Twiggy Forrest’s $600 million bad week
Friday, September 7, 2012/
About a week ago, Fortescue Metals founder and chairman Andrew Forrest spent just under $40 million buying about 10 million shares in a company that can only be described as his baby.
If it was meant as a show of confidence in Fortescue, it has failed miserably. Fortescue has been hit by an avalanche of bad news in the past five days, and it has cost the man they call Twiggy dearly.
First came Fortescue’s announcement that it would save $1.6 billion by winding back its expansion plans and sacking about 1,000 staff – many of whom appear to have received their marching orders almost immediately, sending shockwaves through the organisation.
A day later, the company raised $300 million by selling a power station in February.
Then yesterday, long-time Fortescue executive and joint company secretary Rod Campbell announced his resignation.
Against the backdrop of all this internal turmoil, the iron ore price just won’t stop dropping. Iron ore prices hit a three-year low of $US86.90 on Wednesday and seems unlikely to find a floor any time soon.
It’s little wonder, then, that investors are fleeing from Fortescue. The company’s shares have fallen 16.5% this week and have now fallen from above $6 at the start of the year to about $3.
For Twiggy, who has spent $175 million buying shares since June 20 – including the $40 million spent last week – the cumulative effect of all this has been worth about $600 million.
The value of Forrest’s stake in Fortescue has fallen from $3.6 billion at the start of the week to a tick over $3 billion this morning.
Since the start of the year, the value of his shares has dropped by $2.5 billion from a peak of $6.1 billion.
To add a little insult to Twiggy’s injury, there are reports this morning that Fortescue hasn’t closed the door on a capital raising, which could dilute Forrest’s 32% shareholding.
Of course, Twiggy is no stranger to the vagaries of paper wealth.