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Here’s one for the corporate governance experts out there.
Kelso’s a microcap UK-listed activist investor whose biggest holding by far is THG, the maker of protein bars and online retailer of cosmetics. It says it owns about 0.5 per cent of THG’s shares, worth about £4.6mn at today’s price, having first bought in January 2023.
Kelso says THG’s trading at a “significant discount to its sum of the parts value” and wants the company to follow through on a promise to move its listing from London’s standard class to premium. In protest at what it sees as the lack of progress, Kelso intends to vote against the reappointment of THG chair Charles Allen at an AGM scheduled for June 24.
Kelso’s biggest shareholder is CEO John Goold, who has 11.36 per cent of its shares. Its second-biggest shareholder is Matt Moulding, THG’s co-founder and CEO. Having first popped up on the Kelso register in late November 2023, Moulding has raised his stake to 9.11 per cent, a regulatory filing today shows.
Moulding has said nothing publicly about his personal investment in Kelso (and doesn’t welcome our calls), so we have to approach this hypothetically.
Kelso directors hold 16.31 per cent of its stock in total, Bloomberg data shows. Their fiduciary duty is to act in the best interests of all shareholders. The biggest independent shareholder is Moulding, followed by a lot of custodian accounts for retail brokerages.
It’s reasonable to think that Moulding is happy with the way he’s running THG, so 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 – each have plenty to say. Naturally, it’s ramped up further since listing.
I’ve learned to suck it up and listen to most advice….and then to rarely act on it! Listening, processing and then discarding 95% of advice, is super valuable.
Why?
If we acted on all the advice, it would be as effective as drinking water from a fire hose. Most people sharing their views are unaware countless others are advising the complete opposite.
Kelso said last week that “two shareholder accounts” voted against three of its AGM resolutions. We’ve asked the company for more detail and, if the response is useful, we will update this post.
At current prices, ceteris paribus, Moulding could become Kelso’s biggest shareholder by spending another £200,000. With a £750,000 share purchase he could exceed the aggregate stake held by insiders. For not much more than the cost of one City AM he’d hit 25 per cent and gain the power to block special resolutions.
The big hurdle Moulding’s brokers face would be finding Kelso shares to buy, since only 800,000 trade on an average day. Still, from a fiduciary duty perspective, it’s already an odd arrangement.
Kelso’s board has a duty to all Kelso shareholders to do things that will benefit them equally. For the moment it can say that a campaign to change how THG is run is in the best interests of all shareholders, including Moulding, no matter what he believes. But Moulding isn’t an average shareholder. His wealth is tied up in THG and his main duty is to do what’s in the best interests of all THG shareholders, which includes Kelso. And since Kelso’s stake in THG is insignificant when compared with Moulding’s stake in Kelso, it’s not obvious who should be working for whom.
But then, we are in no sense corporate governance experts. If you are, dear reader, let the comment box be your canvas.