Saad’s defence under pressure is straight from Musk’s playbook

I’’d imagine one of the most tedious and tiring of jobs on the desk of any CEO of a listed entity is convincing the investment public of his or her views of the company and its prospects. When it’s done well and everyone, and more importantly, analysts, are on the same page, it’s a smooth ride and what normally follows is a rapidly rising share price as the company basks in the hope of future profits. The opposite is also true, when a CEO loses his investment community and the questions get just that bit more difficult to answer. Or the answers become just a bit too “high grade” for analysts to understand. In such cases, the share reacts, sometimes violently. Stephen Saad, the founding CEO of Aspen Pharmacare, has experienced both sides of the story. He was a beneficiary of market affection that knew no bounds about five years ago, when he was lauded by London’s Financial Times and named on Forbes magazine’s list of African billionaires as he rode the crest of a wave of stock that was shooting the lights out.

In the five years leading up to the peak in Aspen’s share price in January 2015, the stock had gained more than 600%. Now let’s put that into a bit of context. Over the same period Apple gained 284% and Amazon 159%. It’s easy to see why the Durban-based company and its

CEO had received such acclaim and international attention as his firm pursued its global expansion into about 150 countries. And personally,

Saad, with his more than 10% investment in Aspen, has been a handsome beneficiary of the rise in the company’s shares.

The investment community at that stage was certainly eating out of his hand. It’s not the case anymore. At the start of the year, when that pesky short seller, Viceroy, was said to be targeting some SA companies after striking it lucky, some would say, in making the right call with

Steinhoff, it was speculated that Aspen would be its next target. Instead, the unsecured lender Capitec came into its cross-hairs. Analysts figured

Saad’s company was a potential target because its ambitious expansion play had many questioning its strategy.

Saad is now and has been for some time experiencing the not so glamorous part of running a listed entity, dealing with an anxious investment community. It’s a side that has prompted billionaire inventor, the SA-born Elon Musk to smoke cannabis on a live web show just last week. Not such a great idea with so many questions around Tesla, one that put his company’s shares under even more pressure.

But back to Saad, Aspen’s star has faded in recent years. Since its peak, the company’s shares have slumped more than 57%. And after this week’s results, the stock fell almost 30% as investors frowned over the price received from the sale of its infant-milk business, and the “quality” of its earnings.

He has fast lost the market’s faith; a fate that has befallen even the best CEOs, in truth. But his defence doesn’t bring much comfort for those seeking clarity on his strategy. Shares “. . . go up and down, sometimes it’s so high it is terrifying, to be honest, at a personal level, because you’ve got these huge expectations. It’s much easier when the share price is down.” He added that any analyst who did not understand the company’s strategy and its environment, were just “too lazy” to learn more about multinational pharmaceuticals.

That’s a defence straight from Musk’s playbook, which the Tesla founder used when he took on some analysts on a conference call, who queried his company’s growth targets.

Saad and Musk now seem to be stuck in the same position, one that requires that they work their investment community and try to revive lost faith. The latter needs to temper market expectations because there are many believers in the future of electric cars built on the end of the combustible engine, no matter what the recreational activities of the Tesla founder are. I think Saad faces possibly the more difficult task of convincing an investment public about his strategy after having been burnt by their blind faith in the financial “genius” of Markus Jooste, he of Steinhoff infamy.

Aspen’s expansion play has many questioning its strategy