H&M's Liquidity Crisis: Why Minority Shareholders Should Exit Now

H&M, the once-mighty Swedish fashion retailer, is teetering at a critical crossroads. The Persson family, which founded the company, has steadily accumulated a controlling stake—70% of equity and 85% of voting rights—and is now positioned to potentially delist the stock. For minority shareholders, this spells disaster: mounting liquidity risks, deteriorating fundamentals, and a valuation that increasingly reflects a "heads I win, tails you lose" dynamic. Here's why investors should consider exiting now.

The Persson Family's Grip Tightens

The Persson family's stake in H&M has grown from 35.5% in 2016 to nearly 70% of capital today, thanks to over SEK 63 billion ($6.6 billion) in acquisitions through their holding company Ramsbury Invest. This ownership is amplified by H&M's dual-share structure, where Class A shares carry ten votes each, giving the family 85% of voting power. Analysts estimate they could hit 90% ownership—a threshold enabling delisting—by .

The implications are stark. A delisted H&M would remove minority shareholders' ability to trade shares freely, leaving them with either a forced buyout at a depressed price or illiquid equity in a private entity. With H&M's stock down 29% over the past year and trading at a 60% discount to its 2015 peak, the valuation already reflects deep skepticism. But the risks go far beyond price.

Financials in Freefall

H&M's operational and financial decline is accelerating. Q2 2025 results show:
- Operating profit down 21% to SEK 5.6 billion from SEK 7.1 billion in 2024.
- Revenue fell 4.5% to SEK 56.9 billion, hurt by unseasonal weather, currency headwinds (SEK appreciation), and tariffs.
- Gross margins at a five-year low of 10.4%, pressured by rising input costs and inventory markdowns.

The debt burden is equally alarming. With SEK 73.28 billion in debt and a debt-to-equity ratio of 2.01, H&M's leverage is among the highest in the sector. Compounding this, the dividend payout ratio hit 108.14% in 2025, meaning dividends now exceed earnings. The current 5.24% dividend yield is unsustainable and all but guarantees a cut—a blow to income investors.

Liquidity Risks: The 21% Short Interest Time Bomb

Minority shareholders face a perfect storm. Over 21% of H&M's free float is held by short sellers—a record level—signaling widespread investor despair. Should the Persson family proceed with a delisting, these short sellers would be forced to cover their positions, potentially driving the stock price even lower.

But the bigger threat lies in the structure of a potential buyout. The Perssons, with their voting power and financial flexibility, could negotiate terms that favor their interests. Minority shareholders would likely receive an offer far below the already-depressed current price.

Valuation: Is H&M Already Too Expensive?

Despite the stock's 29% decline year-to-date, H&M's valuation metrics still look stretched relative to its fundamentals. At a trailing P/E of 21.91x and EV/EBITDA of 7.94x, the stock trades at a premium to its own historical averages, even as margins collapse. Compare this to peer Inditex (Zara), which trades at a P/E of 16x with stronger cash reserves and margin stability.

Analysts' consensus price target of SEK 130 (vs. current ~137 kronor) suggests further downside, especially with U.S. tariffs set to rise 10-15% by Q3 2025, worsening import costs.

The Exit Strategy: Time to Cut Ties

The writing is on the wall. H&M's structural issues—from declining sales to margin erosion—show no sign of reversing. Minority shareholders are trapped in a game where the Perssons control the rules.

Key Risks to Monitor:
1. Ownership Milestones: Watch for Persson family stake surpassing 85% of equity, which would solidify their ability to delist.
2. Margin Performance: Q3 results will test whether H&M's cost-cutting (including 190 store closures) can stabilize profitability.
3. Dividend Cut: An inevitable reduction will further pressure the stock and expose the fragility of its valuation.

Conclusion: Run, Don't Walk

The math is simple: H&M's liquidity risks, debt, and operational decline are existential threats to minority shareholders. With the Persson family's stake rising and short sellers poised to amplify volatility, there's little upside to justify the risk.

Investors should consider exiting H&M now. The path forward is littered with obstacles: a potential delisting, unsustainable dividends, and a brand losing relevance to rivals like Shein and Zara. The "heads I win, tails you lose" dynamic leaves minority shareholders with little to gain and everything to lose.

Final Take: Sell your shares. Let the Perssons and speculators battle over a sinking ship. Your portfolio deserves better.