Martin Sorrell’s S4 boosted after US hedge fund ups stake

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A New York-based hedge fund has doubled its stake in Sir Martin Sorrell’s advertising group S4 Capital, which lost nearly a third of its stock market value this week following a delay in the publication of its financial results.

Permian Investment Partners increased its stake in S4 to 4.1% this week, betting that concerns over the postponement would prove unwarranted.

Alex Duran, co-founder and portfolio manager of Permian, said his company had “tremendous confidence” in the “operational and financial management and control of the business” of Sir Martin and S4’s chief growth officer. , Scott Spirit.

He added that Permian had “studied closely” Sir Martin’s background at WPP, the world’s largest advertising group which he founded and led for more than three decades.

Analysts have raised concerns over the lack of any clarification from S4 as to the cause of its earnings delay, with one saying the company has been “strangely and disturbingly quiet”.

Duran played down those concerns. “I don’t think they can say much, so they didn’t,” he said. He added that this was not Permian’s first investment in the advertising group, although its previous stake fell below the 3% threshold that prompts disclosure.

The deal helped push S4’s share price up just over 11% to 321p at Friday’s close, a slight recovery from a tumble that wiped around £1bn off the market value of the company listed in London.

S4’s woes began on Wednesday when it announced that PwC, its auditor, had been unable to complete “the necessary work” for the company to proceed with the planned publication of its preliminary annual results the next morning. . He added that the 2021 results should still “remain within the range of market expectations”.

S4 declined to comment. The company, which appointed a new chief financial officer in January, had blamed the first delay in its results in March on the pandemic affecting “travel and resource allocation”.

Permian was founded in 2008 by alumni of Brahman Capital, a New York-based investment manager. Duran said Permian’s mission is to invest in “the best CEOs in the world, primarily in Europe.”

Sir Martin launched S4 in 2018 after an abrupt departure from WPP. During four years of negotiation, the group quickly acquired 29 companies, building a workforce of 7,500 people in 33 countries.

Aware of criticism that he was running WPP from a lean corporate center and not paying enough attention to integrating its sprawling assets, Sir Martin promised a different and unitary approach in his “new” S4 project. age”.

The digital-only business was built around Media Monks, a digital production arm, and Mighty Hive, which made a name for itself as a reseller of Google’s automated ad platforms.

However, the blow to S4 over its delayed audit potentially raises longer-term challenges for Sir Martin. Since most of S4’s transactions have been financed by the issuance of company stock, rather than a cash payment, a sustained decline in its share price may complicate further acquisitions.

Additional reporting by Adrienne Klasa

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