MIFA and Maschmeyer Seek to Settle Share Price
SANGERHAUSEN, Germany – With its shares dropping sharply in the wake of loss-making results, German bike maker MIFA said this week that it is engaged in a forensic exercise to determine the depth of the inventory irregularities that contributed to alarm among investors. Meanwhile, the largest of those – German financier Carsten Maschmeyer – told reporters he still views the company as a long-term investment even as India’s Hero Cycles looms as a potential buyer of his 28 percent stake.
From 6.59 euro on March 20, when the company announced a 15 million euro loss for 2013, the stock shed some 60% of its value to open for trading at 2.65 euro on March 26. Analysts say that investors were unprepared for the uncertainty of the downbeat earnings picture and the news that accompanied the announcement, including that CEO Peter Wicht was ill and had ceded management control at least until the end of 2014.
In addition, the company said inventory irregularities – the product of the introduction of a new accounting system – meant that stocks were incorrectly booked for the second and third quarters, leading to erroneous guidance. And that Hero Cycles was nearing completion of an agreement to acquire some 7% of MIFA’s shares for 15 million euro.
While MIFA stressed that the results were driven by lower-than-expected sales of both traditional and electric bikes, and that improving weather in the first quarter of 2014 bodes well for stronger sales. It added that liquidity is unaffected by the inventory issues, but that covenants related to an 25 million euro bond issued in August of last year and credit facilities with commercial banks may be undone by the unforeseen accounting difficulties.
Analysts said that the fact that MIFA is a sales-driven story was being reflected in the market’s revaluation of the company, whose shares posted a 52-week high of 7.74 euro in September 2013. And speculation both in the market and in the industry centred on Hero Cycles, which has 40 million euro earmarked for acquisition ‘of a German bicycle company’, according to Indian news reports quoting company officials.
Maschmeyer: “No intention of selling off his stake”
The collapse of the MIFA share price spun the rumour mill still faster, with observers noting that purchases in the open market would enable Hero to build a position in MIFA shares ahead of completion of a deal announced in July 2013. Some 44 percent of MIFA shares are listed for trading on the Frankfurt Stock Exchange.
The downward trend prompted Maschmeyer, who acquired his stake in 2011, to reassure the market that he had no intention of selling off his stake. Wicht, who holds around 24 percent following a capital-raising in July 2012 that accompanied the move of MIFA shares to the top-tier trading platform in Frankfurt, holds 24 percent.
While MIFA officials were keeping mum in the wake of the results announcement a spokesman from the financial public relations company Cometis in Wiesbaden said that more information would be forthcoming when Hans-Peter Barth, an accountant by training who is guiding MIFA in Wicht’s absence, assesses the audit of results to German accounting standards that is expected to be completed in the coming weeks.