Ascendis shareholders take another vicious shellacking
Problem is that it’s not clear how many shares Shayne and, by extension, Coast2Coast will still have to offload
If Ascendis Health shareholders were hoping for a short-term fillip from the resignation of nonexecutive director Gary Shayne, it has yet to materialise.
Shares in the pharmaceutical group sank to a new all-time low on Monday, of R3.05, before recovering somewhat to close at R3.40.
As of Monday, Shayne is no longer a board member of the company he helped create, under his and Cris Dillon’s private equity outfit Coast2Coast. That means Ascendis will no longer have to disclose his share sales, which he has been forced into after using Ascendis stock as collateral in raising funding to support the group.
As Ascendis’s largest investor, Coast2Coast was the only real supporter of the company's 2017 rights offer which, at R20, was pitched at a premium to the then share price. It raised R750m from the sale.
That was a far cry from Ascendis's first cash call of 2016, which was more than three times oversubscribed and which raised R1.2bn for the company.
But by 2017, it was clear that the market had begun to seriously question Ascendis’s financial strength after a breakneck acquisition spree.
The problem now is that it’s not clear how many shares Shayne and, by extension, Coast2Coast will still have to offload to meet its obligations. Already, C2C’s investment in Ascendis has been winnowed down to an 18% share of the company, from 29% in 2018.
It would be tempting to hope that the stock overhang is the principal reason behind the slump in Ascendis shares, which listed at R10 in 2013 and peaked at R28.90 in 2016.
But Ascendis has a mountain of debt to level, as well as produce better revenue and profits from the businesses it so quickly acquired. No wonder the market remains wary.