Guzman y Gomez at American crossroads
A cash-burning US foray has shareholders fuming.
In the days leading up to February 19, a small group of active fund managers was praying and hoping that Mexican fast food chain Guzman Y Gomez would deliver something in its half-year result to arrest the company's 12-month share price slide.
Their prayers went unanswered. GYG shares have fallen further and last week closed down 5.6 percent to end at $18.05 per share, significantly below the IPO price of $22 per share. The close represented a near-60 per cent fall from last year's peak of $45 and a market capitalisation wipe-out of $2.7 billion. Or, as I like to think of it, 675,000 Maserati Gran Turismos.
Weaker-than-expected December quarter sales and a blow-out in the size of losses in the US business were blamed for GYG's bad hair week. GYG is a growth stock and one thing that is unpardonable in a growth stock is not delivering the expected rate of growth. Once confidence evaporates in a growth story, it's a bumpy ride down the stairs to low-growth multiples.
While Australian active fund managers long GYG were rushing for the heart pills, a number of mostly New York-based hedge funds had made a killing shorting the stock.
