Investors react positively to the news that ‘turnaround’ activist Sherborne Investors (SIGC) has taken a 5.2% stake in Barclays (BARC). Its share price rises 3.6% to 216.98p on Monday’s news.
Activist investor Edward Bramson’s Sherborne has invested £500m in shares and derivatives of Barclays and says it may increase or decrease its investment in Barclays ‘without further notice’ to the bank.
The Guernsey-based investment vehicle says in a statement ‘Sherborne Investors has advised the Company [Barclays] that its turnaround assumptions indicate a potential return on the investment in line with Sherborne Investors' customary return objectives’.
Barclays response via a regulatory statement says it welcomed the firm as a shareholder and will ‘continue to engage’ with the investor.
SHOULD BARCLAYS BE FEELING THE PRESSURE?
Barclays’ chief executive officer Jes Staley has vowed to turnaround the fortunes of the company’s investment banking division although it is still the bank’s worse performing division and losing market share to competitors.
Ian Gordon, analyst at Investec, describes the division’s impact on its 2017 results released last month as ‘self-inflicted harm’ due to higher spending. However, he adds that investment banking’s performance was ‘less bad’ than expected despite a 37% decline in revenues on a year-on-year basis.
There were glimmers of a turnaround when Barclays released its results, its share price rose on the back of news it will return its dividend to previous levels. The bank also stated it was considering share buy-backs for the first time in two decades. While the bank reported a loss for the year, mainly due to restructuring costs on the disposal of Barclays Africa and conduct charges of £1.2bn, the shareholder friendly rhetoric was welcomed by the market.
For Sherborne Barclays represents a step up in size for its financial institution targets. The firm is known for targeting smaller firms such as Electra Private Equity (ELTA). Bramson managed to extract £1.3bn for Electra’s shareholders after seizing control of the private equity house with a previous fund.
Edward Bramson seeks to identify a company which he believes is undervalued and in some difficulty. With Electra, Sherbourne built up a 30% stake and Bramson himself became chief executive.
Earlier this decade Sherbourne took a 5.2% stake in fund manager F&C Asset Manager and then ousted its chairman despite pleas by the company for shareholders to reject his plans. Bramson became chairman and exited the company, now BMO Asset Management, with a 100% return.
