Monday, May 23, 2022

Graham Adams: Simon Henry’s “fair criticism” gets overlooked

On Friday, My Food Bag announced its results for the year ending March 31. The meal-kit provider had increased its profit and declared a four-cents-per-share dividend.

On the back of this excellent news, its shares rose six cents from Thursday’s close of 79 cents to 85 cents at the end of Friday trading.

However, anyone who bought shares in My Food Bag’s public float on the Australian and New Zealand share markets in March 2021 might not have hurried to break out the champagne to celebrate their good fortune just yet.

It’s a melancholy fact that the shares are still 54 per cent below their listing price of $1.85 in the company’s Initial Public Offering.

Meanwhile, the shares of DGL Group — the chemicals company headed by the notorious Simon Henry — rose 14 cents on Friday from $3.36 to $3.50.

Despite the fallout from the severe and relentless beating he has taken in the media over the past fortnight for his “Eurasian fluff” comments about My Food Bag’s ambassador and co-founder Nadia Lim, he and his board have delivered a 240 per cent rise for investors who bought shares in DGL Group’s public float last May.

Or, to put it another way, anyone who invested in DGL just a year ago at the issue price of $1.10 would now have more than tripled their money while investors in My Food Bag would have lost more than half of theirs.

It seems unlikely that the spectacular gap in performance between the two companies will be extensively analysed by mainstream journalists any time soon but it really ought to be because Henry had a real and valid point to make beyond his dumb and offensive insults published in NBR.

In fact, the mainstream media has almost entirely avoided dealing with the substance of Henry’s comments and instead — in the fine tabloid tradition of “relishing under the mask of disgust” — has relentlessly recycled his gratuitous slur aimed at Lim’s appearance and ethnicity to fan widespread outrage.

This has included even the Prime Minister being asked what she thought of his comments. No doubt aware that journalists asking for her opinion as the nation’s leader was slightly ridiculous, she replied in her capacity as a “human” that she imagined they “would have been insulting to all women” — before adding, “The success of Nadia Lim speaks for itself.”

Stuff, in its enthusiasm for hunting down Henry, even sent one of its crack investigative units to corner the CEO at his tennis club in Parnell. As he was filmed retreating from them, a reporter shouted inane questions at his back, including: “Has Nadia responded to your apology? Why were your comments inappropriate, Mr Henry?”

The context to Henry’s comments was his criticism of the fact that, of the $342 million raised in My Food Bag’s float, only $54.8 million ended up going back into the company’s pockets, with $16.7m used to fund the float’s costs and $38.2m to repay bank debt.

The balance — a staggering $287.3 million — was shared among its existing shareholders, including Waterman Capital, and co-founders Cecilia and James Robinson, Theresa Gattung, and Nadia Lim and husband Carlos Bagrie, in various proportions.

Henry was reported in NBR saying about My Food Bag’s public float: “I sort of don’t get it; you come to market telling everyone, ‘It’s a great company… And, by the way, we’re selling it and running.’

“I don’t get it. I mean, I’m a simple man. I don’t get it. If it’s so good, why are you selling it?

“You know, I’m quite cynical about [My Food Bag], to be honest with you. Because they come to the market, they sucker in the mas and pas and they do their dough, and it’s not good for the market.”

In the run-up to its float in March 2021, My Food Bag shares were widely promoted to the public — and to its customers and staff, offering them first dibs on shares. More than 10,000 of them reportedly indicated a (non-binding) interest in a priority allocation.

“Doing your dough” is an old-fashioned phrase for losing money, and perfectly apt for investors who bought My Food Bag shares for $1.85 each. The shares were marked down on listing and have been on a jagged but mostly downward slope ever since.

In saying, “It’s not good for the market”, Henry was pointing to a pertinent and serious problem afflicting the undernourished New Zealand sharemarket. Every time small shareholders and first-timers get burned, more people resolve to never invest in shares again. And that, unfortunately, is one reason that buying houses in New Zealand is often seen as a much more reliable investment — and a reason our sharemarket languishes while our houses are insanely overpriced.

One senior business journalist succinctly summed up the situation on social media shortly after Henry’s comments were published: “There was a fundamental point to be made about the My Food Bag IPO. The prime shareholders, including the founders, trousered out at the $1.85 share issue price. The shares are now 86c.

“The celebrity side of My Food Bag was a significant part of the brand story. It hasn’t worked. People who bought in on the brand story bought a dud. But all of that could have been said without resorting to blatant sexism and racism.”

The Australian Financial Review — while also deploring Henry’s personal comments about Lim — came to a similar conclusion. It pointed out that, since DGL was floated on May 24, 2021, his company “has quickly amassed a devoted following. It’s worth nearly twice what it was a year ago thanks to a string of profit upgrades.

“That had Henry, clearly a competitive man, gushing [in NBR] to journalist Hamish McNicol about how much better his float had done than that of, say,… meal-kit business My Food Bag. That IPO, he noted, had enriched its founders and private equity backers while investing only a fraction of its proceeds back into the business.

“It’s an entirely fair criticism.”

