You can almost hear the scoffs among Hargreaves Lansdown PLC (LSE:HL.) management after receiving an "opportunistic", low-ball bid approach from a private equity consortium after Wednesday’s closing bell.
Priced at 985p per share, the offer by CVC Advisers, Nordic Capital and Platinum Ivy, a subsidiary of Abu Dhabi’s sovereign wealth fund, barely added a percentage point onto the trading platform’s Wednesday closing price.
In fairness, Hargreaves stock saw a burst of action in the closing minutes of yesterday’s trading session, but even with that removed, the sum tabled added less than 6% to Hargreaves’ valuation.
Commenting on what they called an "opportunistic approach", Panmure Gordon analysts noted: “It is a price at which the shares were trading as recently as August 2022 and less than half the peak share price in 2019.
“Admittedly it is a material premium to the views of some commentators who have argued that the shares are worth as little as 630p.” But it is far below Panmure’s target price of 1,500p.
“The approach by private equity for Hargreaves echoes the broader trend across the UK market of low valuations being exploited by investors with the freedom to take a longer view."
At around 16 times Panmure’s projected earnings for Hargreaves’ financial 2025, Hargreaves is indeed cheaper than competitor AJ Bell’s comparable price-to-earnings (PE) ratio of 18.6.
This could be down to headwinds pertaining to revamped cost structures and even the litigation fallout from a £200 million class-action lawsuit filed against Hargreaves for its role in the Woodford Investment Fund (WEIF) collapse.
But according to Panmure: “Business momentum had already surprised the naysayers over the recent trading period and we believe that estimates have scope to increase over time as these secular factors translate into stronger flows and higher activity levels on a cost base now being managed tightly after a period of needed investment."
It added: “Hargreaves remains comfortably the market leader in its field, and that field continues to grow too.”