Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
WolfofWarks....Class actions, a generic term here for Group Litigation, occur here regularly. As you know, they enable individuals and other parties to come together to bring the same claims against those they believe are responsible for wrongdoing. The CA term is used by UK lawyers all the time, and although the term is used more in the USA. I was only repeating what I read in the Telegraph yesterday; that '' findings have sparked a brewing class action against boohoo, which could reach the High Court if a settlement isn't reached''. The claim in respect of boohoo's working practices in factories involves about 100 institutional investores. A fall in value is the basis for investors' bid to claim compensation. It was based on an independent report that concluded that, at the time, ''boohoo's monitoring of its Leicester supply chain was inadequate, attributable to weak corporate governance'. Something we appear to see too often. I expect there will be a settlement which, given its in the Uk, will be considerably smaller than if it had occurred in the US.
Peoplepower1.....you are largely correst in your assumptions about Boohoo. Okay, at this level they are speculative and perhaps money can be made, particularly with Frasers sniffing around as they still see value and a 'fit' into their operations. However, this m0dern slavery accusation has been hanging around for years and was never going to go away. I read the Times article at the time who aledgedly found all sorts of goings ons within the extended family holdings. ''Most allegations were well founded and substantially true'' regarding slave labour said an independent barrister at the time. Of course today Boohoo say their position / stance will be robustly defended....the usual legal waffle. Come the end of the day, I reckon they will be faced with a class action and will eventually be forced to come to a settlement. Boohoo always seems to be involved in questionable practices. Remember the lawsuit in the USA. How much did that cost? Its a good job Frasers will be around to pick up the pieces.
What has prompted the big drop today. Seems harsh. I shouldn't have bought last week.
Utterlycluelee.....very true, I forgot to expand upon those scenarios. When it comes down to it, it can be an economical way to acquire shares if one was already probably intending to buy. What I think he's doing is hoping that the value of the underlying stock will at least maintain (or increase) its value during the course of the contract meaning he won't necessarily have to pay too much a price to acquire. Whoever is buying these put options is praying the opposite, that the SP falls!
Frasers has been constantly 'selling' puts each month thereby receiving an upfront premium. They do not hold any ongoing rights but will be obliged to buy the underlying shares at the strike price if the buyer of the put exercises his right on expiry. MA is playing a risky game with these derivatives because while the upside is limited to the extent of the premium earned at the beginning, the downside (loss) is potentially unlimited, which means he has to deposit margin cover with the stock exchange to undertake such actions. His stance basically implies he is bullish on the shares as he obviously doesn't want them to fall long term. That's how I see it anyway.
As Paulleydee says, Goldman Sachs are acquiring more shares through derivatives only a week after signalling a sell recommendation and a reduced target of 3.80. The action was on the 19th, but they chose to announce it after trading hours today. Makes you wonder what they're up to. Call me cynical, but this sounds like some sort of manoeuvre or manipulation whereby they benefit in some way.
Well that was the kiss of death, me buying some. Sorry folks.
I'm convinced the SP drop was overdone yesterday. I mean a 20% fall on news that USA figures were marginally below expectations is ridiculous. What a fickle market it is, largely down to gloomy forecasts for companies overall. The Uk market compared to others is cheap. RTO's P/E ratio was a bit high but this is now p/e 22, which in my view is worth a punt. I went in at 4.92 but like many should have waited a bit longer. I'm hoping there's some positive comment in the press over the weekend!
Jamess: Interestinging I've been reading about Sosandar (SOS), a much smaller online retailer that is growing revenue year on year, chipping away at the likes of Asos and Boohoo (like so many others). It's worth looking at their financials. Still relatively early days but a growth stock which reached profitability this year. They seem to recognised the value of having a high street presence (having worked with Next and Sainsburys etc) and plan opening in busy areas. Their shares tumbled this week by 25% on this news, but I feel they are actually on the right track having seen the success of people like Next and Sportsdirect. Sosander say: "It will bring increased brand awareness, higher margins, more efficient marketing and overall lower return rates. Over the last two years there has been ample and growing evidence highlighting the financial importance of store locations." Sosandar expects to have opened its first stores by spring 2024 in "affluent towns with thriving high streets", with the investment self-funded from existing cash reserves.
It will also reduce price-led promotions as it moves away from being an online-only retailer. Interesting. Perhaps Asos needs to be more than a one trick online pony.
Boohoo shorts position is dreadful. They are not going away anytime soon. This is because firstly most of the online fashion retailers are having a hard time in an overcrowded market. Boohoo has lost its way and, whilst attractive to predators, is perceived as being vulnerable; the hope I suppose is that the USA distribution centre will increase sales and margins. I have said before that the USA market is difficult to crack long term and it could be a drain on their resources for a long time. They need to get their act together here first before expanding. Secondly, if Asos reports end of year results next week which show other negative aspects which were not contained in their update last month, then both shares will drop further. Boohoos only hope is that a buyer emerges, otherwise it's a long old haul...in my view.
Frasers on a spree here, and at Boohoo. Only difference is, is that all his 15% of Boohoo are physical shares, whereas here, 12% of the 23% holding of Asos is in derivatives.
It looks as though he's selling put options again which generally means he receives an up front premium to possibly do something he may want to do anyway; that is buy the shares if they dip a little bit. It's risky as if the shares drop dramatically, he could be forced to buy the physical shares at a significantly higher price than the market price. To me, his strategy indicates that he doesn't see the price dropping too much from here. But hey, what do I know?!!!
