Kogan shares worth $17 million sniffed by corporate watchdog

A well-timed and lucrative sale has the regulator intrigued.

| More on:
A man holds his hand under his chin as he concentrates on his laptop screen and reads about the ANZ share price

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

sdf

Mondays can be rough, but at least it's not 'under investigation by the Australian Securities and Investments Commission' rough for most of us. The same can't be said for Ruslan Kogan and David Shafer, as their $17 million payday from options over Kogan.com Ltd (ASX: KGN) shares catches the attention of Australia's corporate canine.

In light of the development, shares in the online retailer are down 1.3% to $5.60. However, that's only slightly worse than the 0.3% fall in the S&P/ASX 200 Index (ASX: XJO) today.

The redness in Kogan's share price is a long way off from the wooden spoon currently held by HMC Capital Ltd (ASX: HMC).

How'd we get here?

To understand the present situation, we must first go back to the beginning.

In 2020, long-term incentives of 3.6 million options and 2.4 million options for Kogan and Shafer were approved with one condition: they must not resign before the FY23 numbers get a green light. The options — which allow the holder to buy shares at a predetermined price and sell at the market price — carried a strike price of $5.29.

The incentive was already 'in the money' when approved because Kogan shares were fetching $7.90 at the time. However, for Kogan and Shafer's options to have any value, the Kogan share price needed to be above $5.29 after the approval of the company's FY23 financial report — the options couldn't be exercised before then.

As fate would have it, profits and investor sentiment deteriorated as the company approached 2023. Kogan shares lost approximately 81% of their value between 2021 and the last day of 2022, as shown in the chart below. If the lousy share price persisted beyond August 2023, the options awarded would be worthless.

Created with Highcharts 11.4.3Kogan.com PriceZoom1M3M6MYTD1Y5Y10YALL31 Dec 202031 Dec 2022Zoom ▾Jan '21Apr '21Jul '21Oct '21Jan '22Apr '22Jul '22Oct '22Jan '21Jan '21Jul '21Jul '21Jan '22Jan '22Jul '22Jul '22www.fool.com.au

In April 2023, Kogan announced a share buyback, a process in which the company buys shares on the stock market to return capital to shareholders. The additional buying can create upward momentum in the share price.

Coincidental timing for Kogan share sale

Kogan shares rallied 105% — above the $5.29 exercisable price — until Kogan and Shafer cashed in their options on 4 April this year for $17 million. To avoid shareholder dilution, the company elected to buy the options from the executives rather than issuing new shares.

Coincidentally, a disappointing market update sent Kogan shares back below that all-important $5.29 price point 22 days later.

This intriguing timing has ASIC interested.

At this stage, there is no implication of wrongdoing. Instead, the watchdog is taking a closer sniff to ensure all is above board.

Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended HMC Capital and Kogan.com. The Motley Fool Australia has recommended HMC Capital and Kogan.com. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Consumer Staples & Discretionary Shares

A square ballot box with an envelope going in it sits on a blue keyboard key that says 'vote'.
Consumer Staples & Discretionary Shares

Own Star Entertainment shares? Last chance to vote on 'only lifeline' left for company

Independent expert says terms of Bally's takeover unfair but the 'only lifeline' left for Star Entertainment.

Read more »

A woman sits at her home computer with baby on her lap, and the winning ticket in her hand.
Consumer Staples & Discretionary Shares

How much upside does Macquarie expect for Lottery Corporation shares?

This ASX 200 stock has proven resilient through various economic conditions.

Read more »

A smiling man take a big bite out of a burrito
Consumer Staples & Discretionary Shares

Fundie says Guzman Y Gomez share price 'looks highly attractive'. Here's why

Blackwattle Investment says Guzman Y Gomez's current valuation and risk/reward profile looks very appealing.

Read more »

a bearded man with a big smile wearing a bright red apron holds a knife in one hand and a big slab of cheese in the other as though he is about to slice it.
Consumer Staples & Discretionary Shares

What's the upside for Bega shares according to Macquarie?

This broker sees room to grow for this Aussie consumer staples company. 

Read more »

I young woman takes a bite out of a burrito n the street outside a Mexican fast-food establishment.
Broker Notes

How much upside does Macquarie see for Collins Foods shares?

The company is scheduled to report on 24 June.

Read more »

A team in a corporate office shares a pizza while standing around a table chatting about the Domino's share price.
Broker Notes

JP Morgan upgrades Domino's Pizza shares

Does the broker expect things to turn around?

Read more »

A block of cheese with grated cheese on top.
Consumer Staples & Discretionary Shares

Macquarie expects 20% upside for this ASX All Ords consumer staples stock

This week, Macquarie initiated coverage on Bega Cheese with an outperform rating.

Read more »

Man with a hand on his head looks at a red stock market chart showing a falling share price.
Consumer Staples & Discretionary Shares

Why are Cettire shares crashing 27% today?

Things aren't looking good for this online luxury products retailer.

Read more »