HGH - Heartland Group Holdings

[Snow Leopard]

As reported :-
"Existing shareholders will get A$22.5 million ($23.9m) of the A$92.5m set to be raised through the initial public, a prospectus for the offer released on Friday shows. It is due to list on November 19. Major shareholders will sell a portion of their shareholding into SaleCo - a special purpose vehicle set up to facilitate the process - which will then on sell the shares as part of the offer."

Read the friggin Prospectus (Page 35)!

[Beagle]

Read the friggin Prospectus (Page 35)!

I don't have the time to pussyfoot around !

[Snow Leopard]

I don't have the time to pussyfoot around !

Well shut up then.

[Beagle]

Well shut up then.

Well excuse me for posting what was reported in the NZ Herald.

[winner69]

NZ Herald article needed to be read slowly to comprehend

Pertinent extract from Prospectus:

The Selling Shareholders are employees and directors and Unaffiliated Shareholders who are Existing Shareholders who have each agreed to sell a portion of their Existing Shares to SaleCo prior to Listing.

[winner69]

NZ Herald article needed to be read slowly to comprehend.

For the record Heartland et al number of shares after the IPO same as before

Pertinent extract from Prospectus:

The Selling Shareholders are employees and directors and Unaffiliated Shareholders who are Existing Shareholders who have each agreed to sell a portion of their Existing Shares to SaleCo prior to Listing.

[KJMLimited]

The NZ Herald is hardly the definitive source for anything. P167 (Section 7.2 of the prospectus) gives you the before and after shareholder stack so work off that. Sale Co is the vehicle for some existing shareholders (staff and management) to sell $22.5m worth shares collectively into the IPO, which is not 100% of what they own btw. Heartland isn't part of this. If the bookbuild is big enough, I believe there may be an option for existing shareholders to sell more, and that might include Heartland. But they are all escrowed for the moment according to the prospectus (P176 to 178).

[King1212]

Roberts, who founded Harmoney in 2013 as New Zealand's first peer to peer lender, will remain the biggest shareholder through his trustee company but will see his stake in Harmoney drop from 27.5 per cent to 18.4 per cent.
While Michael Lookman and associated family trusts will reduce their share from 12.6 per cent to 9 per cent.
Kirwood Capital Partners - an Australian private equity investor which bought a stake in the business a few years back, will go from 12.1 per cent to 8.7 per cent and NZX-listed Heartland Group will reduce its stake from 11.8 per cent to 8.4 per cent.
Trade Me will also drop from 10.6 per cent to 7.6 per cent.
Only 26.2 per cent of the newly listed company will be owned by new shareholders and there will be restrictions on when many of the existing shareholders can further sell their shares.

[Snoopy]

Heartland was up 2c when the announcement came through it had acquired a 10% stake.

2c x 463.3m Heartland shares = $9.26m. So HarMoney in total must be worth

$9.26m/ 0.1 = $92.6m today, according to Heartland shareholders.

The above I wrote in September 2014 when the purchase of an 'approximately 10%' stake in Harmoney by Heartland was announced.

Not being a separately listed investment (yet) Heartland was under no obligation to revalue their Harmoney stake every year. I see from AR2015 p43 under Note 9 (Investments) that Heartland paid $6.719m for their stake in Harmoney (11% stake) AND an equity investment in another company "Ora HQ Limited" (12% stake). Ora HQ Limited provided business analysis through a cloud based software platform. The Company offered customers a platform for maintaining performance reports, market news, customer and competitor research, digital marketing channels and other related analysis and research. Ora HQ served small businesses throughout New Zealand. According to the NZ company's website

http://www.companiesnz.com/company/3...ora-hq-limited

Ora HQ Limited went into receivership in 2018.

On 12th January 2015 Heartland announced:

"Harmoney has completed a successful $10m capital raise in which Trade Me has taken a 15% shareholding in Harmoney. As part of this capital raise, Heartland has increased its investment in Harmoney to maintain its existing shareholding of approximately 10%. Based on the investment made by Trade Me, the current implied value of Heartland’s investment in Harmoney is in excess of $5.0m. Following the capital raise, Heartland will have invested approximately $3.5m in Harmoney. Heartland’s initial investment in September 2014 was prior to the launch of Harmoney’s platform and formed part of a wider commercial arrangement."

