Comment, question or quotation of the day
17-09-2023 : Reverse auction
Exor, the listed holding company that groups together the investments of the Agnelli family, has announced a share buyback of 5% of its share capital using the reverse auction technique for €750m, and ordinary purchases on the market over time for €250m.
It is true that family investment holding companies are not very popular on the stock market at the moment, with discounts to net asset value (NAV) of between 38% (GBL) and 57% (Peugeot Invest). Exor, which has registered the best performance in recent years, has a discount of 43%. For an investor, these vehicles, which allow families to play a more important role in their investments than they would be entitled to if they were limited to their own funds, are unattractive, hence the discount. Who would think that Exor would keep its stakes in Ferrari, Juventus or Stellantis, solely on financial criteria, without the historical attachment to the companies playing an essential role?
The announcement of this reverse tender offer was combined with a 23% rise in NAV over the first half, compared with half that for the benchmark stock market index. It is therefore difficult to attribute the 5% rise in the share price that day to either of these announcements with any certainty. For a company with a market capitalisation of €20bn, we believe that the performance effect had the greatest impact. This transaction, which will reduce NAV by around 3% but the number of shares in issue by 5%, will result in a 2% increase in NAV per share, which may explain part of the 5% rise in the share price.
The reverse auction technique, more rarely used in Europe than the simple fixed-price offer, simply means that shareholders interested in selling some of their shares in this way will indicate the price at which they are prepared to sell what quantity of shares, within a range of between - 3% and + 10% of the market price. Exor will set the price at that which will enable it to buy back €750m, starting with the lowest prices, hence the term "reverse auction".
16-08-2023 : Novo Nordisk illustrates one of the laws of breakeven
The publication of the half-yearly results of the Danish pharmaceutical group Novo Nordisk illustrates one of the laws of breakeven, which states that the further a company is from its breakeven point, the more its results vary in close line with sales.
With an operating margin in the first half of 2023 of 45.4%, Novo Nordisk is indeed a long way from its breakeven point, probably around 270% above it. In short, sales would have to fall by 73% (sic) for operating profit to cancel out, assuming that fixed costs remain fixed, which is a particularly conservative assumption when sales fall by three quarters!
In the first half, sales rose by 29%, boosted by excellent results from its anti-obesity and anti-diabetes drugs. Operating profit grew by 30%, almost as much. For the year as a whole, Novo Nordisk has announced sales growth of between 27% and 33% and operating profit growth of between 31% and 37%. When you're excellent, it's hard to be super excellent!
Novo Nordisk is Europe's second-largest market capitalisation, 10% behind LVMH (€377bn market value, compared with €403 bn for the luxury goods leader).
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The Vernimmen.com Letter
Number 151 of July 2023
News : News from our friends the SPACs
Statistics : Employee share ownership in Europe
Research : How can unicorns be properly valued?
Q&A : What is the Arbitrage Pricing Theory?
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