Future slumps as Shadowfall Research says it's short, stock is overvalued
Shares of magazine publisher Future tumbled on Friday after London-based research firm and short-seller Shadowfall Research said it was short the stock, arguing that it’s overvalued.
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In a 69-page report, Shadowfall said: "Future’s potential for success rests on the ingenuity of its management in turning a sizeable collection of often distinct and shrinking assets - which it has largely acquired since 2016 - into a cohesive, profitable and cash generative enterprise."
Following a review of the company’s financial statements and the acquired assets, Shadowful said it was "incredulous" that such a hopeful outcome can be achieved.
It said that while Future’s reported FY19 organic revenue growth was 11%, it calculates from Future’s disclosures that it would have been more like 1%.
"Based on the revenue contributions that Future provides from its acquired assets in 2018 and 2019 and the methodology it provides for its like-for-like organic revenue growth, we calculate that Future’s organic revenue growth totalled 1% in FY19.
"With some companies, we have seen stronger organic revenue growth reported due to more creative definitions, sometimes including growth in the year from acquired businesses or excluding discontinued lines of business."
Shadowfall also reckoned that a greater proportion of Future’s FY19 EBITDA stems from it being acquired than from strategic effects such as the ‘Growth from Platform Effect’.
"In its FY19 results presentation, Future indicates in its EBITDA bridge that ‘acquired EBITDA’ contributed £14.5m in FY19. However, we calculate that in profit before tax alone, the carry over contribution from 2018’s acquisitions and contribution of 2019’s acquisitions, would have totalled £15.6m."
Shadowfall said this conservatively assumes zero growth in profit before tax for the 2018 contributions.
"We interpret this to mean that the strategic effects of Future’s M&A may be less strong than the wider market believes," it said.
At 1455 GMT, Future shares were down 14% at 1,310p.