One of the biggest drags on the share price of consumer group Haleon might be gone by the end of the year suggests Barclays.
According to the broker, and based on Pfizer's latest placing, it's possible it and GSK will have entirely sold down by the end of this year, leaving Haleon 100% free float, said the broker.
“Given repeated investor feedback about the overhang being a barrier to share price performance, we think this could be a significantly helpful potential catalyst.”
Currently, Pfizer has 2062m shares in Haleon (22.6%) and GSK has 385m (4.2%) for a total overhang of 27%, down from 45% in May 2023 before the first GSK placing.
“The pace of sell-down is accelerating and our analysis shows Haleon could be overhang-free by year-end at the current rate of progress,” said the broker.
“With a 90-day lockup from the Mar24 placing, there is time for three more placings before year-end, assuming the lockup remains unchanged.
“Haleon also has £185m remaining in its announced buyback plans for this year, which is 57m shares at the current share price. This would leave an overhang of 18m shares, or 0.2% of Haleon, less than a rounding error.”
Barclays sees the overhang as a key reason for Haleon’s strong sales performance since its split from GSK has failed to translate into a better share price performance.
“When Haleon spun in summer 2022 there was considerable scepticism about its 4-6% organic sales growth target, yet that year it delivered 9%.
“Then there was considerable scepticism about it delivering 4-6% in 2023 given the 9% comp, yet last year it delivered 8%.
Barclays added that Haleon remains one of its most preferred names within European Consumer Staples, a sector it sees as highly attractive, and potentially consolidating.
The broker has a price target of 390p for Haleon and an overweight rating.