Buckley Capital Management, a top 15 shareholder in Mark Dixon’s IWG, has written to the company’s board of directors urging that the business switch its listing from London to New York or consider a take private of the firm.
The shareholder said the switch would help to boost IWG’s flagging share price.
In an open letter, Zach Buckley, managing partner of the Miami-based investor, said he believed that IWG was “misperceived by the investment community as lacking sufficient credibility”, which he said was a “primary reason for the mispricing of the company’s shares”.
Buckley said the firm had been “compelled” to invest in IWG in February 2023 because of its confidence in the growth abilities of the company and had expectations of a 300-600% upside in IWG shares over a multi-year time frame.
He believes the business is the “undisputed leader” in the co-working office market and is best positioned to benefit from the secular trend towards flexible leases, now that the two major headwinds of Covid and a well-funded competitor – WeWork – are behind it.
However, the shareholder said that despite these factors and the fact that the group was on track to deliver a record EBITDA this year, its share price continued to languish and was currently down by around 50% over the last five years.
“It is clear to us that there exists a significant dislocation between the current share price and the intrinsic value of the company, despite management’s efforts to improve communications and financial disclosures to the investor community,” said Buckley.
He added: “We are concerned that efforts by IWG’s management to articulate the investment merits of the company have fallen on deaf ears, and further action needs to be taken to unlock the company’s intrinsic value. Therefore, we believe the board should initiate a major share buyback as soon as the company reaches its 1x net debt/EBITDA target. Simultaneously, we believe that the board should expedite the re-listing of IWG’s shares onto a US stock exchange.”
Buckley said that a shift to a US listing presented a strategic opportunity to enhance shareholder value and would expose IWG to a new and more liquid market with “investors who have greater appreciation of its leverage levels and business model”.
“The more efficient capital market in the US can help the company realise intrinsic value in a timelier manner, which the UK market has failed to do over the last five years,” said Buckley.
The investor pointed to Irish buildings materials provider CRH as an example. Since moving its primary listing to the US in September 2023, Buckley said the group’s share price had risen by 51.4%.
If a US listing and the proposed share buyback failed to cause IWG’s share price to rise, Buckley will urge the business to explore a take private of the business to “realise its intrinsic value”.
“There has been rumoured interest in 2018 from financial buyers at prices much higher than current levels, between 9-10x EBITDA,” said Buckley. “Firms such as Terra Firma, TDR Capital, Starwood and Lone Star were rumoured to have expressed interest back in 2018. Today, IWG is in much better shape, with a higher-quality revenue mix, greater profitability, significantly improved competitive position and clearer growth prospects. Yet it is trading at a significantly lower multiple. Given the significant interest in the past, if the public market fails to recognise IWG’s value, we strongly recommend that management consider selling the company.”
The demand came as IWG announced that it had completed a number of financial transactions that would reduce its net debt by around $1m (£760,000). The transactions include an increase in the size of its €575m (£485m), 6.5% bond by €50m and £25.5m of repurchases from its £350m, 0.5% bond.
Read the letter in full here.
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