KELYA - Kelly Services Inc. (KELYA) - Are the B Shares Telling Us Something?
B Shares on a Tear. Since August 11th, Kelly Services' B shares (KELYB) have traded in a range of $18 to $90, completely disconnecting from the A shares. On the 11th, the shares more than doubled to $38.28 on 494,100 shares of volume, with an additional 558,800 shares changing hands this past Friday.Yesterday the B shares closed at $35.17, with the A shares at $19.44 Historically, the A and B shares have traded in tandem with little price difference.What are the B Shares? The 3.4 million outstanding B shares actually control the Company as they are the only voting shares. The Adderley Trust held 3.1 million of the B shares as of March 16, 2020, unchanged from the original Schedule 13D filing of October 19, 2018. If the Trust were to make a material change in its holding or change its investment purpose which originally did not contemplate an extraordinary corporate transaction, the Trust would need to file an amended 13D, which it has not done to date.Day Traders? Looking at historical volume for the B shares, prior to August 11th volume typically was less than 1,000 shares per day, with many days with zero volume. From August 11th through yesterday, 1.6 million shares have traded, or almost six times the B share float. Little, if any, of the trades have been block trades.What is the Company Saying? In our discussions with management, the Company stated that it is "not aware of any news in the market that would prompt this level of activity." Given the control of the B shares held by the Trust, the lack of any new 13D filing, no market news that we have seen, and the small B share float, it seems the recent B share trading activity is not supported by the current facts, although if the Trust does file an amended 13D, we would need to take any changes into account.Maintain Market Perform. We maintain our Market Perform rating due to the uncertainty surrounding the COVID-19 crisis. We continue to believe, however, the Company is well positioned to weather the current storm and come out the other side in a stronger position to capitalize on both organic and inorganic growth opportunities.Read More >>