I am calling it quits on EML, my thesis on this stock was a simple one. A rising interest rate environemnt would give them the extra cashflow and room needed to get the regulators back onside and enable EML to become an integrated financial services company rather than a series of bolted on acquisitions. I thought Emma Shand (new CEO) and the board renewal process was key to this transistion. Emma had been in the job just under 6 months, and the board renewal had only just been completed so I was willing to give her and the board some time to turn it around. The commentary at the half was that it is a slow expensive process but is moving in the right direction @mikebrisy gives a good rundown on how the costs on professional services balloned.
Despite this, the first major cracks in my thesis started the next day after the letter from the Central Bank of Ireland was released which said they were not on track and that their remediation efforts to date were unsatisfactory. In my thesis I had expected the full change in leadership to be the first step in appeasing the Bank but this clearly is not happening. Not only were they unhappy they were also going to further restrict growth until the remediation effort was completed to their satisfaction. I did have a bit of thesis creep here and toyed with the possiblity that they would spinoff the problem acquisitions or shutdown of this part of the buisness could result in a smaller but still profitable Gift card buisness in North America, but in hindsight this was more wishful thinking than a good bet.
The 2nd and final strike for me is yesterdays sell down by Alta Fox, who only recently bought a 10% stake in the company and got a seat on the board as@Magneto and @ArrowTrades explained. For them to have aggressively bought on market, got on the board and had a good look inside the company to now want to offload their stake really can only communicate that this company is on the way out, or at best it is not going to be making them a decent return anytime soon.
So for me I am selling my EML shares, I only had a small position in RL as it was always a high risk play. The lesson I am taking from this is stay away from any comany that has major regulation issues as they suck up a lot of time and money to fix. Also dont get sucked into a company that you watched but didn't buy years ago on the implicit assumption that history would repeat. So I have sold on market this morning.
