Own AGL shares? Expert warns Cannon-Brookes’ stake might not be all it seems

An old man wearing long robes with a long white beard holds a staff that emits light in all directions as he stands in front of a mystical landscape of mountains and a rising sun.An old man wearing long robes with a long white beard holds a staff that emits light in all directions as he stands in front of a mystical landscape of mountains and a rising sun.

News of AGL Energy Limited (ASX: AGL)’s new major investor broke last week, but it’s claimed their hold on the company’s shares might not be all it’s cracked up to be.

Corporate governance advisory group Ownership Matters has rebutted tech mogul Mike Cannon-Brookes’ reported claims that there’s no “financial wizardry” going on with his recently acquired 11.2% stake in AGL’s shares.

On the contrary, the research group says Cannon-Brookes’ stake is “sorcery”.

Ownership Matters has warned that much of the billionaire’s stake could be withdrawn at any time with three days’ notice. That could leave the billionaire with significantly less voting power on the company’s upcoming demerger.

At the time of writing, the AGL share price is $8.22, up 0.24% on its previous close.

For context, the S&P/ASX 200 Index (ASX: XJO) is currently down 0.56%.

Let’s take a closer look at the latest news on AGL.

Expert criticises Cannon-Brookes’ holding

Much of Cannon-Brookes’ hold on AGL shares – and the accompanying voting rights – could reportedly be recalled before shareholders go to the ballot box on the company’s controversial demerger next month.

The split will birth energy retailer AGL Australia and energy generation business Accel Energy. Shareholders will have their chance to vote on the scheme on 15 June.

Cannon-Brookes has made his opposition to the split clear. He has previously said the company’s plan is “flawed” and “makes no sense, or cents”. But much of his stake could be pulled from his grasp before the shareholder vote.

Cannon-Brookes’ holding was acquired in a complex matter through broker JPMorgan.

Ownership Matters claims 40 million AGL shares are on loan to Cannon-Brookes for “a pitiful fee”. It also states the shares can be recalled with three days’ notice.

It has reportedly urged institutional investors to recall loaned stock ahead of the vote or up their fees.

“Shareholders of AGL who participate in securities lending programs ought to be mindful to recall their shares to ensure that their voting rights are clawed back at the record date for voting entitlements of the scheme,” Ownership Matters founder Simon Connal said, as quoted by the Australian Financial Review (AFR).

Cannon-Brookes responded to claims that shareholders are concerned his exposure to AGL might not be all it’s cracked up to be.

He told the AFR:

There’s no financial wizardry to try to be a sham or to try to fake it out here.

There is a literal way of actually achieving that amount of a stake, and I’m under contract to make sure that that will be paid for.

I’m putting more than 650 million bucks into this thing because I think it can do a lot better than it’s currently doing, and I speak for 11.28%.

Ownership Matters is reportedly not concerned by Cannon-Brookes’ stance against the demerger. Instead, it’s said to be worried that market participants might be misinformed of the billionaire’s position on the company’s register.

AGL share price snapshot

The past few weeks have been tough on the AGL share price.

The company’s stock has slumped nearly 5% since Cannon-Brookes upped his campaign against AGL’s planned demerger. That’s roughly in line with the performance of the S&P/ASX 200 Index (ASX: XJO) over that period.

However, the AGL share price has gained more than 30% since the start of 2022 while the ASX 200 has slumped nearly 6%.

Over the last 12 months, however, the energy company has underperformed the index by 6%.

The post Own AGL shares? Expert warns Cannon-Brookes’ stake might not be all it seems appeared first on The Motley Fool Australia.

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JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Motley Fool contributor Brooke Cooper 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 Scott Phillips.

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