Doug Goodwille from Kayne Anderson speaks to Drew Meredith from The Inside Network on market thinkers.
While a surging gold price is on hold as the world adjusts to a Trump presidency, all the factors that saw its price rise more than 50 per during his first term in office – trade disputes, fiscal deficits and geopolitical tensions – are almost certainly guaranteed the second time around.
Telus what happened at Appen
A rollercoaster wouldn’t do justice to the ride Appen Ltd (ASX: APX) shareholders have been on lately. In fact, it’s more like an avalanche, with a temporary reprieve on the way down.
After missing internal and external forecasts over the past two years, the Appen share price is down a staggering 84%. In 2020 it once traded above $40 yet closed on Wednesday at $6.40. During that time, its founder, former CEO and Chairman Chris Vonwiller departed. And that’s before we even get to this week’s shenanigans.
Late on Wednesday, it was leaked that Canadian based technology firm Telus had made a non-binding $9.50 per share offer to Appen.
On Thursday morning, Appen subsequently confirmed receival of the offer but said it had declined. Instead, the business was willing to sign a non-disclosure agreement (NDA) to let Telus have a look at its books in hope of providing a better offer. The market didn’t waste any time, sending the Appen share price up 29% to $8.27.
The deal made plenty of strategic sense. Telus has already acquired the number two and Appen’s biggest competitor Lionbridge last year. Adding Appen would consolidate the industry, provide administrative and technology synergies and place the combined entity in a stronger bargaining position against big tech. All that was needed was the NDA, which Telus had not signed yet.
Conveniently, Appen also provided a negative trading update which was largely overlooked by the market given the takeover approach. Revenue was tracking behind last year’s numbers, while earnings would take a hit due to investment.
But by Thursday afternoon, Appen was in a trading halt. Telus had walked, without explanation, leaving Appen alone at the altar. On Friday, the Appen share price fell 22% to $6.44, effectively where it was just two days ago.
The market disclosures will likely draw the scrutiny of regulators including the ASX and ASIC. Appen was heavily shorted prior to the announcement, with the offer forcing many to cover their short positions. Meanwhile, the timing of its underwhelming trading update will be questioned. When did Appen know it was trading below expectations? Did that coincide with the leaked bid?
If it couldn’t get any more drama-packed, Appen held its already planned annual general meeting on Friday. One shareholder didn’t pull any punches, asking newly elected Chairman Richard Freudenstein “When are you or the management team, including directors going to resign? You have destroyed shareholders’ investment”.
One’s a dot, two’s a line, three’s a trend. Missing targets, founder departing and a botched takeover bid. Appen has plenty of work to regain the markets and investors’ trust.
No wonder shareholders are calling for management and directors heads.
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