Conscious uncoupling the SEEK way
Andrew Bassat's fee slate has been wiped clean.
Last week, SEEK managing director Ian Narev made the first tentative step towards decoupling the company's share price from its unpopular structure – the marriage of a highly successful online jobs marketplace that generates tonnes of free cash flow to a capital-hungry "black box" venture capital fund whose manager and co-investor is SEEK co-founder Andrew Bassat.
The partial decoupling is a bold move for Narev. Not only is Bassat a friend, SEEK's former boss and a demigod in Australia's online marketplace firmament, but the terms of Bassat's compensation as manager over the next five years will be dictated by him being able to return $700 million in cash to SEEK.[[SEEK owns 84 per cent of the VC fund. The overall liquidity hurdle is $840 million.]]
This process will take some time, which has not pleased all SEEK shareholders, some of whom want the separation of SEEK and the VC fund, SEEK Growth Investments, to happen yesterday. The few anti-Growth Investments shareholders that remain on the SEEK register want the company to immediately return to its roots as a high-margin operator totally focused on the jobs marketplace.[[A number of formerly keen backers of SEEK sold all of their shares progressively after the formation of the Growth Fund as they regarded the transaction as a mixture of bad economics and bad governance. According to data from S&P Global CapitalIQ, one of the sellers that bailed was Mutual Trust Pty Ltd, the holding company for many of the larger Baillieu and Myer family investment funds. Another seller was Charles Goode's Australian United Investment Co Ltd. Capital IQ's list of big offshore fund managers that have scaled back SEEK holdings includes Schroders, Fidelity, BlackRock, MassFinancial, Geode Capital and Norges Bank.]]
That ain't going to happen, at least not quickly, as a fire sale of Growth Investments' portfolio could only be procured by selling assets at huge discounts to their current valuation. Like dozens of global private equity giants sitting on thousands of pre-loved companies, SEEK is a flamboyantly keen seller in a market with few buyers.
It's easy to see why the anti-Growth Investments crowd have fire ants in their pants. Since SEEK embarked on its dual structure back in August 2021, SEEK's annualised total shareholder returns have been a dismal negative 13.1 percent. While correlation isn't causation – a softer jobs market and the SaaSpocalypse are also to blame – the naysayers have a point.
