The Magellan Financial Group Ltd (ASX: MFG) share price has started the week well, climbing 10% yesterday to start trade on Tuesday at $16.84.
The gain marks an 18% spike in shares over the past month after a harsh selling period that has seen Magellan shares tank 21% since January 4.
What’s up with Magellan shares?
The fund manager has suffered heavy losses in 2022 as it continues to underperform key benchmarks and its staff remains tied up in internal struggles.
Industry analysts at Bloomberg Intelligence, Matt Ingram and Jack Baxter, recently noted that Magellan may “face staff retention issues”, despite its efforts in ensuring more attractive compensation for employees.
“Magellan may face staff retention issues, we believe, despite its compensation initiative, which includes retention bonuses, amends repayment terms of its share-purchase plan (SPP), and offers employee options with a strike price of $35 vs. $16 at present,” the pair said.
“It doesn’t seem to address about $20 million of staff losses on the SPP due to a 71% stock-price slide since July – many employees need the price to top $50 to recoup their investment,” they added.
Fund outflows are likely to compound the problem, with chairman and former CIO Hamish Douglass’ recent departure. That followed soon after its former CEO Brett Cairns’ exit.
“The global fund’s performance issues and outflows, and management instability, could also prompt departures,” both analysts remarked.
“SPP loans funded by the firm, which may be valued around $19 million or $141,000 per employee for about $35 million of stock, were issued as a staff-retention step.”
These loans are required to be fully paid within three months of departure and therefore could disincentivise employees to leave.
Magellan released a prospectus for a special options package for eligible staff and shareholders that could see it raise up to $1.2 billion.
According to company filings in early March the funds giant had around $69 billion in funds under management, down from $110 billion in April 2021.
Meanwhile, 63% of analysts urge their clients to sell Magellan shares right now, with just one analyst saying to buy, according to Bloomberg data.
In the last 12 months, the Magellan share price has erased 65% and is down 21% this year to date.
The post What’s up with the Magellan (ASX:MFG) share price lately? appeared first on The Motley Fool Australia.
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Motley Fool contributor Zach Bristow has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
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