Woodford’s Summer of Woes Continues as Provident Slumps 76%

  • Star manager says the company was undervalued before selloff
  • Another Woodford holding, Sphere Medical, slumps even more

Bloomberg Intelligence’s Jonathan Tyce discusses problems at Provident Financial. He speaks with Mark Barton on 'Bloomberg Markets.' (Source: Bloomberg)

Money manager Neil Woodford’s unlucky run is continuing as Provident Financial Plc plunged the most on record after announcing it’s being probed by regulators, that its chief executive officer stepped down and that it’s scrapping its interim dividend.

Woodford’s funds are the second-largest shareholder in Provident, with a stake of about 19 percent. Defending his position, he said that the lender should deliver 300 million pounds ($385 million) in pretax profit in 2019 if the consumer credit division stabilizes.

“Provident Financial shares started the day undervalued,” Woodford, who oversees about 17 billion pounds in total, said by email. “I am hugely disappointed by what has happened to the consumer credit division but I continue to believe that it will, ultimately, get back on track. This business has been around for more than a century and I believe it will be around for many decades to come.”

A value investor like Warren Buffett, the 57-year-old co-founder of Woodford Investment Management targets companies that pay dividends and are resilient to economic downturns. The star money manager, who left Invesco Perpetual in 2014, was also hit Tuesday by declines in AA Plc, online estate agent Purplebricks Group Plc and Allied Minds Plc.

Provident was the fourth-largest holding in Woodford’s lead fund, the CF Woodford Equity Income Fund, at the end of June. That fund is down more than 5 percent in the past month. Provident, which also forecast a full-year loss on Tuesday, tumbled as much as 76 percent in London trading.

Provident isn’t even the worst performer for Woodford’s funds on Tuesday. Sphere Medical Holding Plc plunged more than 80 percent, giving it a market value of 1.6 million pounds, after saying its working capital will be exhausted by late September without additional finance. Woodford’s funds are the largest shareholders in the company, data compiled by Bloomberg show.

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