A company held across several Fundsmith funds has got offside with Terry Smith after it failed to approach the firm about a capital raise even though the equities boutique is the fifth largest shareholder.
Smith (pictured) told Sky News the move could make him reconsider his investment in Amadeus, a Spanish online travel booking website. “You’re touching a bit of a raw nerve with me at the moment on that particular subject,” he said when questioned about pre-emption rights during the coronavirus pandemic.
The company raised €750m (£668m) in new capital and a further €750m in convertible bonds at the start of April in order to improve liquidity in the face of the Covid-19 outbreak and lockdown. Shares were issued at a 5.8% discount to their last trading price.
“They never even bothered to call us and neither did anyone acting for them; their banks didn’t bother to call us,” Smith said. He noted Fundsmith has invested with the company for seven years.
JP Morgan had been the global coordinator of the capital raise while Citigroup and Credit Agricole had been book runners. A press release providing details on the accelerated book build said it been targeted at qualified investors.
“People are always talking about trying to encourage long-term shareholders, we’d like to think we are long-term shareholders given that we have that record, but they never even bothered to contact us.”
‘It undermines our faith in good governance’
Smith said although Amadeus would point to the fact it complied with the rules, he still felt it was the wrong way to behave.
“It undermines our faith in good governance to think that somebody like us in those circumstances would be completely ignored, and other far more short-term shareholders would actually receive stock in our company.
“To make matters worse in this particular case, I sent some correspondence to the CEO about it and he’s not replied to me for a month.”
Luis Maroto has been chief executive of Amadeus for the duration of Fundsmith’s investment having been appointed to the top job in 2011.
Smith affirmed that Amadeus’s actions would make him reconsider his investment in the business.
“Our strategy is one where we try to invest in companies for the long term and let them do the capital allocation and let the great returns some of these companies can demonstrate, compound over time. It’s not particularly our cleverness in trading or timing or anything like that, most definitely not. It’s the companies themselves. When they make bad decisions of that sort it undermines our confidence in them.”
The company does not sit in the Fundsmith Equity top-10 holdings, according to its latest factsheet from May.
In April, Smith said Amadeus had been one of his worst hit stocks, alongside Intercontinental Hotel Group, thanks to its focus on the travel sector. At the time, its shares had fallen 42% to €41.42. Today they are trading at approximately €54.
See also: Terry Smith argues flagship fund could handle £30bn
