L1 Capital bets on Lendlease after $749M loss, becoming top shareholder
What's the deal? L1 CapitalDealroom has a profile for this one. Try Dealroom → has lifted its stake in global property developer LendleaseDealroom has a profile for this one. Try Dealroom → to 10.8%, up from 6.6%, making the hedge fund its largest shareholder. The move follows a reported net loss of $749 million for the 12 months through July — a sharp reversal from a $225 million profit a year earlier.
Why now? Lendlease shares fell more than 11% after the results, extending a sharemarket slump of roughly 44% and leaving the stock near a 40-year low. L1 stepped in as the company hit that trough.
The context: Lendlease develops and manages property across urban regeneration, residential communities, and infrastructure worldwide. Once a blue-chip with an $11 billion market capitalisation, the 68-year-old company has since shrunk to $2 billion and was removed from the S&P/ASX 100 Index in March.
How bad are the numbers? CitiDealroom has a profile for this one. Try Dealroom → downgraded the stock and cut its price target, noting earnings guidance sat 30% below broker estimates. Analyst Suraj Nebhani warned that “consensus earnings downgrades as well as elevated gearing could mean investors remain cautious on Lendlease near term.”
What could go wrong? Hedge funds are betting against the company, with short selling rising from 1.1% in June to 7.2%. Lendlease's “capital release unit,” meant to sell $4.5 billion in assets, has consumed capital rather than freeing it.
What's the endgame? New chief executive Nick O'Neil — the first external hire to the role since 2002 — must engineer a turnaround. Earlier activist campaigns from Allan GrayDealroom has a profile for this one. Try Dealroom → and HMC CapitalDealroom has a profile for this one. Try Dealroom → pushed for strategic overhauls and asset sales without the results they wanted.
The signal: L1's stake is a contrarian wager on a fallen giant at its lowest point. Morgan StanleyDealroom has a profile for this one. Try Dealroom → analyst Simon Chan said “patient investors” might see a path to a stronger balance sheet under the new CEO, but “earnings unpredictability” could mean a volatile two to three years ahead.
Read more: finnewsnetwork.com.au
Image credit: @yakobusan Jakob Montrasio
