Investors are in a mood to imagine possibilities.
Shares of Compagnie Financière Richemont jumped as much as 5.2 percent on Monday following reports that activist Daniel Loeb’s hedge fund Third Point was taking a close look at the luxury giant.
After briefly hitting a new 52-week high of 126.55 Swiss francs, shares of Richemont closed up 2.8 percent to 123.70 Swiss francs. That translated into a market capitalization of 70 billion Swiss francs, or nearly $77 billion.
Some reports said Third Point had taken a stake in the company already, while other sources threw cold water on the back and forth and said the activist made some inquiries, but that the situation likely wouldn’t go anywhere.
Richemont declined to comment and Third Point did not immediately reply to a WWD query.
With the stock market at a high and some companies coming to market getting sweet valuations — witness the loss-making Allbirds with a market capitalization of $3.8 billion — more investors are looking at fashion and luxury companies with an eye toward unlocking value.
Activist Jana is pushing Macy’s Inc. to separate its e-commerce business from its brick-and-mortar and follow the lead of Richard Baker’s Saks Fifth Avenue, the e-commerce half of which is seen as an IPO next year.
At Richemont, the picture is a little bit different with the company’s Yoox Net-a-porter business, which has lost ground to Farfetch and is set to add a marketplace component next year.
Separating businesses can help clarify companies, let the individual pieces better navigate the market and tell their stories to investors. Such seems to be the case with Lee and Wrangler owner Kontoor Brands Inc., which was spun off of VF Corp. in 2019 and pushed through the pandemic well.
But corporate rejiggerings can also leave businesses to fend for themselves and letting the stronger parts press their advantage.
While an activist could certainly make noise around Richemont, they would have to square off with chairman Johann Rupert — the luxury force who controls 10 percent of the company’s capital and 51 percent of its voting rights.
One financial source told WWD: “We’re not surprised that an activist investor has taken a stake, but with Johann Rupert in charge there is a limited amount any activist investor can do. Richemont is different from other activist situations as Rupert has more than the majority of votes.
“Dan Loeb can’t really use the same playbook with Richemont that he’s used in the past,” the source said. “In addition to spinning off YNAP — and potentially taking a stake in YNAP’s new owner, whether that is Farfetch, or someone else — an activist investor would look for better governance and succession planning. That said, Richemont has been making changes on the corporate governance front, so it’s YNAP that’s the main issue.”
Richemont is due to report second-quarter results on Friday and, while the business overall has been impacted by results at YNAP, the powerhouse Cartier and Van Cleef & Arpels are seen continuing perform well.
MORE FROM WWD: