- Shares slump to all-time low
- Takeover offer from founder Dunkerton unlikely
- Discounted rights issue on the cards
Shares in beleaguered fashion chain Superdry (SDRY) slumped more than 50% to an all-time low of 14p today as investors finally got the chance to price in the barrage of bad news released after the market close on Thursday 28 March.
Takeover hopes were dashed as the troubled jackets-to-hoodies retailer said an offer from CEO Julian Dunkerton is unlikely, although Superdry’s founder remains committed to the company.
The severity of the share price slump implies disaster for shareholders who face wipe-out with a discounted equity raise on the cards and a stock market de-listing looking the most likely scenario.
DUNKERTON WALKS AWAY
In February, Dunkerton, who has a 26% stake in Superdry, confirmed he was in discussions with potential financing partners and was considering a possible cash offer for Superdry.
But in a pre-Easter release, Superdry explained a takeover offer from Dunkerton is ‘unlikely to deliver an outcome for shareholders, or stakeholders more broadly, that the transaction committee and Julian Dunkerton are confident can be executed in the context of the company’s ongoing work on its turnaround plan and material cost saving options.’
BYE, BYE SUPERDRY?
Superdry stressed Dunkerton remains ‘fully committed to the company over the long-term and is in discussions with the company in respect of alternative structures’.
These include a possible equity raise fully underwritten by Dunkerton, ‘which would provide additional liquidity headroom for the company’s turnaround plan’.
Unfortunately for shareholders who’ve seen Superdry stock plunge 97% over the past five years, the fashion retailer warned any equity raise would be at ‘a very material discount to the current share price’ and ‘conditional on a de-listing of the company’.
In a separate pre-Easter missive, Superdry announced that it has agreed an extension and increase to its secondary lending facility with Hilco Capital which will provide the embattled retailer with improved liquidity headroom to help with its turnaround plan and cost-cutting programme. Its existing asset backed lending facility with Bantry Bay Capital remains in place.
A victim of the cost-of-living crisis and fickle retail sector’s shifting sands, Superdry coughed-up a pre-Christmas profit warning (19 December 2023) pinned on the challenging retail market and one of the warmest autumn seasons on record which persisted through the Christmas period, impacting demand for its autumn/winter 2023 ranges.
Ensuing first half results (26 January 2024) confirmed a woeful festive period with group sales down 13.7% in the 12 weeks to 20 January 2024 amid heavy sector-wide discounting.
THE EXPERT’S VIEW
Russ Mould, investment director at AJ Bell, commented: ‘Julian Dunkerton has withdrawn his attempt to take the troubled retailer private which means Superdry now faces the prospect of having to conduct a heavily discounted fundraising to stay alive, conditional on de-listing the group from the stock market.’
Mould added: ‘It has secured additional borrowing facilities that come with a chunky interest rate but that’s only going to be a small plaster on a big wound – not enough to save the day.
‘Investors now appear to be dumping the stock to get back anything they can, even if it means crystalising a loss. In the absence of someone else throwing their hat in the ring and trying to buy the business, we can probably wave goodbye to Superdry as a listed entity.’
DISCLAIMER: Financial services company AJ Bell referenced in this article owns Shares magazine. The author of this article (James Crux) and the editor (Martin Gamble) own shares in AJ Bell.
