Billionaire H&M Chairman Steps Up Stock Purchases as Shares Sink

(Bloomberg) -- Hennes & Mauritz AB Chairman Stefan Persson is drawing investor attention as he buys up huge amounts of stock in the company amid a share slump.

In April and early May alone, the billionaire acquired about 22.2 million shares in Stockholm-based H&M for 3.06 billion kronor ($346 million), bringing the value of purchases since the beginning of last year to 14 billion kronor.

Shares in H&M have lost about 43 percent since the beginning of last year, and fell as much as 5.6 percent on Thursday.

The question analysts and investors are asking is whether the chairman’s purchases are the only piece of good news out there for H&M stock. Meanwhile, short interest is now at 10.2 percent, according to data compiled by IHS Markit. That’s up from 8.8 percent at the end of January or 5.2 percent one year ago.

The latest transactions mean that Persson and his family now hold 43.1 percent of H&M, according to Bloomberg calculations based on regulatory filings.

H&M’s Billionaire Owners Get a Reality Check From Number Pundits

“We have had a lot of incoming calls from investors wanting to understand why H&M shares have risen so sharply over the last few weeks and whether this has any implications for our fundamental views on the stock," Morgan Stanley analysts Geoff Ruddell and Amy Curry said in a note to clients on April 29. "It does not."

Recent gains in H&M’s share price are primarily driven by the chairman’s purchases, and the analysts remain "as bearish as ever" on the stock, they said.

But the chairman’s purchases have provided some respite to investors as H&M struggles to adapt its business model to a world in which physical shops are less important and a big online presence is key.

Of the 34 analysts who provide their research on H&M to Bloomberg, only two are advising clients to buy the shares. Eighteen have sell recommendations and 14 have hold ratings.

On average, the analysts predict H&M shares will fall about 16 percent over the next 12 months, marking the worst return potential the company has had since at least early 2004.

The Morgan Stanley analysts said they expect the effect Persson is having on the stock to peter out in the next few days because they expect him to limit new purchases to the amount he gets paid out in dividends this month.

There’s also only a “limited risk that the Persson family could look to take H&M private," they said. The family has also repeatedly denied it has any such plans.

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