Singapore-based holding company The Marketing Group is worth just a tenth of its peak value following a share price plummet in recent months.
Shares in the publicly listed group of 17 small agencies fell to the lowest price to date – €0.56 (S$0.83) – last week. When the company first floated on June 9 last year, the shares were worth €1.23 (S$1.80) and the market capitalisation was €17m (S$25m).
The current nadir is in deep contrast to the picture last August when, two months after listing on the Swedish alternative stock exchange First North, the share price skyrocketed to a high of €9 (S$13.3).
As a result, TMG market capitalisation has fallen from a high of €257 million (S$383m) on August 1 last year to just €25m (S$37m) today. The collective refused to comment on what might be the possible causes of the share price volatility.
Singapore-based independent financial analyst Rahul Kewalramani told Mumbrella Asia: “When an agency is acquired by TMG and becomes a portfolio company, it swaps its equity in itself for shares in TMG. So the acquisition is stock-based and no cash trades hands, as it’s easier to pay high valuations when using stock as currency.
“However, the entrepreneur that’s selling is not really recognising this value in liquid cash or assets anytime soon, as they might by an outright cash acquisition by a holding company like WPP.”
Likening the company to a pie being sliced into multiple pieces, Kewalramani added: “As TMG brings more and more companies into the group using stock, existing portfolio companies’ owners – who are now owners of TMG stock – get diluted further, so they are sharing the pie with more people. Theoretically, each acquisition needs to be accretive or to add value to earnings per share to avoid a loss in value of each TMG share.”
Another independent Singapore-based financial expert, Jean-Frederic Gagne, expressed surprise at the stocks sudden rise and fall. He said: “The share lost 94 per cent of its value when measured from its 52-week high, and during the same period, most major indices showed positive returns. This deviation from the general market needs to be explained.”
Founded by Callum Laing and Jeremy Harbour of Singaporean private equity firm Unity Group, TMG positioned itself as a decentralised alternative to the much-criticised holding group model, whereby a firm like WPP – for example – would acquire an agency and then enforce diktats from above. When it first floated on June 9 last year, the company consisted of only four agencies: Black Marketing, Creative Insurgence & One9Ninety from Singapore and Nice&Polite from the United Kingdom.
By November, thirteen more agencies from all over the world, including Brand Theatre and Ad Addiction from Singapore, had joined. Upon handing over full company ownership to TMG, the portfolio companies are unable to leave the group or sell their holding company shares for at least 12 months.
Nearly six months ago, the company hired Adam Graham to lead TMG as chief executive officer and more recently the company completely overhauled its original board of directors, with five of them – including Laing and Harbour – stepping down.
London-based Graham said: “I think there were a variety of factors last year that didn’t help [the share price]. And going forward, we will be looking to build a much more credible and trustworthy case as investors are quick to punish and slow to forgive. The new team will be looking to rebuild trust and demonstrate value in a format that everyone can trust.”
At the time of going to press, the share price stood at €0.70 (S$1.04).