🔒 Boardroom Talk – Transaction Capital reminder of never just one cockroach in kitchen

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By Alec Hogg

Once again, the Oubaas of Omaha has saved BizNews tribe members a bundle.

In June 2022, primarily on the strength of its controlling stake in mega vehicle retailer Webuycars, shares in Transaction Capital were added to the BizNews model portfolio. This was done despite a community member’s warning about the group’s lending activities two years earlier. We investigated but found nothing.

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Six months after the stock was added to our portfolio (at R39), our tribesman once again raised his Transaction Capital concerns, this time using its own published data to contend there was a black hole in the balance sheet. Once again, we received soothing answers to our questions, so remained invested.  

In late March, Transaction Capital’s “shitshow” began with the release of shocking financial results, worsened by investors rejecting CEO David Hurwitz’s explanation why he had sold shares worth R50m three months earlier. In our post-results interview (click here), Hurwitz said the group was postponing buying more of Webuycars because its share price (now R13) had been pushed too low.

That left us with a tough call in that month’s portfolio update: Stick with Transaction Capital shares on the strength of Hurwitz’s “too cheap” view, or follow Warren Buffett’s advice that when scandals hit, treat them like a cockroach in the kitchen –  cousins will be close behind. We went with Buffett and sold the shares at R13.15.

It’s now six months later, and yesterday saw the release of Transaction Capital’s latest results. The share price, already down by half from the level at which we sold out, took another 16% hit as the numbers were even worse than forecast. Plus, Hurwitz himself is now throwing in the towel and will be leaving the CEO post.

The R13.15 received for our Transaction Capital shares in March is miles away from the current price of R5.85. Thanks, Warren. Not for the first time. And certainly not the last.

Sterkte

Alec

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