Continuous Disclosure: What’s in a share sale or purchase by management?

Two transactions by key executives have recently attracted investors’ attention.

Last week, My Food Bag chief executive Kevin Bowler sold a sizeable portion of his shares to pay for a tax obligation and make way for new investors.

And this week Leon Newnham, chief executive of Vista Cinema – a key division of Vista International – disclosed a substantial purchase of shares in the company.

Tama Willis, a portfolio manager at Devon Funds, said while Newnham wasn’t the CEO of the whole company, he headed a division that was critical to Vista’s recovery.

“It is a positive sign he is putting up a substantial amount of money.

“If he had bought $5000 worth we would have thought that was a token gesture that should be ignored. But this is $200k north and is quite a significant number. So the inference would be that he is seeing value at this price.”

Willis said while many cinemas remained closed, some in the US had begun to reopen. Virus numbers in the US and UK were falling sharply and those two markets were where the majority of Vista’s cinema revenue came from.

Very few blockbuster movies had gone straight to streaming services, another positive for Vista, which could enjoy a strong recovery in its revenue if a large number of movies were released over the next 12 to 18 months.

Willis said in the case of My Food Bag, it was common for chief executives to sell shares as part of an IPO. “But obviously we want them to sell less rather than more.”

My Food Bag’s share price has continued to disappoint since its listing last week. On Thursday it closed $1.63, well down on its $1.85 issue price.

Willis said My Food Bag’s peers Marley Spoon and HelloFresh had also seen weaker share prices.

“There has been a transition in the market away from Covid beneficiaries to Covid losers and that certainly has gathered pace in the last month.”

It’s a shift which has seen Fisher & Paykel Healthcare’s share price fall while banks and financial businesses have enjoyed a recovery.

“I don’t see anything company-specific that would be hurting them.

“Once we get through this period of changing market sentiment we would expect them to perform well,” Willis added.

Investors remember only too well the share selldown of a2 Milk by former CEO Jayne Hrdlicka. That resulted in the infant formula marketer moving to close off a loophole that allowed chief executives to sell shares soon after their appointment.

Who are NZ's biggest retail investors?

It’s would be easy to picture the big-wigs of Auckland’s Herne Bay or Remuera as the biggest investors in US shares.

But online investment broker Stake has revealed some surprising characteristics of New Zealand’s rising retail investors.

Those investing the most via Stake are likely to live in the Marlborough region. And Kiwis have an obsession with electric vehicle companies.

Tesla is a global favourite and has also been the most popular in New Zealand until recently.

But there’s a new kid on the block challenging Tesla.

From September to November 2020, Nio became the most traded stock by Kiwis on Stake,knocking Tesla down to number two.

It seems Kiwis like their technology and consumer cyclical stocks, with those sectors making up more than 60 per cent of the total Stake portfolio.

Conversely, banking, real estate and energy make up less than 4 per cent each.

So far, Kiwis have picked the likes of payments company Square, acquisitions business Churchill Capital and data company Palantir as this year’s best stocks to own.

Stake launched in the New Zealand market just under a year ago, offering access to US stocks, and already has about 30,000 Kiwis signed up with more than $100 million invested.

Housing boost for retirement village stocks

Last year, dire predictions of property price plunges weighed on the retirement village industry, but now the opposite has proved true, analysts are predicting a boost to the sector from rising house prices.

Forsyth Barr analysts Arron Ibbotson and Matt Montgomerie say the strength of the New Zealand housing market is a clear medium-term positive for aged care.

“So far this strength has not translated into higher unit pricing; our analysis suggests that is about to change.”

The pair have been gathering sales data across the sector for the past three months and found an increase of almost 3 per cent in February after a modest rise in January.

“These, coupled with likely continued positive housing market news flow, helps support our overall positive view of the sector and strong earnings growth expectations.”

They found Summerset had the highest price increase, with a rise of over 5 per cent in February driven by higher sale prices on independent living units,

Price growth was more modest at Ryman, up 1 per cent, while the data suggested increased pricing for Arvida units and stable prices for Oceania Healthcare.

Tracking of Google search data also found Summerset and Oceania experienced a steady increase in interest from the public, knocking Ryman off the top perch as the previously most searched for operator.

Appetite for Contact

Investor appetite for dividend yield is such that the $75 million retail component of Contact Energy’s $400m capital raising was heavily oversubscribed.

The money is going towards the construction of a 52 megawatt geothermal power station at Tauhara, near Taupō.

Contact said it had received applications totalling $230m for the retail offer and that scaling would be applied.

Under the offer, which was not underwritten, eligible existing shareholders could each subscribe for up to $50,000 worth of new Contact shares.

Contact said 18,667 shareholders applied for the offer, with an average application of about $12,300.

The retail segment follows on from a fully underwritten $325m placement of new shares to institutional shareholders.

The new shares under the retail offer will be issued at a price of $6.74 – a 2.5 per cent discount to the five-day volume weighted average market price of Contact shares traded before the offer’s closure.

Private investors did better than the institutions, which had to stump up $7 a share through the placement. United States-based investment giant BlackRock last month said it had a 14.34 per cent stake in Contact.

Takeover target?

Back in July last year, Continuous Disclosure raised the prospect of further M&A activity in the retirement sector once Metlifecare was gobbled up by Swedish-based EQT.

The rationale was that EQT, with $50 billion under management, might look to target other players such as NZX-listed Oceania Healthcare and the unlisted Bupa NZ’s care home asset to gain more scale.

The Swedes might even partner with another investor, such as Morgan Stanley, whose infrastructure fund had previously been interested in Metlifecare.

Fast-forward to today and the idea has grown some legs with recent news that Oceania’s chief executive Earl Gasparich has jumped ship to join Metlifecare.

The move was very sudden, with Gasparich telling the Oceania board about his resignation only the weekend before it was announced on March 8. That suggests Gasparich, who had been with Oceania since 2014, was poached.

Certainly, his knowledge of that company would be valuable for Metlifecare should its new owners be contemplating a merger attempt.

That said, EQT may not be the only private equity buyer lurking around the sector and could face competition from Australian firms in particular.

Oceania shares have eased back to $1.40 (yesterday’s close) since hitting a high of $1.60 in February. But they are up a whopping 174 per cent since the Covid-19 pandemic shook markets this time a year ago.

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