Investor Coast2Coast’s forced sales reach 3% of Ascendis
Ascendis Health’s mainstay investor has been forced to offload about 3% of the company’s total shares in issue to meet obligations to lenders, compounding a precipitous share decline that has made it one of the worst performers on the JSE so far in 2018.
A series of stock exchange filings in recent weeks show that parties linked to major shareholder Coast2Coast have had to sell more than 13-million Ascendis shares to meet margin calls and to partly settle convertible debentures, which are debt instruments that can be swapped for equity.
Analysts said this suggested Coast2Coast was taking financial strain after it forked out more than R700m less than a year ago to buy 37-million newly issued Ascendis shares at R20 a piece. This was during Ascendis’s rights offer, which was aimed at helping it pay off debts but which received negligible interest from investors.
"My sense is Coast2Coast is being quite massively squeezed," one analyst said.
Partly due to concerns about Ascendis’s high gearing levels and tepid organic growth, as well as broader market jitters in the wake of Steinhoff’s meltdown, the stock retreated to just R3.81 on Wednesday, a 78% decline year to date.
Coast2Coast, an investment holding company whose portfolio includes Bounty Brands and Marlin Home, listed Ascendis on the JSE in late 2013.
Buoyed by a number of international deals, the stock reached a high of R28.90 in September 2016 before its trajectory quickly turned.
In the most recent stock exchange announcement, on Wednesday, Ascendis said Coast2Coast had been forced to offload another R1m worth of its shares to meet a margin call from a bank, and another R25.6m worth of its shares to partly settle a convertible loan issued in 2016.
Ascendis board member Gary Shayne, who is also the majority beneficial owner and CEO of Coast2Coast, did not respond to requests for comment on Wednesday.
In its announcement, Ascendis said Coast2Coast "is a long-term shareholder of Ascendis and remains confident in the strategy of the company".
Ascendis is led by Danish national Thomas Thomsen, who took over as CEO from Karsten Wellner in March 2018.
In September, Ascendis said it would sell its bioscience business, which accounts for 12% of group revenues, as part of a new strategy to focus solely on core operations.
In the year to June, Ascendis’s total revenues grew 21% to R7.7bn, while normalised headline earnings increased 14% to R738m. However, the group’s net debt to earnings before interest, taxes, depreciation and amortisation ratio remained high at 3.4 times.
The company will need to settle a number of deferred vendor liabilities over the next year, including a R228m payment due in the first quarter of 2019 and an R841m payment, related to the Remedica deal, due in August 2019.
The latter obligation "will create a liquidity challenge", Ascendis said in a presentation posted on its website in September.