Ascendis shares bounce as forced sales slow
Private equity firm Coast2Coast has been offloading the company's shares to meet margin calls
The share price of Ascendis Health, the JSE’s worst performer in 2018, rebounded over the past two weeks since anchor shareholder Coast2Coast said it was putting measures in place to halt damaging forced sales of the company’s stock.
Private-equity firm Coast2Coast, which listed Ascendis in 2013 and then pledged some of its shares as collateral for bank loans, has been a heavy seller of the health-care company’s stock in recent months.
The sales have been involuntary as Coast2Coast has failed to meet margin calls from banks, which were triggered by a falling Ascendis share price. When facing a margin call, a borrower must either deposit more money into the loan account or the bank will sell some, or all, of the shares it holds as security.
The forced share sales compounded a sell-off linked to concerns about Ascendis’ tepid organic growth rate and high debt levels.
By December 12, the company’s share price reached a record low of R3.26. Just a year before, Coast2Coast had forked out R20 a share during an Ascendis rights offer.
But the stock has rebounded from its historic low, reaching R5.02 on Wednesday, the best closing price in two months.
Coast2Coast CEO Gary Shayne, who is also an Ascendis board member, told Business Day this week the forced share sales were coming to an end.
Shayne said in December his private-equity firm was working on measures to shore up liquidity and avoid further margin calls.
“Coast2Coast has initiated a number of projects, some of which are well progressed, which will provide additional liquidity … at which point we expect to see an end to the current overhang on the Ascendis share,” Shayne said at the time.
Coast2Coast, which also owns majority stakes in consumer goods companies Bounty Brands and Marlin Brands, had been forced to rely on cash flows from those assets to support its shrinking investment in Ascendis.
The firm was considering a partial sale of Bounty Brands to a private investment company and would also consider listing the business on the JSE “within the next two years”, after an earlier plan to do so was shelved, he said.
Bounty Brands, 75% owned by Coast2Coast, owns the Serena range of Mediterranean food products and refuse-bag maker Tuffy, and holds licences to international apparel brands such as Levi’s.
Independent analyst Anthony Clark said that if Coast2Coast was not forced to sell more Ascendis shares “anyone who was short the stock is probably covered or is covering, hence perhaps some of the relief rally”.
“But the company now has to deliver. If the next set of results, for whatever reason, is weak, any recovery the stock has made will get blown into the wind.
“People will want to see how margins are doing in the weak economy and what the debt situation is since we’re in a rising interest rate cycle,” Clark said.