Stock of the day: Platinum Asset Management
Platinum Asset Management's shares rise after Regal Partners' takeover bid, highlighting future fund management and shareholder implications.
(AI video summary)
This video was created on 17 September for IG audiences by ausbiz.
Stock of the day: Platinum Asset Management
ASX code: PTM
Suggestion: Sell
Platinum shares surge on takeover news
The focus today is on Platinum Asset Management, which announced it has received a takeover proposal from Regal Partners, an alternative investment management specialist. The news propelled Platinum’s shares up 12% this morning.
Under the terms proposed by Regal, Platinum shareholders would receive 0.274 Regal shares for each Platinum share they hold. Additionally, Platinum intends to distribute a 20cent dividend from its cash reserves, pending the deal’s closure. However, the deal is contingent on several conditions, including a successful due diligence process, which has previously derailed similar negotiations.
Historical significance and market reaction
The market responded well to the announcement, with a modest 0.3% rise in Regal Partners’ shares. Scott Phillips reflected on Platinum’s past, noting its status as a top fund manager in the 1990s under Kerr Neilson, comparable to the rise of Magellan Financial Group.
Challenges in fund management acquisitions
The conversation also covered the complexities of fund management acquisitions. The value in such businesses is often tied to their personnel and the funds they manage, both of which can change rapidly. The instability seen in Magellan’s fund management, which saw a drastic reduction in assets, illustrates the risks involved.
Comparative financial performance and shareholder decisions
Platinum’s performance over the past decade has been underwhelming, with returns lagging behind the ASX 200 significantly. Investors who placed $10,000 in Platinum a decade ago would see a slight decrease in value, in stark contrast to ASX 200 investments which would have doubled.
As Platinum navigates through this takeover proposal, shareholders are at a crossroads. The potential for another bidder or a simple rejection of the offer presents a critical decision point. Market experts, including Scott Phillips, suggest that selling now might be the prudent choice, especially given the recent spike in share price.
This information has been prepared by IG, a trading name of IG Australia Pty Ltd. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
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