.....just a liitle add-on to my last comment this morning. Whatever MA is up to, don't expect him to do any favours for the small private investor. He's a predator and an opportunist. He is disliked by both the City and his competitors as he doesn't conform to the norm. He is just as likely to sell up on a share in entirety without warning. He's unpredictable. Having said that, he's normally shrewd as can be seen by Frasers and the businesses it encompasses. However he lost out big to Kamani in the Debenhams debacle and still feels aggrieved about it having been sidelined and losing £150m as a result. What we see now is, in my view, not only an opportunity to possibly fit Boohoo into his set up, but also to get one back on Kamani who has let the business drift.
With MA adding to his holding, one would think the SP would react more positively. The reason it hasn't is that Boohoo are presently in a precarious state due to poor leadership and MA is, to an extent, propping up the SP. Nevertheless, he apparently sees good value under 30p. Notwithstanding the overcrowded competition, Frasers sees huge value in the teenage female market that Boohoo targets. It fits in well with their business. It simply needs someone who knows what they're doing, and Frasers more often than not have had the midas touch. Pure online fashion retailers are a one trick pony whereas the likes of Next and Frasers see the value of not having all their eggs in one basket.
The shorts aren't going anywhere soon. They still see money to be made here. And when they do start reducing it will be a very gradual process. Therefore liquidity is not an issue here.
Jamess....and I also see what you are saying in many respects. The way I see it, businesses who operate on the high street as well as online are spreading the risk. Interestingly Next's online sales are significantly higher online: 2022 £3.1 billion with an online profit of £467m. The high street sales were about £1.8billion and a profit of £241m.
Asos online sales for 2022 were about £3.9billion with a loss of £31million.
I know it is wrong to compare like with like, but nevertheless just look at those figures. It's quite depressing as an Asos shareholder.
I have to say that during the pandemic, the pure online retailers had a huge advantage, as that is where most of the money was directed to. High street clothes retailers were shut. I believe companies like Boohoo and Asos completley lost focus because it was all too easy for them, and they thought online was going to be the only way in future, with growth year in year out. As the saying goes....big mistake, huge. Frasers, Next , Primark and others have other ideas and it entails the best of both.
James's....if anything, (and based on the continual apparent demise of the high street) the pure online retailers should be miles ahead in the game. The likes of Next, and Frasers have large bricks and mortar costs to contend with in addition to their large online operations and yet look at their profits. In a nutshell, they've had far better people running things. They have excellent insights and strategies and move quickly when necessary, whereas Asos and Boohoo seem to go from one crisis to the next, with promises of more jam tomorrow, whereupon another excuse arises. Sorry, but you can't be lax in this crowded market. Boohoo and Asos in the right hands will succeed. Presently they are in the wrong hands.
AlexTrader.....the Asos spokesperson's waffle about 'refreshing the leadership' in order to move forward in the right direction, was somewhat disingenuous in it's content. The CEO himself fairly recently moved from the CFO position, and now some of the other promotions are also happening from within. Now, normally I wouldn't mind this if they had done a good job. But it's blindingly obvious that with a 93% drop in the SP, they have done a bloody awful job. The company needs much better top quality management. That means the CEO must go for a start. The company needs a good shake up by someone with a better vision and with a midas touch. Meanwhile check out the SP performances of ABF, Next, and Frasers. Go compare!
BlackfoxTrading....Asos already had their trading update in September, which was fairly detailed and indicated the end year 'results' at the end of Oct/early Nov would be at the bottom end of guidance. At least hopefully all that is already priced into the current SP, unless more undeclared issues are highlighted in the official accounts. Therefore don't expect much of an uplift in Booho shares. Look at the shorts and they're sending you a message. I agree, if Boohoo do survive as an independent, proper recovery will take a couple of years at least.
With Boohoo overtaking Asos as the biggest declared shorted share on the stock exchange, the signs are ominous. I see the shares in both companies continuing to head southwards, with the likes of MA accumulating more on the way. It's painful to watch. And it's equally painful to read some of the ever hopeful rampers here who still see this as a growth stock with a great independent future ahead of it. Well maybe, but this is a very overcrowded market and only the best will survive. Neither Boohoo or Asos presently have the quality at the top. I reckon both their days of independence are numbered.
T4G....BooHoo, with the recent distribution warehouse beginning to operate, has little more than a small 'foothold' in the States. Like other UK company's have found out to their peril in various sectors, the Americans will do their upmost to spoil the party. I predict, fairly confidently, that the USA, in one way or another, will continue to be a drain on the company's resources. Mark my words. Boohoo has to get its house in order closer to home in its core market before venturing out further. I'm surprised the CEO is still there. His days must (or should) be numbered. Come the end of the day, it is the fittest who survive in this crowded market. On balance, I don't see boohoo being a dominant player. Its had its time as an independent.
Unfortunately, with trade unlikely to be improving this year, and what with GS downgrading to 29p, this share is heading in only one direction. One can try and ramp this up as much as one likes but MA is likely to be snapping up more shares at a lower level in the next few weeks. The short position says it all. I agree with a previous comment that the company's expansion plans in the USA and the costs pertaining to that could ultimately be its downfall. So many companies think the USA is the place to be. So many companies have failed as a result. Best to get your home markets sorted out first.