(News Bulletin 247) – The owner of the Sandro, Maje, Claudie Pierlot and De Fursac brands is jumping on the Paris Stock Exchange as the British courts confirm the illegality of the sale of a block of shares in 2021.

SMCP is undoubtedly the stock of the day on the Paris Stock Exchange. The stock of the parent company of the Sandro and Maje brands is sought after in reaction to a court decision favorable to the creditors of the specialist in “accessible luxury”. This could accelerate the process of restructuring the group’s capital.

In a press release published today, SMCP reported that it had been informed that the London Court of Appeal had rejected the appeal requests made by Dynamic Treasure Group concerning a decision of the British High Court.

The epilogue of a shareholder crisis?

On July 12, this jurisdiction invalidated the sale of a 15.9% block of SMCP’s capital by European Topsoho to Dynamic Treasure Group, a company based in the British Virgin Islands, three years earlier. This company belongs to Chenran Qiu, the daughter of the former boss of SMCP. It should be remembered that this block represented a total of 12 million shares which had then been sold in November 2021 for a symbolic euro, while the stock was trading at 7.75 euros that day.

However, this sale triggered the ire of the creditors of European Topsoho, the Luxembourg subsidiary of Shandong Ruyi (the businessman’s eponymous group) and a 53% shareholder in SMCP. These creditors, united under the trustee Glas, recovered 37% of SMCP’s capital (29% directly and 8% entrusted to a firm to avoid going above the 30% threshold) which were pledged on Topsoho loans. Following a default by Topsoho in the fall of 2021, the creditors therefore received this capital.

Problem: since 2021, the SMCP share price has plummeted and the 37% of the capital no longer allows creditors to recover their investment.

One possibility for them to make up for lost time is to draw on the remaining 16% of the capital, still held by European Topsoho. “If the 16% were to be repatriated to Luxembourg (which should be the case), then they could probably be seized by Glas”, Oddo BHF estimated in July. However, the transfer of 16% of Topsoho to Dynamic Treasure Group de facto prevents such a possibility. Hence the legal challenge by the creditors of this transfer.

They therefore brought the case before the British commercial courts with a view to having this transaction annulled, judging this sale to be “potentially illegal”. They therefore won their case this summer, and the recent decision of the London Court of Appeal “is now no longer subject to appeal”, SMCP specifies in its press release.

The “accessible luxury” specialist also reports that Glas wants the forced restitution of this 15.9% stake in Singapore, the jurisdiction where the corresponding shares are currently held.

The process of restructuring SMCP’s capital could therefore accelerate after the British courts confirmed this sale, which was deemed illegal. Creditors now have free rein to initiate the sale of 37% of SMCP’s capital, as announced in March 2023.

In a note published this summer, Oddo BHF had already indicated that it could see a resolution this year of these “shareholder stories which will have spoiled the equity story” (the stock market story), with court decisions favourable to SMCP’s creditors.

On the stock market, the prospect of a capital restructuring is causing a surge in SMCP. The stock is still up 11.1% at around 3:10 p.m., after jumping 16.6% at the end of the morning.

At the dawn of a new stock market history

Indeed, the file has been weighed down for a long time by this long and complex saga that has lasted for many years. SMCP is also under pressure in a context marked by a consumer crisis. The title of the “accessible luxury specialist” bears the stigmata of this distrust and is still losing nearly 32% in 2024 after having already conceded 43% last year.

In the first half of the year, the owner of the Sandro, Maje, Claudie Pierlot and De Fursac brands announced a 3.6% organic decline in sales over the year, to €585.3 million. The group suffered the hit in Asia-Pacific in particular, with sales falling by 20% on a comparable basis to €106 million.

“The textile sector, particularly that which is neither very affordable nor luxury, is suffering, and SMCP, with its positioning of ‘accessible luxury’ is no exception,” Oddo BHF recalled last July.

So to face these headwinds, the fashion specialist has unveiled a plan to revive its growth and profitability dynamics. Isabelle Guichot, SMCP’s CEO, detailed the cardinal points of this reconquest program, which is based on strengthening the desirability of the group’s brands, optimizing cost management, and pursuing “disciplined” management of cash flow and debt.