Question 1: What do you think of the Latitude Financial IPO?
Answer: This is the second time the private equity owners of Latitude Financial have attempted to IPO the business so I guess I am somewhat underwhelmed by the prospect of investing. The business (formerly the GE Finance business) is interesting, but hardly compelling. The description of the business as a “digital payments, instalments and lending platform” is interesting – I guess this is what they mean by “Latitude 2.0”.
Pricing is not aggressive (indicative 12.4x to 13.9x 12 month earnings to 30/6/20) and retail shareholders have comfort in that institutional investors will set the price via a book-build. The first dividend (estimated to be 5 cents) won’t be paid until October 2020.
A major risk for IPO investors are the escrow agreements and potentially, a flood of stock hitting the market. A group described as “minority shareholders”, who will hold approximately 9% of the shares, are only escrowed until 29/1/20. The private equity owners (KKR, Varde and Deutsche Bank), who will own around 54% of the shares, are escrowed until the release of 1H20 accounts, sometime in August 2020.
Pass.
Question 2: Can you tell me the way to calculate the cost price on the demerged shares of Coles (COL) from Wesfarmers (WES)? The Wesfarmers shares were purchased after 1985. Is there a simple way to satisfy the ATO because I have sold some of the Coles shares and a large capital gain is involved?
Answer: Yes. There is a formula (agreed with the ATO). If you acquired your Wesfarmers shares post 20/9/1985, then you apportion the cost base such that 28.91% of the cost becomes the cost base for your Coles shares and your Wesfarmers shares take on 71.09%.
Say, for example, you purchased your original Wesfarmers shares at $30 per share. Post the demerger, the cost base for the Wesfarmers shares will now be $21.327 (71.09%) and the Coles shares $8.673 (28.91%).
Question 3: What’s your view on Pilbara Minerals (PLS) share purchase plan at $0.30 per share?
Answer: The brokers like Pilbara Minerals (PLS) as a long-term play – a consensus target price of $0.53, range $0.40 to $0.60. But it is now trading down, near the SPP price of 30 cents (last price 31 cents).
I guess if you are a “believer” in the company’s story, you take part in the SPP. Otherwise, you pass.
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