AIM-listed delivery company DX Group’s shares jumped as much as 13 per cent today after activist fund Gatemore Capital Management sent a letter to the company announcing it had built a substantial stake and requested a seat on its board.
In a letter to DX Group’s board members this morning, Gatemore said it had accumulated a stake of approximately 20.5 per cent in the company, and counted itself “amongst DX’s most enthusiastic shareholders.”
But the fund manager said it had been “deeply disappointed” by recent failures by the board of the company, which has seen its share price plunge 36 per cent in the year-to-date.
Gatemore said the tip of the iceberg had been DX Group’s announcement on 25 November that it would not publish its annual results in time for its Annual General Meeting (AGM) that day.
Shares in the logistics company slid as much as 25 per cent last Thursday when it revealed it was forced to delay the results publication until at least 2 January next year, while its risk and audit committee carry out an internal investigation into its corporate governance.
“We question why the content of that announcement was so ambiguous and lacking in any meaningful detail, in particular regarding the nature of the internal investigation,” Gatemore wrote in the letter to the company’s board today.
“This lack of transparency is entirely unacceptable,” the letter continued.
The activist investor followed by requesting that its managing partner Liad Meidar “be appointed immediately to the DX Board in order to better understand the underlying issues, promote improved governance standards and investor communications, and seek ways to achieve full value for shareholders, including through exploring strategic alternatives.”
DX Group’s share price performance has been lacklustre this year, repeatedly missing analysts’ targets, despite the company returning to profitability and upgrading its profit forecast five times during this financial year.
Gatemore argued today that there are “two main reasons for this dislocation.” First, it points to the board’s “mismanagement across multiple areas, including corporate messaging and transparency, audit process, broker engagement, and the lack of return of capital to shareholders.”
Second, it condemns the “clear missteps” by DX Group’s new auditor Grant Thorton that have caused the company’s results to be pushed back twice, “alarming investors” and leaving both parties with a lack of time to resolve issues like the open internal investigation.
“It is our opinion that the nature of this announcement demonstrates a complete failure of the Board to act in accordance with its fiduciary duties and an absence of acceptable governance standards at DX,” the fund said.
Gatemore’s objection to DX’s governance comes hot on the heels of the news earlier this month that it had bought a stake in DFS, and told its fund investors that the sofa chain was undervalued by public markets and thus ripe for a private equity bid.
Shares in DX Group were up almost 13 per cent just before market close on the day of the news.