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Griffiths

Griffiths

This is the man who called the Stagecoach (SGC 140p) share price absolutely right. Yes, that’s right, the CFO Martin Griffiths.

Since July 24th (see copy of note below) Stagecoach shares have halved in price, and are down 37% relative to the FTSE 100.

Following the recent results (‘Stagecoach to cut jobs as recession looms’– Bloomberg) I am closing my negative call with a 51% absolute return.

Can I point out to shareholders that on October 29th the company announced in their Trading Statement that ‘the outlook for the Group remains positive’ (Source Stagecoach Group website).

I might be so bold to suggest that Mr Griffiths ‘outlook’ expectation must have differed substantially from the markets interpretation of a ‘positive outlook’, and that Stagecoach failed to acknowledge and relay this difference to the market in an appropriate way. Why else would Stagecoach’s share price be down 32% since the October 29th Trading Statement?

But Griffiths’ real skill was selling shares on the realisation that things couldn’t get any better. People switching to public transport, fuel prices starting to come down, premium valuation due to ‘non cyclicality’ of the business.

Addendum Friday December 5th: Stagecoach yesterday announced two share purchases by directors as follows:

Non exec Sir George Mathewson (of Scottish banking fame) bought 35,000 shares at 139.39p on December 4th, initiating a holding.

CEO Brian Souter bought 2.085m shares at 138.96p on December 3rd, taking his holding to 106 million shares.

These purchases do not yet warrant a positive view on the stock, as in % terms Souters is too small as a proprtion of his existing position, and Mathewsons position as a proportion of his net wealth must be assumed to be very small.

Followthedirectors.co.uk Note of July 24th 2008:

Stagecoach – CFO Griffiths thinks it’s time to take profits

Martin Griffiths, CFO of Stagecoach (SGC 275p) is taking his money off the table.

As at the beginning of June he held Executive Share Options over 479,000 shares, with varying exercise periods, starting in June and December 2006 and December 2007, and extending mostly to June 2010, with some as far out as December 2011 (Annual report).

Griffiths exercised all 479,000 between 26th of June and 8th July this year, which cost him £365k.

He sold all of them them on the same dates, realising £1379k, a net £1m in his pocket.

Why do I think this significant?

  • He had another 2-3 years before he needed to exercise these options, but chose to exercise and sell now.
  • This 479,000 shares is the total amount in his Executive Share Option pot*. Griffiths today owns less than 20,000 shares.
  • When exercising options, directors usually sell sufficient to pay the tax man and hold on to the rest. Not in Griffiths case. He has exercised and sold the lot.

Griffiths behaviour and the subsequent risk profile of his remaining ‘Plan’ shares indicates to me that the risks to the Stagecoach shares outweigh the medium term returns. So I’d follow Griffiths and take some money off the table too.’

Griffiths

Griffiths

Martin Griffiths, CFO of Stagecoach (SGC 275p) is taking his money off the table.

As at the beginning of June he held Executive Share Options over 479,000 shares, with varying exercise periods, starting in June and December 2006 and December 2007, and extending mostly to June 2010, with some as far out as December 2011 (Annual report).

Griffiths exercised all 479,000 between 26th of June and 8th July this year, which cost him £365k.

He sold all of them them on the same dates, realising £1379k, a net £1m in his pocket.

Why do I think this significant?

  • He had another 2-3 years before he needed to exercise these options, but chose to exercise and sell now.
  • This 479,000 shares is the total amount in his Executive Share Option pot*. Griffiths today owns less than 20,000 shares.
  • When exercising options, directors usually sell sufficient to pay the tax man and hold on to the rest. Not in Griffiths case. He has exercised and sold the lot.

Griffiths behaviour and the subsequent risk profile of his remaining ‘Plan’ shares indicates to me that the risks to the Stagecoach shares outweigh the medium term returns. So I’d follow Griffiths and take some money off the table too.

*Griffiths also owns 166,000 in the Executive Pension Plan (vestable mid ’09 and mid ’10), and the equivalent of 675,000 in the Long Term Investment Plan, but these are subject to Total Shareholder Return criteria as detailed in the Annual Report, and designed to be taken in cash not shares, so you may not find out whether they have been exercised until the next Annual Report.

References:

Stagecoach Annual Report 2008, pp 35-38

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