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Here’s one for the corporate governance experts out there.
Kelso is a UK-listed activist investor whose largest holding is THG, the protein bar maker and online cosmetics retailer. It says it owns about 0.5 percent of THG shares, worth about £4.6 million at today’s price, after first buying in January 2023.
Kelso says THG trades at a “significant discount to its sum of share value” and wants the company to follow through on a promise to move its listing from standard London class to premium. In protest at what it sees as a lack of progress, Kelso intends 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 has 11.36 percent of its shares. Its second largest shareholder is Matt Moulding, 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 percent, a regulatory filing showed today.
Molding hasn’t said anything publicly about his personal investment in Kelso (and won’t take our calls), so we have to approach this hypothetical.
Kelso directors hold 16.31 percent of its shares in total, Bloomberg data show. Their fiduciary duty is to act in the best interest of all shareholders. The largest independent shareholder is Moulding, followed by many custodial accounts for retail brokerages.
It’s reasonable to assume that Molding is happy with the way THG is running, so he doesn’t believe Kelso has much of an argument. “Every day people tell me how THG should do things differently,” he wrote last month on LinkedIn:
From advisors, commentators, investors, friends, family, or even strangers when out for a family dinner – everyone has a lot to say. Of course, it has grown further since listing.
I’ve learned to soak it up and listen to most advice… and then rarely act on it! Listening, processing and then discarding 95% of the advice is very 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 views are unaware that countless others advise the exact opposite.
Kelso said last week that “two accounts of shareholders” voted against three of its AGM resolutions. We’ve reached out to the company for more details and, if the response is helpful, we’ll update this post.
At current prices, ceteris paribus, Molding could become Kelso’s largest shareholder by spending another £200,000. With a share buyback of £750,000, it could exceed the overall shares held by insiders. For not much more than the cost of a City AM it would go up to 25 percent and gain the power to jam special resolutions.
The big hurdle facing Molding’s brokers would be finding shares of Kelso to buy, as only 800,000 trade on average per day. However, from a fiduciary duty perspective, it is already a strange arrangement.
Kelso’s board has a duty to all Kelso shareholders to do things that will benefit them all. At the moment it’s safe to say that a campaign to change the way THG is run is in the best interests of all shareholders, including Moulding, regardless of what he believes. But Molding is no average shareholder. His fortune is tied to THG and his primary duty is to do what is in the best interest of everything THG shareholders, which includes 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 then, we are by no means corporate governance experts. If you are, dear reader, let the comment box be your canvas.