BBC Radio Programme on AIM

Are British investors being ripped off by unscrupulous businesses exploiting the AIM market? This is one of the questions being tackled on the BBC tomorrow night (27/9/2016) in a File on Four radio programme – BBC R4 at 8.00 pm – see

It should make for interesting listening.

It certainly came up as a topic of conversation in our meeting with LSE management today where we discussed the problems of AIM. More on that later and I hope to write a report on the BBC programme in due course.

Roger Lawson

Foresight 4 VCT Update

ShareSoc wrote to shareholders in Foresight 4 VCT (FTF) in advance of the AGM on the 30th September. We suggested shareholders vote against the re-election of the directors. For the background, see: . Subsequently the board of the company indicated they were considering a merger with Foresight 3 VCT and also commented on our letter.

A riposte has been published here: As the note says, the tone and content of the comments are typical of a board attempting to distract shareholders away from their own failings.

Shareholders in Foresight 4 are encouraged to attend the AGM to learn more about the issues.

Roger Lawson

ShareSoc Events – Altrincham, Richmond and Brighton

This is a final reminder that we have a company seminar in Altrincham (near Manchester) next week (Tuesday the 27th September) with four interesting smaller companies presenting.

These are:

– FRENKEL TOPPING GROUP (FEN): Specialist asset manager and advisor to vulnerable individuals.

– GRESHAM HOUSE STRATEGIC (GHS): Investment company with a focus on smaller companies.

– SRT MARINE SYSTEMS (SRT): Development and supply of automatic identification system (AIS) technologies.

– VIPERA (VIP): Mobile financial services provider.

This is a great opportunity to learn about these companies and meet your fellow investors (and ShareSoc Members). The event starts at 5.30 pm and is free to everyone (and that includes refreshments of course).

Go here for more information and to register if you have not already done so:

We also have “Supper” events in Richmond (Surrey) on the 4th October, and in Brighton on the 11th October where 1PM is presenting. Go here for a full list of ShareSoc events in the next few weeks (but some are already over-subscribed) so the moral is book soon!:

Roger Lawson

Autumn Mists, and Profit Warnings

Autumn, the season of mists and mellow fruitfulness to quote Keats, or in the case of small cap stocks the season for profit warnings it seems.

As many companies have a December year end, this is the time of year when management come to realise that given the first half figures and current trading, they are not going to meet the optimistic plans they gave out at the start of the year. Here’s just a few that have issued warnings or where the share price has dropped precipitately for other reasons that I have noticed of late (in alphabetic order): Bonmarche, Cenkos, Crawshaw, Intercede, Judges Scientific, Majestic Wine, Skil Ports and Sprue Aegis. Excuses range from too cold (earlier in the year) to too hot (more recently), to Brexit, to poor retail footfall (don’t they know more people are now shopping on the internet), to contracts being deferred, to production difficulties, to more fund raising required and of course to management’s plans not working out as expected.

The optimism of management seems to be a particular problem here that affects small companies rather than big ones – the latter are like giant oil tankers – difficult to change course abruptly and less buffeted by stormy seas. But the management of small companies are often great at telling a story about how their business plans are going to enable the company to grow sales and profits rapidly when in reality it’s a lot more difficult than they think.

So how do avoid these risks? I would suggest be wary of new management who give a great sales pitch such as in Majestic Wine where it always looked a bit optimistic to me to reinvent wine retailing in a competitive market, or Crawshaw who are reinventing butchers shops to compete with supermarkets on price. These difficult objectives can sometimes be achieved but often at more cost than is expected.

Of course it’s also the time of year when year end forecasts can be upgraded and it’s usually companies who are simply following their established business model more successfully – Abcam, Accesso and Just Eat come to mind. No great revolutions there, and not a mention of the weather, nor of Brexit or the weakness of sterling. But they do tend to have one thing in common – they all have a strong emphasis on new technology or internet based business models. That makes them a lot more predictable.

The writer holds some of the stocks mentioned above.

Roger Lawson

Corporate Governance Inquiry Launched in Parliament

The BIS Select Committee of MPs has launched an inquiry into corporate governance focussing on executive pay, directors duties, and the composition of boardrooms. That includes worker representation and gender balance in executive positions.

It has been prompted by the recent comments from the Prime Minister and the Committees recent inquiries into BHS and Sports Direct where major failings were revealed in the way those businesses were run. The terms of reference for this inquiry are very broad – see this web page for more details: .The deadline for submissions is the 26th October and ShareSoc will be undoubtedly making one. Let us have your suggestions to include.

Committee Chairman Iain Wright said “We need to look again at the laws that govern business and how they are enforced” and that “Whopping pay awards to senior executives are not only vastly bigger than workers could ever expect to receive but often seem to have very little relationship to company performance”.