After having unleashed a tsunami of condemnation of Henry over a full fortnight, it seems very unlikely that New Zealand’s mainstream media will now investigate in depth his “entirely fair criticism” and the dismal fate of those who had invested their money in My Food Bag when it was floated on the sharemarket.

It’s very hard to know exactly what journalists want from Henry — apart from ruining him. He has apologised, and has been admonished by his own board. The value of his 57 per cent shareholding in DGL has fallen by tens of millions of dollars — although some of that is due to the overall slide in the Australian and NZ sharemarkets.

And it’s not just journalists. KiwiSaver providers Kiwi Wealth and Simplicity have added the company to their blacklist while the Financial Services Council NZ (FSC) has encouraged Henry to redeem himself.

The FSC touts itself as “the industry body for the financial services sector, with a vision to grow the financial confidence and wellbeing of New Zealanders”.

It says its 103 members — including major insurers, fund managers, and KiwiSaver and workplace savings schemes — handle funds of more than $95 billion.

In a post on its blog 10 days ago — headed “FSC applauds Nadia Lim and invites Simon Henry to join campaign to grow women’s financial wellbeing” — the council lauded Lim as a “role model”.

It invited Simon Henry and the board of DGL “to support our ‘It Starts With Action’ campaign”.

The council describes the campaign as “focused on impactful action, and so far 70+ supporters have committed to undertaking tangible steps to improve the financial wellbeing of women in New Zealand”.

Nadia Lim hasn’t been on My Food Bag’s board for more than six years but she is still a brand ambassador for the business. When I asked FSC by email why a celebrity entrepreneur who fronts a company that has seen investors lose more than 50 per cent of their investment in a year should be praised as a “role model for other Kiwis in business”, no reply was forthcoming.

The FSC also didn’t respond to the question of whether Henry had made a reasonable point about “ma and pa” investors being suckered in and “doing their dough”.

You might think a finance industry body dedicated to growing “the financial confidence and wellbeing of New Zealanders” might have something to say about a share float that has achieved exactly the opposite result. But apparently not.

It should be recorded here that Nadia Lim and her fellow shareholders have done nothing illegal. The prospectus for the public float made it clear the existing shareholders were going to sell most of their holdings.

And My Food Bag’s chief executive, Kevin Bowler, also made it clear to NBR in response to Henry’s criticism of his company’s float that it “had (on provisional and unaudited results) achieved or exceeded its forecasts… and paid its planned maiden dividend to shareholders”.

On Friday, Heather du Plessis-Allan interviewed Bowler on Newstalk ZB. He said he was very pleased the company had achieved its profit forecasts and “beat them in terms of revenue”.

He seemed less pleased to be asked about the merits of last year’s float. He said, “Well, look, the purpose of the IPO was to enable other people to invest in the business and for the founders to take some money out of the business, which was what they wanted to do. And we were very transparent and very clear about that.”

Du Plessis-Allan suggested that perhaps Henry had been saying, “My Food Bag had capitalised on the naivete of mum-and-dad investors. Did you guys?”

Bowler: “Well, I don’t think that’s at all fair.” He mentioned again the performance of My Food Bag in matching or beating its targets.

However, he wasn’t asked whether listing the shares at $1.85 was far too high to be warranted by the company’s fundamentals — and especially with the threat of serious competition looming by operators such as HelloFresh and Woop, among a growing number of meal-kit businesses entering New Zealand’s small domestic market.

Simon Henry’s approach stands in stark contrast. He could legitimately boast to NBR: “Well, you know, I’m a sort of, a bit of, a fundamentalist. I did [my] IPO and I didn’t take one cent off the table and I put every cent back in.”

Last October he told the NZ Herald he was proudly “old-fashioned” in his approach to business.

“I came to the market to grow the business, not to sell the business, and I have bought shares post-listing and I will buy more when I’m allowed.”

Perhaps in time we might come to conclude that while Henry may be a flawed and perhaps a foolish man in some ways he is an honourable one in important ways too.

Graham Adams is a freelance editor, journalist and columnist. He lives on Auckland’s North Shore. This article was originally published by and is published here with kind permission.


Anonymous said...

when you have a population 'educated' in social justice instead of basic economics, what kind of critical analysis would you expect?

the extent of hero worship (or critique) looks weird for a developed nation. the merit of a product/service should lie in what value/return it brings to you (as a customer or a shareholder). how does the personal view (no matter how repugnant) or image (no matter how exotic) impact that assessment? then again, this would mean a total shutdown of the advertising & branding industry :(

Alan said...

Henry's comments were inappropriate but rather than causing offence they caused glee in the minds of those piling in on him.

Fred H said...

Henry's comment was stupid but his reasons for lambasting My Food Bag founders us more than just legitimate -- Nadia Lim and her cohort of founders have shown themselves to be the "unacceptable face of capitalism". The ESC and other virtue-signallers would do well to concentrate on this aspect of the kerfuffle and take Nadia Lim and co-founders to task over their float because these are not the type of people we want to see in business in NZ or anywhere.

Robert Arthur said...

Seemed tame to me. If he had called some befitting bloke a polynesian hunk or somesuch would there have been a fuss? The comment was in the context of the advert not her life generally. Nigella has brushed off far more pointed content. Do all the non managed tracking funds automatically fall for similar floats?