DGI9 shares plummeted 40% yesterday (28 September) after the board announced it would scrap the trust’s 6p dividend target for the 2023 financial year and not declare a dividend for the second quarter, due to ongoing liquidity and balance sheet pressures.
The pessimistic market reaction also followed what Investec described “disappointing” interim results, as well as progress on the potential syndication of a majority or co-controlling stake in Verne Global and the launch of a shareholder consultation to determine the trust’s future.
Digital 9 Infrastructure shares plummet by 40% as turnaround hopes slump
In a research note, Investec analysts Alan Brierley and Ben Newell said the news was confirmation of their “long-standing” concerns, which they said were a function of “strategic mismanagement”.
However, they also noted that the share price slump to just 33.5p exceeded even their “worst fears”. At the time of publication, the trust’s shares had recovered by less than 10%.
“With long-suffering shareholders now left to pick up the pieces and, in our view, the credibility of the board and manager irreparably damaged, we struggle to see how DGI9 can survive these disappointing developments and return to business as usual,” the analysts added.
Digital 9 Infrastructure withdraws 2023 dividend target as balance sheet pressures mount
Brierley and Newell said a “wide range of options” on the future direction of the company should be considered, such as a “full refresh” of the board, replacing the investment manager, and strategic exit routes, including a full managed wind-down of the company.
“We now regard this as a special situation and given the substantial fall in the share price yesterday and the material discount to NAV the company currently trades on, we upgrade our recommendation from ‘Sell’ to ‘Buy’,” they added.
