Unfortunately for Blue Sky Alternative Investments Ltd (ASX: BLA) shareholders, things just seem to go from bad to worse for the embattled investment company.
The Blue Sky share price is down a further 18.5% to a multi-year low of $2.19 in morning trade after the release of a surprise market update.
What was in the update?
According to the update, which the PDF file names “Project Rainbow”, Blue Sky has decided to withdraw its earnings guidance and its fee earning assets under management (FEAUM) guidance for FY 2018.
Previous guidance, which itself had been downgraded, was for underlying full-year net profit after tax of between $20 million and $25 million and FEAUM between $4 billion and $4.25 billion.
Management made the move after taking into account increased uncertainty caused by deal timing related to its U.S. transactions, the timing and structure of three development projects in Australia, and the allowance for significant non-recurring expenses associated with restructuring the business. The latter includes plans to reduce fixed operating costs below recurring annual management fees.
In addition to this, management advised that Blue Sky now expects to complete exits for 4 to 5 assets during the financial year ending 30 June 2018. This has some market observers speculating that Blue Sky may need to money to fund redemptions.
Should you buy the dip?
There’s nothing the market hates more than uncertainty and Blue Sky is the epitome of that right now.
While part of me thinks that one day we could look back on this and see it as an opportunity missed, there’s also a part of me that feels that there could be even darker days ahead for Blue Sky in the future. Perhaps Project Rainbow wasn’t the best codename to use for this latest market update in that case.
Investors looking to gain exposure to the listed investment company space might want to consider WAM Capital Limited (ASX: WAM) or Pendal Group Ltd (ASX: PDL) instead. Pendal was previously known as BT Investment Company (ASX: BTT) until its recent rebranding.
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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.