By Lucas Baird
Concerns over the future of Challenger’s relationship with Wall Street asset manager Apollo are behind a sharemarket rout that wiped more than $530 million from the Australian financial services company’s value, analysts say.
Shares in Challenger fell 13 per cent to $6.09 on Thursday after it confirmed that Apollo reduced its equity stake in the ASX-listed retirement income provider, which The Australian Financial Review’s Street Talk column reported on Wednesday.
Apollo’s partial exit via a block trade netted it about $460 million. The pair confirmed the share sale in the statement, but assurances that the relationship between Challenger and Apollo would continue fell flat. Challenger distributes some Apollo products in this market.
Morningstar analyst Shaun Ler said the investor panic “feels like overblown jitters”.
“My suspicions are Apollo simply found another higher-returning opportunity as compared to annuities for Challenger,” he said.
Mr Ler said Challenger was a capital-intensive business and its return on equity had taken some time to improve. The company’s 2024 financial year result was “fairly solid”.
Mr Ler said the share sale would give Challenger more strategic independence.
“Apollo very well holds some sway in corporate strategy given their prior substantial ownership, and thus the sell-down of their stake provides the Challenger board [and] team with somewhat greater level of independence in deciding the next steps,” he said.
Anna Milne, a senior investment analyst at Wilson Asset Management, which is a Challenger shareholder, called the sharemarket reaction “unfair”.
“It feels overblown,” she said. “Naturally, there are jitters whenever there is a big sell-down, but fundamentally nothing has changed and Challenger delivered a strong full-year result.
“Challenger is delivering on the controllables, and we are very comfortable.”
Apollo first appeared on the Challenger register in July 2021 and has steadily ramped up its shareholding since. Apollo’s head of Asia-Pacific Matthew Michelini said Challenger was a “unique platform”.
“As one of our most important long-term strategic partners globally, we look forward to continuing to collaborate on asset management and product design,” he said on Thursday.
Challenger CEO Nick Hamilton said the pair were “pursuing a range of initiatives to deliver value for Challenger shareholders”.
“[This includes] asset origination and distribution of Apollo’s high-quality products in Australia,” he said. “Apollo’s re-evaluation of its investment in our business will also significantly increase Challenger’s free float and improve trading liquidity.”
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