Activists Are Circling

On Monday Richemont finally managed to break above R200 a share. It's been a hard slog after first breaking R100 a share in 2013. LVMH, by comparison, has managed to double in value over the last two years. Richemont, the jewel in the Rupert-family empire, is managed conservatively, which slows down their growth a bit, but that also ensures sustainability and longevity.

Earlier this week, it emerged that activist investor Dan Loeb of Third Point has built up a small position in Richemont and is now trying to put pressure on the management team to make changes. You might recognise the name because Loeb's Third Point are the same guys pushing for the break up of Shell. In this case, they argue that Richemont's online division should be spun-off or sold.

Richemont has spent billions building up their online operation, called YOOX NET-A-PORTER, and it accounts for around 9% of the group's sales. The problem is that last year it lost EUR 223 million. Loeb argues that Richemont should focus on creating beautiful products and let someone else worry about scaling an online shop. Maybe he has a point, but thinking long-term, online sales will increase and it is better to control the customer experience from start to finish.

The Rupert family controls over 50% of the Richemont voting rights, meaning an activist investor like Loeb is less intimidating. Johann Rupert will probably hear him out and then make up his own mind. However this turns out, having people talking about how Richemont as undervalued will be good for the share price.