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Magellan shares come back to earth on broker ratings

Tom Richardson
investor broker

Magellan Financial Group Ltd (ASX: MFG) shares dropped 6.8% to $55.74 today after the company announced a full year profit of $364.2 million and offered 4.98 million new shares to institutional investors at $55.20 a pop to raise $275 million.

It will also pay a final dividend of $1.114 per share to take full year dividends to around $1.85 per share. This puts it on a respectable yield of 3.3% plus full franking credits.

The stock probably tanked today as many sell side brokers still have reservations over the business’s valuation with The Australian reporting the likes of Citi, Goldman’s, and Ord Minnett all slapped ‘sell’ ratings on the shares on valuation grounds. 

Another factor leading some retail investors to hit the ‘sell’ button is the opportunity to sell some stock to fund buying units in its soon to be launched Magellan High Conviction Fund. Eligible Magellan shareholders can invest up to $50,000 and receive a free 7.5% in bonus units on top of the amount allocated in the Magellan High Conviction Fund offer.  

It’s even possible powerful institutional investors who subscribed to its offer at $55.20 a share took the opportunity to lock in some instant arbitrage profits today, with the stock settling just above the offer price. 

Other fund mangers still to report this earnings season include Platinum Asset Management Ltd (ASX: PTM) and Perpetual Limited (ASX: PPT).

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Motley Fool contributor Tom Richardson owns shares of Magellan Financial Group.

You can find Tom on Twitter @tommyr345

The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. 2019