Liontrust share price at risk of a ~20% drop as it works to acquire GAM

Liontrust (LON: LIO) share price has been in a steep sell-off in the past few months as concerns about the asset manager continued. The shares plunged to a low of 828p on Thursday, which was ~36% below the highest point this year, meaning that it has moved to a bear market.

Liontrust and GAM combination

The main catalyst for the Liontrust stock price is the ongoing deliberations to acquire GAM, a troubled Zurich-based asset manager. In a statement last week, Liontrust said that it was interested in buying GAM. GAM confirmed that it was in talks of a potential deal.

At its peak, GAM was one of the best-known Swiss asset managers with billions of dollars in assets under management. This changed a few years ago when the company found itself embroiled in a major crisis. The crisis related to the company’s Absolute Return Bond Fund (ARBF) holdings of private credit. 

In the aftermath, the company fired Tim Hayward, who led the company. Its assets under managemenrt dipped to just 74.6 billion Swiss francs and its share price has plunged by over 90%. Today, the company has a market cap of just 115 million francs. It lost over 273 million pounds in 2022.

Therefore, investors are worried about Liontrust’s buyout of the company because of how different they are. Liontrust made its name targeting retail investors while GAM normally targets institutional investors. As such, there could be synergy concerns in the two companies. 

Perhaps, the biggest concern is that GAM is still making substantial losses. As mentioned, it lost over $270 million in 2022 and there is a possibility that these losses will continue. The company’s assets under management could continue falling. In a statement, analysts at Numis said:

 “We would assume that cost-cutting/synergies would be a major part of the rationale, given that GAM remains meaningfully lossmaking with its current cost base.”

Investors would instead prefer for Liontrust to focus on improving its business as outflows jumped. 

Liontrust share price forecast

Liontrust chart by TradingView

The daily chart shows that the Liontrust stock price has been in a strong bearish trend in the past few months. After peaking at 1,297p in February, the shares have shrunk by more than 36% from the highest point this year. It has moved below the 50-day and 25-day moving averages. It has also moved below the important support at 999.5p, the lowest point on December 12.

Therefore, the shares will likely continue falling as sellers target the next key support at 691p, the lowest point on September 29. This price is about 18% below the current level.

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