Working back through the numbers, if Trade Me had 15% of Harmoney after this capital raise, then Heartland must have increased their own investment in Harmoney by 15% to maintain the same percentage shareholding they had before Trade Me came on board. So the original investment (OI) by Heartland into Harmoney must have been:

OI x 1.15 = $3.5m => OI = $3.0m

The Harmoney investment by TradeMe would suggest an incremental gain on the holding value of Heartland's 'Harmoney' investment of:

$5.0m -$3.5m = $1,5m

What has been said on 'equity investments' in successive annual reports follows:

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FY2016/ The value of all equity investments increased over the year (see AR2016 p49 ) by:

$7.291m - $6.719m = $0.572m

This change is after a gain on the sale of investments of $1.136m (AR2016 p46). If we add the gain on the sale of investments onto the end of year balance figure, and then subtract the total investment balance from the previous year I get:

($7.291m + $1.136m) - $6.719m = $1.708m

That $1.708m could include the $1.5m gain recognised as part of a new carrying value of Harmoney. However, I am unable to see where such a change in value has been taken account of in the 'Statement of Comprehensive Income' for FY2016.

FY2017/ Moving on to note 9 of AR2017 the value of 'investments' has increased from $7.291m to $11.791m = $4.5m. During the year some investments were sold meaning a gain of $0.628m was booked as part of 'Comprehensive Income'.

FY2018/ By FY2018 'Equity Investments' had reduced from $11.791m to $9.694m, a drop of $2.097m (AFR2018 p28) although $0.156m of investment sale profits were booked during the year (AFR2018 p25).

FY2019/ Rolling on to FY2019 (AFR2019 p22) 'Equity Investments' have increased to $12.435m from $9.694m (a rise of $2.741m) after $0.174m gain was realised on investments sold (AFR2019 p18).

FY2020/ Finally by FY2020 (AR2020 p107) $16.335m of equity investments were recorded on the books. This represented a rise in the equity investment balance of $3.9m. There were no reported gains on investment sales over FY2020 (AR2020 p100).

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An interest.co.nz article on the October 2019 'C' capital raising:

https://www.interest.co.nz/news/1023...-and-2-unnamed

suggested that new investment of $NZ25m by Kirkwood capital of Melbourne implied an overall valuation of Harmoney north of $100m. Kirkwood's 13,4% stake at that time would suggest an overall valuation of the company of:

$NZ25m/ 0.134 = $187m

That $187m figure is 'considerably north of $100m'.

The 30th October Harmoney prospectus is now touting a 'market capitalisation offer price' of $A353.2m, after the completion of the public capital raising. At that price, the Heartland 8.4% stake would be worth:

0.084 x $A353.2m = $A29.7m / 0.94 = $NZ31.5m

There is a missing peace ti this puzzle. In the pre-Restructure Shareholdings, the Heartland stake in Harmoney was 11.8% (Harmoney Prospectus p35). So did Heartland add in some more capital to take their stake from 11% to 11,8%? I can't find a press release that says so. P35 in the Harmoney prospectus notes that Heartland owned 1,966,555 'Series B' shares. A report on the Sries B capital raising on 16th February 2016 is here:

https://www.altfi.com/article/1744_k...inancing_round

This suggests that a UK based company 'Alternative Credit Investments' took a stake worth up to $8.5m. Spread over 3,933,109 shares (Harmoney Prospectus p35), this suggests a capital raise share price of up to: $8.5m / 3,933m = $2.16. I will guess the capital raise was done at the 'round figure' of $2. If that is what happened, then Heartland must have increased their investment in Harmoney by

$2 x 1,966,555shares = $3.955m

However that figure doesn't correspond with any new Heartland equity investment capital outlayed over FY2016 as I have reported above :-(. Oh dear! It is getting late and this is the best I can make of a far from clear situation. However, whatever way you slice this deal, it does appear that Heartland will be in for at least a $20m 'windfall one off on paper profit', should the Harmoney float go through at the price projected.

SNOOPY

[Beagle]

Help me out then my Beagle friend because I'm just an overworked time poor Beagle trying to follow too many companies and cats are never a dog's friend and all the resident one ever wants to do is claw me. (Cruel animal he is).

So their stake is now worth $A3.50 per share x $8,518,864 shares = ~A30m. Seems like a pretty tidy unrealized profit but didn't they invest a bit more later on ?