More about Skin in the Game and Impax

By Cliff Weight, Director, ShareSoc

Please note that these are my personal views and not those of ShareSoc. Neither I nor ShareSoc is able to give financial advice and nothing in this blog should be construed as such. Disclosure: I hold shares in Impax but not in IGR.

Back to my Portfolio and Impax

I have had a busy few weeks, with the launch of the Woodford Campaign, the Sirius webinar and a massive 49 page response to the FCA’s Call for Input on the Consumer Investments Market, which I co-authored. So today it was time to look at my own investments and whilst perusing the early morning RNS’s and press coverage I saw the share sales by directors of Impax.

https://citywire.co.uk/wealth-manager/news/impax-chair-banks-11m-on-rocketing-share-price/a1440390 explained that the outgoing Chairman Keith Falconer sold £10.6m of Impax shares.

I am a great believer in skin in the game and this was a huge red flag for me.

I tend to buy shares in companies who present at ShareSoc events. This was where I first heard of Impax, who I have also seen at Mello and Equity Development, the latter writing paid for but excellent reports explaining Impax’s progress. As a result of some purchases in 2017/18 and subsequent great share price performance, Impax now makes up about 25% of my “growth” portfolio of shares. Having lectured Sirius ex shareholders on the wisdom of diversification, I am acutely conscious of not following my own guidance. So it is very important to keep a close eye on what is happening.

Chairman Keith Falconer is retiring. I feel that Directors should not sell until two years after they leave, so that any worms/gems they leave behind can emerge and influence the share price up or down before they sell. Anyway, no such rules applies at Impax and Keith has decided, not unreasonably, to diversify some of his wealth and sell 20% of his holding. He still retains about £37million. So, I am relaxed about his sale on this occasion. Were he to sell more, then my view might change!

Keith’s last sale was in Feb 2018 , when he sold 3.8m shares at £1.65 for a total of £6.35m. A sensible diversification, but in retrospect an awful decision as the share price is now £7.22!

Other worrying things are the sales by the CFO Charlie Ridge and largest shareholder BNP.

This week Charlie sold 66,666 at £7.10 for £473,000 and this was on top of selling 450,000 in July at £3.65 for £1.64million. (note to Charlie, not your greatest financial decision!) Does he know something I don’t? It is always a big red flag when the CFO sells.

Largest shareholder and long term partner BNP sold 13.6 million shares or around 10.5% of Impax’s market cap at £5.10 for just under £70m leaves BNP sitting on 18.2 million shares, about 14% of the total. See https://citywire.co.uk/investment-trust-insider/news/impax-tumbles-10-as-biggest-backer-sells-major-stake/a1424078

High performing fund manager Liontrust ,and also Standard Aberdeen, invested at the same time and with the share price now at £7.22 must be very pleased with their new investments.

Close Brothers also bought into Impax, in Aug 2020. Most critical of all is CEO Ian Simm, who retains his £70m stake.

I discussed with my wife this morning whether I should diversify and sell 20% of my holding. I decided not to, because of the growth in the AUM, and the forecasts shown on Stockopedia (to which I have recently subscribed and now realise I should have done much earlier – my first impressions are that it is very good) see https://app.stockopedia.com/share-prices/impax-asset-management-LON:IPX The margin forecast of 25% in 2022 looks low to me. This is an outperforming asset manager and should have higher than average margins. As we noted in our response to the FCA, asset managers are very profitable and average 36% margins.

A PS is required: since I drafted this blog this morning, 18th December, the share price has dropped 5% to £6.92.

On to IG Design

I chatted to David Stredder this morning and he, like me, is a believer in skin in the game. He told me to look at IGR where the CEO and CFO have been selling shares and now own no shares, only options. The Chairman has sold two thirds of his shares. You have been warned.

Here is info from recent RNSs.

IG Design Group plc was notified on 19 August 2020 that Paul Fineman, Chief Executive Officer of the Company, sold 2,369,334 ordinary shares of 5 pence each in the capital of the Company (“Ordinary Shares”) on 19 August 2020 at a price of 460 pence per Ordinary Share. The sale was for financial planning purposes. 

Following the transaction Mr Fineman retains 641,808 Ordinary Shares which can be vested under various Company LTIP schemes and has no beneficial shareholding in the Ordinary Shares of the Company.

IG Design Group plc announces that on 16 December 2020 Giles Willits, Chief Financial Officer of the Company, exercised 79,767 options over ordinary shares of 5 pence each in the Company (“Ordinary Shares“) for nil cost. Mr Willits disposed of the 79,767 Ordinary Shares issued following the exercise of the options and an additional 93,573 Ordinary Shares at a price of 607 pence per share.

Following the transaction Mr Willits retains 53,179 Ordinary Shares which can be vested under the  Company’s LTIP scheme and has no beneficial shareholding in the Ordinary Shares of the Company.

IG Design Group plc announces that on 24 November 2020 Lance Burn, an Executive Director of the Company, exercised 188,523 options over ordinary shares of 5 pence each in the Company (“Ordinary Shares“) for nil cost. Following the exercise Mr Burn sold the 188,523 Ordinary Shares at a price of 580 pence per share on 24 November 2020. Following the exercise and sale of Ordinary Shares, Mr Burn continues to have no beneficial shareholding in the Ordinary Shares of the Company. 

The Company also announces that John Charlton, Non-Executive Chairman of the Company, sold 200,000 Ordinary Shares at a price of 580 pence per share from his pension fund on 24 November 2020. Following the sale of Ordinary Shares, Mr Charlton holds 99,616 Ordinary Shares in the Company, representing 0.1 per cent. of the issued share capital.

Finally, the Company announces that Elaine Bond, Non-Executive Director of the Company, sold 15,000 Ordinary Shares at a price of 572 pence per share on 24 November 2020. Following the sale of Ordinary Shares, Ms Bond holds 4,301 Ordinary Shares in the Company, representing less than 0.1 per cent. of the issued share capital.