’s share price. At the time of writ­ing, Su­per Group was trad­ing at around 150c on the JSE – mean­ing ev­ery rand in­vested in the rights is­sue is now worth a measly 38c.

Fin­week has sub­se­quently heard that Su­per Group founder and CEO Larry Lip­s­chitz ad­mit­ted at a re­cent AGM he didn’t fol­low his rights in the re­cent fund-rais­ing ef­fort. Nat­u­rally, any ret­i­cence by Lip­s­chitz to com­mit to such an im­por­tant rights of­fer would raise eye­brows – es­pe­cially con­sid­er­ing that in­sti­tu­tional share­hold­ers forked out bravely.

There’s been a scur­rilous in­fer­ence it might have suited Lip­s­chitz to hang back in the rights is­sue, as it seems the true pic­ture about op­er­a­tional set­backs at Su­per Group only emerged af­ter the fund-rais­ing ef­fort was con­cluded. Share­holder ac­tivist Theo Botha has pointed out that no sooner had the cap­i­tal been raised than Su­per Group’s man­age­ment is­sued a state­ment (12 De­cem­ber 2008) out­lin­ing hitches in An­gola and de­tail­ing a pro­vi­sion of R197m in its 2008 fi­nan­cial state­ments.

Botha noted: “The share price fell im­me­di­ately on that news. Pity the fund man­agers who fol­lowed their rights – they’ve lost more than half of their money in less than two months.” Botha says Lip­s­chitz must be ex­tremely happy he didn’t take up the 10m shares due to him in the rights is­sue. “If he had he’d have lost R20m.”

Of course, it may sim­ply be a case of he “could not” fol­low his rights rather than “did not” fol­low his rights. One could well be­lieve sug­ges­tions that Lip­s­chitz sim­ply couldn’t find the cash to fol­low his rights, know­ing full well that cur­rently banks aren’t ex­actly in the habit of ex­tend­ing fi­nance to par­ties want­ing to dab­ble in shares.

Still, it’s lucky for Lip­s­chitz as Su­per Group’s share price cer­tainly af­fords him an op­por­tu­nity to stock up if and when in­vest­ment funds be­come avail­able.

Funds cer­tainly aren’t a prob­lem at Al­lan Gray. How­ever, we won­der if they would be en­thu­si­as­tic enough to be top­ping up on Su­per Group at cur­rent lev­els.

Newspapers in English

Newspapers from South Africa

© PressReader. All rights reserved.