The recent insolvency filing by KTM AG, Europe’s largest motorcycle manufacturer, has unveiled significant managerial failures under CEO Stefan Pierer and Chairman of the Supervisory Board Josef Blasicek of Pierer Mobility AG. Despite clear indicators of financial distress, the company continued to distribute substantial dividends, misleading investors about its fiscal health. Here is an investor update on the KTM case.
Management Failures and Dividend Distributions
KTM‘s financial instability has been evident for years, marked by declining sales, particularly in the U.S. market, and an overstock of approximately 130,000 motorcycles valued at around one billion euros. Additionally, rapid expansion and contentious acquisitions, coupled with miscalculations in the e-bike sector, exacerbated the company’s financial woes.
Despite these challenges, KTM disbursed nearly €200 million in dividends since 2020, with Stefan Pierer personally receiving about €50 million euros over four years. Notably, in April 2024, a dividend of €17.1 million was paid out despite existing financial problems.
This practice was particularly controversial during the COVID-19 pandemic in 2020, when KTM received state subsidies for short-time work (€10.4 million for KTM AG and 1.69 million euros for KTM Components GmbH). Simultaneously, the company planned dividend payments, leading to public criticism. Although it was officially announced that no dividends would be paid out, the annual report for 2020 contains contradictory information.
Impact on Employees and Investors
The insolvency affects 3,623 employees, with plans to cut an additional 300 jobs by year’s end, potentially resulting in up to 750 job losses. Meanwhile, Pierer and Blasicek have profited millions, raising ethical concerns about their leadership. The annual dividend payments gave investors the impression that the company was healthy, concealing the true extent of the crisis.
The insolvency of KTM AG is a dual tragedy: while employees and creditors face significant losses, investors have also suffered immensely. Pierer Mobility AG, the parent company of KTM, has seen its shares plummet by over 81% from their initial listing price, now trading at just under CHF 10. At their peak in January 2022, shares were valued at CHF 95—yet by that time, management must have been fully aware of the brewing crisis at KTM, which generates 95% of Pierer Mobility’s turnover. Alarmingly, no disclosures reflecting the severity of the situation were made to investors, further compounding the breach of trust.
- In January 2024, Pierer Mobility celebrated strong performance in the motorcycle segment with a jubilant announcement, despite management likely being aware of the deepening crisis. No warning signs were disclosed, and dividends continued to be paid.
- It wasn’t until June 2024 that the company issued an ad hoc announcement acknowledging deteriorating market conditions, projecting a 10% to 15% decline in sales for the motorcycle and bicycle segments and highlighting the need to reduce dealer inventories.
- By August, the company reported a negative EBIT for H1 2024 but struck an optimistic tone, forecasting improvement for H2 2024.
This narrative unraveled in November with the insolvency filing, starkly contrasting with earlier reassurances. The sequence of announcements appears to have misled investors, obscuring the severity of the crisis.
Broader Implications for Pierer Group
The crisis extends beyond KTM. Pierer Industries AG, the ultimate parent company, initiated European restructuring proceedings to secure the Group’s financial stability and avert insolvency. This involves financing amounting to 250 million euros, including a €100 million bond and promissory note loans totaling €132.5 million.
The centerpiece of the Pierer construct is Pierer Mobility AG, a publicly listed company traded on the Vienna Stock Exchange and the SIX Swiss Exchange (primary listing). At the helm of its Supervisory Board is Josef Blazicek (LinkedIn profile), a former investment banker and long-time associate of Stefan Pierer, with ties to the stock market through his collaboration with former market guru Mike Lielacher.
According to the information available to FinTelegram, Blazicek was Pierer’s man for the capital marktes. Together, Blazicek and Pierer have shaped the Pierer Group, whose holding company, Pierer Industrie AG, also maintains direct connections to the capital markets. The Group’s bonds are listed on the Vienna, Frankfurt, and Hamburg stock exchanges under ISIN AT0000A2JSQ5 and WKN A283KL, reinforcing its critical links to investors.
Investors in Pierer Mobility AG and Pierer Industries AG were seemingly kept uninformed about the ongoing crisis at KTM, raising questions about the transparency and timeliness of information provided by the management and Supervisory Board.
Conclusion
The unfolding situation at KTM and the broader Pierer Group necessitates thorough examination from capital market and investor perspectives. The apparent concealment of the crisis’s magnitude, coupled with substantial dividend payments during periods of financial distress, reflects significant managerial failures. This has not only jeopardized the livelihoods of thousands of employees but also misled investors regarding the company’s true financial health.
