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Agree, perhaps the most interesting number is the £10m integration cost, at half the planned number. The exercise will give them a big run at the US.
Yeah there has to be a huge upside before dilution. The idea being at that point you’ve made so much (which they funded) then you won’t care
The stock fell as (again) investors are having to look at a heavy amount of capex spending to fund the future
Asos is now “materially” moving revenue to own brand which will bring the higher margins. For me I’d like to see asos copying nexts idea of taking equity stakes in brands. Asos’s ace here is they can spot young emerging brands where as Next are paying big money for established brands (who don’t have the size to be proper and agile online businesses)
It will then be a bit like the big commodity traders (glencore etc) asos can then establish exclusivity over growth brands so seeing equity growth and then eating the lunch on the sales growing and getting paid for what asos does best ie the logistics
I think forward expectations weren’t raised as I think they are seeing the increased margin offset by headwinds. That way if things get better they can surprise to the upside
Danl90. Thank you for the reply. I do stand corrected. I should have read the entire RNS before commenting. I can now see that it makes sense so thanks again.
They also talk about Topshop being popular in US and that their excited about its potential growth there. My guess is own warehouses will be for own brands and 3rd party they will just charge around 20% commision on sales. At least thats my understanding from watching video presentation
Imo it is a great deal. 0.7% interest and share dilution at 50% premium to current share price. If they want to conquer US they need money. Uk is like kindergarten compared to US. Can't just go there and expect to be one of biggest online retailer by reinvesting cashlow. Etsy is 28b mcap. Don't think there is any big online fashion retailer in US yet.
https://www.statista.com/forecasts/646097/top-online-stores-fashion-united-states-ecommercedb
Macys number one. Look how horrible their clothes and website is. I hope Asos will focus on US with that cash and take the crown of biggest online fashion retailer. With partner fullfilment they can grow quick without worrying about running out of warehouses.
A good post Dan. Does that explain why the company would not change its forward forecast? Having bought Topshop and integrated it (note the integration leaves a pathway for other brands to follow).
I find it very strange to now have direct control on +£1bl in sales and all of the margin, plus recoveries for first costs, that noting was said? Having said that, your points protect existing shareholder value
It’s not currently dilutive it’s a convertible bond. Atm they are still bonds and not equity (no dilution)
The protection for current shareholders is the convertible bonds will buy shares at £79 not the current price
It’s only dilutive if the shares in the future are worth more than £79. If they are worth less then no one will convert the bond
However if the shares are above that then yes there would be dilution but we’d be far enough past £79 and say on 50% profit from here that losing a little would be fair given that the 50% upside you’d be sat on was driven from the cheap cash you got from the bond
The share price has dropped mainly due to the nearly seven per cent dilution of the shares regarding the convertible bond. Asos need to raise money to keep the growth on track. Whether this has more negative impact on the shares is anyone’s guess. It seems a massive dilution to me and sits uncomfortably. They should have released the statement at the same time as the trading update not hours later. It’s always sleight of hand with businesses. Doubtless Nick Bieghton will reward himself with extra free shares very soon.