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Since listing in 2016, On the few occasions WiseTech shareholders they have faced a significant pullback in the shareprice, the only question they have generally had to ask themselves was ”how much?” when they bought the dip. Both analysts and shareholders have willingly embraced their Stockholm syndrome, but, amid the recent scandal, boardroom exodus and governance concerns, Wisetech investors find themselves in a situation they have rarely encountered before, are they comfortable with the boardroom becoming the Throne room?
In recent days the founder flexed his 37% ownership muscle, triggering the mass exodus of independent board members, confirming once and for all, WiseTech and Richard White are now, one and the same.
Despite analysts rushing to reaffirm “buy” ratings and price targets as recent as today, things are far more complicated than a mere “buy/hold/sell” as by default, the rush to re-affirm that “everything is fine”, analysts have basically admitted that the company now comes with significant key person risk, a blaring omission from the most recent broker updates.
So, as a shareholder, what do you do when the even the experts seem to be hostages, rather than analysts? Here are a few key questions you should be asking yourself when expert views may be more emotional than usual:
- Does this change my long-term investment thesis?: How much consideration do you now need to give to how White’s potential departure or diminished role might affect WiseTech’s future performance and innovation capacity
- Succession: With the mass exodus of the independent board members, succession planning is seems very distant. Are you comfortable with a 69 year old key person and no succession plan?
Finally,
- Risk tolerance: as mentioned, Wisetech shareholders have rarely been tested over the years (unless you have been unlucky enough to buy recently) Do you have the risk tolerance to handle the potential for continued volatility and governance issues?
Once you have answered those questions, you can then approach the buy/hold/sell part of the equation.
For those with a high risk tolerance and strong belief in the company’s long-term potential, holding through the turbulence may be the preferred option. This approach is likely to be favoured by long-term investors, especially given the market’s tendency to have a short memory in the Trump era.
On the other hand, risk-averse investors, those focused on ESG principles, or those concerned about key person risk might consider selling to limit potential losses.
Some investors may view the price drop as an opportunity and consider buying the dip, finding the current valuation attractive. However, with a price-to-earnings ratio of over 100, there is little room for error from a potentially distracted management team.
Overwhelmingly, the majority of investors will adopt the wait-and-see approach, especially with half-year results due imminently.
Our advice is to set a plan before the results are released tomorrow morning, rather than reacting afterward. This proactive approach allows for a more measured and strategic decision-making process.
GENERAL ADVICE WARNING:
Recommendations and reports managed and presented by MPC Markets Pty Ltd (ABN 33 668 234 562), as a Corporate Authorised Representative of LeMessurier Securities Pty Ltd (ABN 43 111 931 849) (LemSec), holder of Australian Financial Services Licence No. 296877, offers insights and analyses formulated in good faith and
Opinions and recommendations made by MPC Markets are GENERAL ADVICE ONLY and DO NOT TAKE INTO ACCOUNT YOUR PERSONAL CIRCUMSTANCES, always consult a financial professional before making any decisions.
