M&G’s disorderly sell down
Thank you @Zenox for posting the article regarding Tom Dobell standing down. M&G should have allowed Tom to maintain his position until the 2nd of October 2020 as MSB’s first binary approval decision will be made. This binary decision will ultimately impact the underlying success of M&G recovery fund and could be the long term reward the fund has been investing for over the past 5-10 years. It will be interesting to see how this affects MSB’s SP over the coming weeks and possibly explains some of the recent large dumps this week.
Until we receive the next announcement M&G will be MSB biggest headwind. M&G are in an extremely difficult position as MSB is one of their largest holdings. As MSB’s price rises M&G will be forced to sell more MSB shares to try and keep their portfolio somewhat balanced.
We are witnessing a somewhat disorderly sell down by MSB’s largest shareholder. Their sell down is stopping MSB share price from making any sustained gains.
MSB made up 8.81% of M&G fund at 30 June 2020. At the 31 July 2020, MSB made up 10.4% of the same Recovery portfolio. Since the end of July, M&G have officially sold 18m shares between 05/08/2020 and 03/09/2020. Unfortunately, the sell down looks like it will now continue and worse, it may accelerate. Have the snorters just done a Bradbury?
The table below shows the number of shares that M&G may need to dispose of as the price rises. For example, if M&G wanted a portfolio exposure of 8%, at $4.50 M&G may needs to dispose of approximately 8,186,000 shares. If MSB share price reaches $10 M&G may need to dispose of 29,891,000 shares to maintain an 8% portfolio weighting.
The table also shows if Michael Stiasny wants a smaller exposure to MSB, the recovery fund would need to dispose of 31,941,000 shares to achieve an exposure level of 4% at $5 per share.
Table in ‘000. 27,347 = 27,347,000 share to buy.
What we do not know is, will M&G continue to sell once their shareholding falls below the substantial holder threshold of 5%. For MSB this is 29m shares, based on M&G last substantial notice on 3 September 2020 they have 51.7m shares. So, we maintain visibility if they choose to sell another 22.5m, after that we are blind but, it may not matter.
By October 1 we will have our binary FDA decision. Although a sell down by M&G may initially hold the SP back, a positive FDA decision should enable the SP to push higher.
Regarding the FDA decision, I suspect MSB will be made aware of the announcement date prior, this means MSB will put both the Australian and USA shares in a trading holt until MSB can release an official statement. The market will know the outcome prior to the announcement BUT, we will not be able to trade until it is officially announced on the ASX. My expectation is, trading holt on 29th of September with an ASX announcement on either the 1st or 2nd of October.
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