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FT editor Roula Khalaf picks her favorite stories in this week’s newsletter.
Here’s one for corporate governance professionals.
Kelso is a UK-listed micro-cap activist investor whose biggest holding by far is THG, the protein bar maker and online cosmetics retailer. He claims to own about 0.5 per cent of THG shares, worth about £4.6m at today’s price, after the first purchase in January 2023.
Kelso says THG trades at a “significant discount to the sum of its parts” and wants the company to keep its promise to move its listing from the London Standard Class to the Premium Class. In protest at what it sees as insufficient progress, Kelso intends to vote against the reappointment of THG chairman Charles Allen at the AGM scheduled for June 24.
Kelso’s largest shareholder is chief executive John Goold, who owns 11.36 per cent of its shares. Its second largest shareholder is Matt Moulding, co-founder and CEO of THG. After first appearing on the Kelso register at the end of November 2023, Molding increased its stake to 9.11 percent, according to a regulatory filing today.
Molding hasn’t said anything publicly about his personal investment in Kelso (and he doesn’t welcome our calls), so we have to take a hypothetical approach.
Kelso directors hold a total of 16.31 percent of its shares, Bloomberg data show. Their fiduciary duty is to act in the best interests of all shareholders. Molding is the largest independent shareholder, followed by a host of retail brokerage depositories.
It’s reasonable to think that Molding is happy with the way THG is running, so he doesn’t believe Kelso is putting up much of a fight. “Every day people tell me how THG should do things differently,” he wrote on LinkedIn last month:
From advisors, commentators, investors, friends, family or even strangers when they’re out for a family dinner – everyone has a lot to say. Naturally, it has further increased since IPO.
I’ve learned to suck it up and listen to most advice… and then rarely act on it! Listening, processing and then discarding 95% of the advice is super valuable.
Why?
If we followed all the advice, it would be as effective as drinking water from a fire hose. Most people sharing their opinions don’t realize that countless others are giving the exact opposite advice.
Kelso said last week that “two shareholder accounts” had voted against three of his AGM resolutions. We’ve asked the company for more details and will update this post if the response is helpful.
At current prices, ceteris paribusMolding could become Kelso’s biggest shareholder by spending a further £200,000. By buying £750,000 worth of shares, he could exceed the total stake held by insiders. For not much more than the cost of one City AM, it would hit 25 percent and gain the power to block special resolution.
The big hurdle facing Moulding’s brokers would be finding Kelso shares to buy, as only 800,000 are traded on an average day. Still, from a fiduciary perspective, it’s already an odd arrangement.
Kelso’s board of directors has a duty to all Kelso shareholders to do things that benefit them equally. At this point, it can be said that campaigning to change the way THG is run is in the best interests of all shareholders, including Moulding, regardless of what they believe. But Molding is no average shareholder. His wealth is tied up in THG and his main duty is to do what is in the best interest All THG shareholders that include Kelso. And since Kelso’s stake in THG is insignificant compared to Moulding’s stake in Kelso, it’s unclear who should be working for whom.
But then we are by no means experts in corporate governance. If so, dear reader, let the comment box be your canvas.