Last man standing, Humm Majority Directors stand down after failed sale of BNPL division

As a drama positioning itself as Season 2 of a potential Netflix series on ASX-listed controversy, the boardroom warfare between Humm (ASX: HUM) directors is nearing an end with its Majority Directors all tendering their resignation, leaving Andrew Abercrombie as the sole member, following the failure of its sale to Latitude Financial (ASX: LFS). 

Following the withdrawal of Humm’s $335m sale of Humm Consumer Finance (HCF), its buy-now-pay-later (BNPL) and cards division, the integrity of Humm’s Majority Directors (everyone except Abercrombie) has been questioned by shareholders, prompting Alistair Muir, John Wylie AC, Carole Campbell, Rajeev Dhawan and Christine Christian AO to tender their resignations. 

The official party line is that the aforementioned directors “cannot remain on the Board of Directors with Andrew Abercrombie.”

It’s effectively been a no-win situation for those Directors who were outmuscled by Abercrombie’s 23% stake in Humm, voicing via a public campaign that the Latitude offer undervalued the HCF business in the hope of receiving a better offer. On the other side, the Majority Directors were desperate to see the sale proceed due to a capitulation of the BNPL sector where Christian repeatedly declared how unprofitable the division was and how it was imperative that shareholders accept the binding offer from Latitude made before global markets and the BNPL sector shat themselves.

Christian, who took over as Chair from Abercrombie in December 2021, holds just 195,000 HUM shares compared to Abercrombie’s 114,858,000, which includes purchasing $11.3 million during his campaign to back up his commentary. 

The mass resignations come just 12 hours after Christian issued a letter to shareholders, providing additional commentary on the withdrawal of HCF’s sale to Latitude.

The letter signed off by Christian said, “As you will be aware, Andrew Abercrombie undertook a strident campaign against the proposed sale, strongly encouraging shareholders to vote against the transaction. Much of the commentary he published was emotion-driven, inflammatory, and provided little clarity on what precise future strategy he envisages for HCF, or on what basis he believed Latitude were going to pay more for HCF.”

“There is still essentially no clarity on the future strategy he envisages for HCF. Some of the information he published was false and misleading, which we instructed him to take down from his website. He persisted in telling shareholders to vote against the transaction.” 

She further elaborated on attempts to get a better offer, but with zero interest from the counterparty whose own shareholders would have been equally livid had Latitude obliged. 

“Public pressure from Humm shareholders threatening to side with Andrew Abercrombie and vote down the transaction had no impact on Latitude’s position, which was unsurprising given the deteriorating economic environment, crashing sector stock prices and lack of any alternative bidding interest” 

The letter also provided one last chance for Christian to tell shareholders how poorly their BNPL business was performing, while publicising the “multiple aggressively worded private threats” of personal legal action from Abercrombie. 

“The HCF group of businesses experienced highly challenging trading conditions for the five months to 31 May 2022, due to lower receivables, margin compression and expenses being incurred in its new product and international growth strategies – strategies which were embarked upon in a better economic and sector environment. Underneath the reported weakness in earnings there remain profitable and valuable businesses such as NZ cards,” said Christian. 

“As I have said, HCF contains a number of high-quality businesses. While the past 24 months have been characterised by the pursuit of growth in BNPL, the focus – across Humm – is now firmly on profitability under the Board as presently comprised.”

That composition however, was dissolved within 12 hours of publishing the letter. 

Stoic throughout the whole saga has been Humm CEO, Rebecca James who has remained silent while doing her best to just run the Humm business at a time when her Board is airing their dirty laundry in public forums. 

Regardless of who joins the new Humm board of Directors, it’s going to be an uphill battle for James to salvage the business that has been crushed by those above her.