Comment: We have of course had several similar reviews in the past, with the invention of the UK Corporate Governance Code (one of the strongest in the world), and the Kay Review where the on-going problems were spelled out. But the problems keep on coming back because non-executive directors seem to be generally spineless, appear to have little interest in controlling pay (why should they when they swim in the same pool and moaning about pay means they won’t be on the board for long), and shareholders likewise exercise little control.

In the latter case, institutions not only don’t much care (on pay because management in those companies get paid similar amounts) but they do not have the willingness to put in time and effort on such issues and hate to fall out with the directors of companies in which they invest. At best they pass the buck to advisors. Regrettably private investors who have more interest have also been sidelined, have difficulties in voting now with the nominee system now prevalent and are not adequately represented however much ShareSoc tries.

A lot of the problem on pay lies with Remuneration Committees where votes at AGMs are too late to influence matters and the use of Remuneration Consultants resulted in the ratcheting up of pay by the use of comparable company figures where nobody wants to be in the lower two quartiles.

ShareSoc has proposed in the past the use of Shareholder Committees to improve matters, and another version of this has recently been proposed by Chris Philp, MP, in a paper entitled “Restoring Responsible Share Ownership”. These are both worthy attempts to tackle the problems in UK public companies.

Having worker representation on Remuneration Committees, or on boards, or having more female representation is surely a diversion though. One or two people won’t change the culture of boards or Remuneration Committees. Indeed female representation in non-executive directors in larger companies is now high, and they frequently chair Remuneration Committees – one sometimes suspects because they might be a “soft touch” and be good at fending off criticism.

One should really step back and say: Why should any director be on a Remuneration Committee? Why should directors be determining their own way, directly or indirectly? Remuneration Committees should be completely independent even though they might take advice from the executives from time to time. Shareholders and other stake holders in the company should make such decisions.

Likewise the nomination of directors, and their initial pay, needs to be determined by shareholders and other stakeholders. And very importantly, that needs to include the views of individual private shareholders who are more likely to live in the real world and have a direct financial interest in the companies in which they invest.

At least that is my personal view.

Let us hope the BIS Committee have plenty of time to study these issues because these are complex issues and no doubt they will be side-tracked by a lot of institutional representation and the bosses of companies who benefit from the current arrangements. Ultimately though the issue is quite simple: how to wrest control of companies from self-appointed boards who determine their own pay!

Roger Lawson

Have you been scammed by AIM?

One of ShareSoc’s primary objectives is to protect the interests of individual shareholders. Sadly, many investors have lost significant sums through outright fraud, misrepresentation or market abuse occurring amongst AIM listed stocks. As a response to this, we have launched our AIM Campaign.

We are delighted that professional journalists, working for a medium with a broad audience, now wish to bring this scandal to the attention of the wider public, especially in relation to the numerous failures of Chinese companies quoted on AIM. Not only will this help protect investors from falling into the same traps, but we expect that it will help us to raise the pressure for action to be taken, leading ultimately to the improved enforcement of existing regulations that we seek.

These journalists would like to speak to any investors who have suffered as a result of the abuses mentioned in the first paragraph. If you are such an investor, would like to see action taken and would be prepared to speak about your experiences, please get in touch with me ASAP, and if your case seems suitable, I will put you in touch with the journalists working on this story. I can be contacted by email on (replace “(at)” with @ in the email address).

This is your chance to help put an end to this malpractice. Rest assured that we will continue to pressure the relevant authorities to take action. The more evidence there is of ordinary investors suffering, the easier it will be for us to make that case. Time is limited, as this story will be going out in the near future, so please respond without delay, if you think you can help.

Thanks for reading this and for your assistance.

Mark Bentley

Greene King & Crawshaw Profit Warnings

In Weatherspoon’s full year results announcement, their CEO Tim Martin took the opportunity to criticise Greene King for blaming poor results on Brexit. He said “The only thing worse than complaining about the weather is complaining about Brexit”, implying that they were poor excuses.

Yesterday (13/9/2016) butcher Crawshaw Group went further. In a profit warning “trading update” they blamed suppressed footfall patterns on “international football, adverse weather and Brexit”. In addition they said customers were now even more price focussed and they were suffering from supermarkets launching aggressive promotions.

The share price fell 44% on the day putting a damper on this previously high flying micro-cap. Perhaps investors were not impressed by these excuses.

Comment: I’m with Tim Martin on this in that I take a jaundiced view of complaints about the weather, even from retailers and Brexit seems to be bogeyman used by lots of companies to scare their investors. I learned to be sceptical about weather excuses after holding some shares in Hozelock in the past. When the weather was dry they claimed hosepipe bans had suppressed demand. When the weather was wet, they claimed nobody was buying watering equipment. To blame the Brexit decision for reduced beer consumption seems odd indeed. Some might be drinking more to drown their sorrows about the decision, while others might be drinking more to celebrate. There appears to be little evidence that retail sales have been reduced since the Brexit decision so Crawshaw’s analysis of their problems is hardly credible.

Roger Lawson