Yesterday, shares of Myer Holdings Ltd (ASX: MYR) surged 10.45% to 37 cents a share, giving the embattled but iconic Aussie retailer a market capitalisation of just over $300 million. You have to go back to early March to find the last time the Myer share price was at this level. Additionally, Myer shares are now up more than 76% since 21 October, when they were asking just 21 cents. So what’s going on here?
What’s driving the Myer share price?
Apart from regular appearances on the ASX’s most shorted stock list (including this week), there has only been one major piece of news out of Myer recently. That was the announcement late last month that Myer’s chair, Gary Hounsell, will be walking the plank.
Mr Hounsell had been under some pressure for some time. It has been well known that Solomon Lew, CEO of Premier Investments Limited (ASX: PMV), had been pushing for Mr Hounsell’s resignation for a while. Mr. Lew’s Premier is a large investor in Myer, owning a 10.8% stake in the company. And, as we reported at the time last month, Lew got what he came for after fellow major shareholder, Geoff Wilson of Wilson Asset Management, sided with Premier against voting for Mr. Hounsell’s re-election. Mr. Lew has also called on the entire board to step down or be shown the door, and has threatened to call an extraordinary general meeting over the matter.
My-store for much longer?
According to reporting in the Australian Financial Review (AFR) yesterday, this is what was behind the massive surge in Myer shares yesterday. The AFR reports that there is building speculation that Mr. Lew, through Premier, is preparing to mount a takeover of Myer. Premier’s retailing businesses like Smiggle, Peter Alexander and Just Jeans have done enormously well during the pandemic, if the company’s stellar FY2020 earnings numbers are anything to go by. It seems plausible at least that Myer shareholders would be excited about the prospects of Mr. Lew running the company.
However, this might not be the whole story. The AFR also quotes Wilson Asset Management fundie, Oscar Oberg, who reckons that Myer is simply benefitting from the goodwill flowing out of the recent coronavirus vaccine announcements:
“If I look into 2022 we’d like to think a vaccine brings back some normality in the business”, the AFR quotes Mr. Oberg as stating. “We think management has been doing a great job, the balance sheet is in great nick and we think they’ll be able to repay their debt when it comes due next year”
It could be one, or a combination of these factors that is pushing the Myer share price to an 8-month high this week.
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Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Premier Investments Limited. 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.
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