RE: Michael Lindsell's purchase18 Jan 2024 19:39
@gotoutjustintime, you make a very good point. Even a limited buyback programme would surely go some way to closing the discount. They could always hold the bought back shares in Treasury and re-issue them at NAV or a small premium in better times. That would keep the share count at 200K in the mid-term (sorry, I mistakenly said 250K in my original post). I agree for your reasons that they probably wouldn't want it to go above 200K.
All that said I think there is a slight practical issue. Right now they pay a very generous dividend, which is in turn mostly funded by the super generous payout from Lindsell Train Limited. After running costs at LTI there is currently very little surplus cash left in the tank for buybacks. Assuming they can't or don't want to take on debt in such an esoteric trust, then any meaningful buybacks would require cutting the dividend. And the special component of the dividend is already gone and we have been told to expect a nominal fall this year. So all a bit difficult. Just to add though that Finsbury Growth & Income Trust has been an active buyback participant. So as a group they are not theoretically averse to them.
But then the cynic in me thinks that there is another point, and that is that Michael and Nick, who are known to have a very LT mindset might not be too upset at the discount - it allows them to keep mopping up shares in LTI on the cheap. On a much smaller scale I am sort of in the same boat. I am bemused by the discount but see it as a great opportunity to tuck away more shares in LTI, in the expectation that one day the discount closes and the NAV reflates.
As a further aside my more major concern is something else. And that's the decision by LTI to sell some of its shares in LTI Ltd in order to incentivise the younger team. You may have seen todays RNS flagging a further sale in LTI Ltd. Granted the sums involved are small for now. And I get the need to keep the younger team members on board. All that said for me the stake in LTI ltd is the trusts USP and raise d'être. I can and indeed do hold Diageo directly. But its LTI's strategy and amazing profitability, which is the real draw. So the LT dilution of that stake lessens the LT interest in the trust for me