More pain for Allan Gray
But ‘Lucky Larry’ has an opportunity to clamber in
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.