Here’s one for the corporate governance experts.
Kelso is a British microcap activist investor whose biggest holding by far is THG, the protein bar maker and online cosmetics retailer. It says it owns around 0.5 per cent of THG’s shares, worth around £4.6m at the current price, having first bought it in January 2023.
Kelso says THG is trading at a “significant discount to the sum of parts value” and wants the company to keep its promise to move its listing from London’s standard class to premium class. In protest at what she sees as the lack of progress, Kelso plans to vote against the reappointment of THG chairman Charles Allen at an AGM scheduled for June 24.
Kelso’s largest shareholder is CEO John Goold, who owns 11.36 percent of the shares. The second largest shareholder is Matt Molding, co-founder and CEO of THG. After first appearing on the Kelso register in late November 2023, Molding has increased its stake to 9.11 per cent, a filing today shows.
Molding hasn’t said anything publicly about his personal investment in Kelso (and doesn’t welcome our calls), so we have to approach this hypothetically.
Kelso’s directors own a total of 16.31 percent of the shares, according to data from Bloomberg. It is their fiduciary duty to act in the best interests of all shareholders. The largest independent shareholder is Molding, followed by many retail broker custody accounts.
It’s fair to think that Molding is happy with the way he’s running THG, and so doesn’t believe Kelso has 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 at a family dinner, they all have plenty to say. Naturally, it has increased further since the listing.
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 who share their opinions are unaware that countless others are advising the opposite.
Kelso said last week that “two shareholder accounts” voted against three of the AGM resolutions. We’ve asked the company for more details and if the response is helpful, we’ll update this post.
At current prices, ceteris paribusMolding could become Kelso’s largest shareholder by spending another £200,000. With a share purchase of £750,000 he could surpass the total insider stakes. For little more than the cost of one City AM he had achieved 25 percent and gained the power to block special resolutions.
The big obstacle facing Molding’s brokers is finding Kelso shares to buy, as only 800,000 are traded on an average day. Yet, from the perspective of fiduciary duty, it is already a strange arrangement.
The Kelso board has a duty to all Kelso shareholders to do things that benefit them equally. At this point it can say that a campaign to change the way THG is run is in the best interests of all shareholders, including Molding, regardless of what he believes. But Molding is not an average shareholder. His wealth is tied up in THG and his main job is to do what is in his best interest all THG shareholders, including Kelso. And since Kelso’s stake in THG is insignificant compared to Molding’s stake in Kelso, it’s not clear who should be working for whom.
But we are in no way experts in the field of corporate governance. If so, dear reader, let the comments field be your canvas.