BT Board Jumps In to Purchase Stock After 21 Percent Decline

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  • Directors, relatives bought $700,000 in BT stock this week
  • Royal London: ‘You’d have to take it as a sign of confidence’

BT Group Plc directors and their relatives bought more than $700,000 of its stock Monday and Tuesday, providing a vote of confidence in the former British telecommunications monopoly one week after it suffered a 21 percent drop.

The purchases, totaling more than 185,000 shares, were led by Anthony Ball, the former BSkyB chief executive officer and current BT board member, who bought 70,000 shares, and relatives of Chairman Mike Rake and audit & risk committee chairman Nick Rose, who bought 90,000 shares combined, according to a regulatory filing Tuesday.

With the stock trading near three-year lows, the insiders are showing faith in BT’s long-term prospects, according to Richard Marwood, senior fund manager at Royal London Asset Management. BT fell the most in more than 30 years on Jan. 24 after disclosing a deeper accounting scandal in Italy and a weaker outlook for U.K. government contracts and corporate business outside its home country.

“You’d have to take it as a sign of confidence in the way that the management think that the share price reaction has been overdone,” Marwood said in a phone interview. “BT is a fundamentally strong business, it just has some uncertainties around it at the moment and I think the share price could recover if we see some of those uncertainties get cleared up.”

Royal London owns BT shares worth about 1 percent of the company and has bought more in the past week, Marwood said.

The insiders included directors Iain Conn, Isabel Hudson and Karen Richardson, along with Ball and the relatives of Rose and Rake. They paid between 302 pence and 306 pence each for the shares, with the exception of Richardson, who purchased American depositary receipts. Based on those reports, the insiders paid about 559,355 pounds ($705,682) for the stock.

The shares closed at 302.1 pence on Jan. 26, the lowest price since June 2013. BT rose 1.5 percent to 308.50 pence at 11:30 a.m. in London.

The company’s directors are encouraged to voluntarily invest at least 5,000 pounds in BT stock each year, Dan Thomas, a BT spokesman, said in an e-mail.

Class Status

Several law firms are working to sign up holders of BT’s American depositary receipts to lawsuits seeking class status that have been filed in the U.S. over the accounting debacle. The suits allege BT violated federal securities laws by failing to disclose material information about the business in Italy.

Prosecutors in Milan have also opened a criminal probe into the allegations of false accounting and embezzlement. In the U.K., the Financial Reporting Council, an accounting and audit regulator, said it’s looking into whether auditors fulfilled their duties and hasn’t decided if it needs to investigate formally. The country’s Serious Fraud Office said it’s aware of the allegations and wouldn’t comment further.

In addition to the recent revelations, BT has been caught up in a regulatory fight over governance of its Openreach unit, the nation’s broadband backbone that competitors access to provide service, and it’s also facing an under-funded pension plan. There are too many uncertainties for some investors, Marwood said.

On Wednesday, BT said it appointed two independent directors, Brendan Barber and Edward Astle, to the newly-formed board of its Openreach infrastructure unit. Finance Director Simon Lowth will also join the board, which is led by Chairman Mike McTighe and held its first meeting on Tuesday. A fourth independent director will be announced soon, BT said.

The company formed the board as it seeks to fend off attempts by regulator Ofcom to force a legal separation of the division, which BT says would add costs to a pension plan in deficit. Ofcom has said the new board doesn’t go far enough toward making Openreach more independent and the two sides are currently in talks toward a resolution.