Patrick Hosking, Financial Editor - August 18 2022, The Times
Clients of Liontrust Asset Management appear to have been the biggest losers from the collapsing share price at Made.com, which was yesterday dubbed the worst-performing flotation of 2021 after warning it needed more capital.
Majedie Asset Management, now a subsidiary of Liontrust, was the main cornerstone investor at the time of the fateful initial public offering of Made.com in June last year, buying £50 million worth of shares, giving it a 6.45 per cent stake at the time.
Other big buyers into the flotation were Axa, NFU Mutual and Premier Fund Managers.
Made.com shares have since collapsed from 200p to just 9.90p at yesterday’s close, leaving investors who bought £200 million worth of shares at the time of the flotation nursing losses of 95.1 per cent. That makes it the worst performing float of 2021, according to calculations by AJ Bell, the broker.
The total hit to Liontrust, which until recently owned 7.76 per cent of the company before selling down to 4.95 per cent on August 2, according to stockmarket filings, could be as much as £58 million in both realised and unrealised losses.
Made.com’s co-founder Brent Hoberman, of Lastminute.com fame, and private equity backers of the business sold £100 million worth of their shares at the time, while Made.com sold another £100 million of newly issued shares as well.
New investors were attracted by the promise of Made.com, the online furniture and homewares company which billed itself as “a digitally native lifestyle brand” using designs from 150 established and up-and-coming designers. But Made.com has since been hit by a string of setbacks and yesterday said it was looking at raising equity capital. It has also hired PwC, which is looking at more drastic solutions including selling the business to a trade buyer if it cannot raise about £50 million in an emergency rights issue to shore up its balance sheet.
Liontrust, a FTSE 250 company that manages £34 billion of client assets, completed the purchase of Majedie, which manages the popular £1.05 billion Edinburgh Investment Trust, in April. Liontrust was approached for comment.
Banks including JP Morgan and Morgan Stanley took £5.4 million in fees as the flotation was pitched as an exciting way for investors to back a platform with a million buyers of furniture and homewares. Made.com’s partnerships with up-and-coming designers made it well placed to grab a bigger share of a total addressable market put at £94 billion, it was claimed.
Since then, Made.com has been hit by setbacks, including supply chain disruption, rising freight costs and the cost-of-living squeeze. It has been scrambling to sell products in sales promotions to improve cashflow and avoid being left with unwanted stock.
A report by Sky News on Wednesday evening — that Made.com had hired PwC to look at restructuring options — flushed out a short statement yesterday morning: “As indicated in the [second qaurter] trading update, Made is considering all options to allow it to strengthen its balance sheet. Made confirms that these options include a potential equity capital raise. Made continues to consider its options and a further announcement will be made if and when appropriate.”
Job losses are expected among the 600-strong British workforce.
Analysts said the share price had fallen so far that a conventional rights issue might be difficult to achieve. The company wants to raise about £50 million, but its market value is £39 million; at the time of the float, that value was £775 million.
While Made has problems, it does have a moderately well-known brand, a database of 1.3 million customers and a strong presence in Europe. It is also free of debt, which could make it attractive to a turnround specialist.
Mike Ashley, whose Frasers Group owns Sofa.com, was suggested yesterday as a potential buyer, though he is tied up with other deals. Frasers said “no comment”. DFS, Dunelm, Maisons du Monde, of France, or Wayfair, of the United States, were also mooted. Made.com could be an interesting fit with John Lewis, though the co-operative rarely makes acquisitions.
Made.com is still burning through cash. In a warning last month, it said it expected gross sales for the full year to fall by 15 per cent to 30 per cent. Its previous guidance had been for a fall of up to 15 per cent. By the end of the year, it expected its cash level to drop to £5 million to £30 million. It had suggested previously that the number could be £40 million to £65 million.
Nicola Thompson, who took over as chief executive in February, said at the time that she was considering options to beef up the balance sheet. “It’s clear that things are tough for consumers. Understandably, we’ve seen a worsening in consumer confidence since May and this has had an impact on this period’s performance,” she said then.
The main sellers at the float were Level Equity Growth Funds, which sold about £15 million of shares, and Partech Growth fund, which sold about £13 million of shares. PROFounders Capital, which partly looked after Hoberman’s holding, sold £6 million of shares.
Hoberman, 53, co-founded Made.com in 2010 alongside Ning Li, Chloe Macintosh and Julien Callède.
Behind the story The year 2021 is not shaping up to be a great vintage for flotations in London (Patrick Hosking writes). It was the year of the “flopperoo” — stock market investors’ damning verdict on Deliveroo, one of the biggest initial public offerings of the year. The meal delivery group raised £1.5 billion in what was one of the biggest capital-raisings of the year. Investors are now sitting on losses on paper of £1.16 billion.
That 77 per cent destruction of shareholder values has been eclipsed by Parsley Box, a tiddler whose IPO investors have lost 95 per cent of their money. Ready meals for the over-65s proved a more difficult market than investors had hoped.
Now Made.com has broken even Parsley Box’s dismal record, making it the worst performer of the “class of ’21”, according to research by AJ Bell.
It was a boom era for IPOs, especially of growth-focused companies that could claim any vestige of technology-related disruptive potential. By the end of the year, 108 debutants had listed in London, including 53 on the main market, according to KPMG data. There were a mere 38 in 2020 and only 35 in 2019.
But too many were priced for perfection or were valued on the assumption that lockdown conditions, which boosted demand for anything delivered to the home, were going to last. Some meaty new arrivals to the market have seen valuations tumble. Investors have lost 29 per cent backing Dr Martens, the shoe supplier, and 69 per cent in Trustpilot, the independent reviews company. Even excitement about Oxford Nanopore, the gene-reading technology supplier that joined the market to rapturous applause in September, has deflated. Investors in that float have lost 27 per cent of their money on paper.
There have been successes. Darktrace, the cybersecurity company, sold shares at 250p in April 2021 and they now trade above 540p and have been boosted by a takeover approach from Thoma Bravo, the UAmerican private equity group. Auction Technology Group, the online auctioneer, whose shares began trading at about 800p when it joined the market in February 2021, is now closer to 900p in spite of the sell-off in anything seen as tech-related. The rise in energy and some commodity prices has lifted a few of the more speculative companies floated last year, including Arrow Exploration and Cornish Metals, up by 172 per cent and 161 per cent, respectively.
The best performer from the class of ’21 is Bens Creek, a small company that mines for coking coal in North America. Investors who alighted on it in October 2021 when it raised £7 million in a placing have chalked up a return of 243 per cent.
Sadly for overall investment returns, investors put 214 times more money into Deliveroo than into Bens Creek.
Investment Synergy - yet again the small investor loses.... maybe it's time to start calling some of these IPO´s what they often shape up to be ?
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