Moving House!

Following the launch of ShareSoc’s new website, www.sharesoc.org, this blog has now been moved to that site and you can find it here: https://www.sharesoc.org/category/blog/

The blog on this site is now closed, and all future posts will be made on the site linked above.

If you are subscribed to this blog, unfortunately your subscription will not be carried forward and you will need to subscribe to the blog on our new site. This is very easy: just click on any post, and then enter your email address in the form at the top right of the page, illustrated below. Click “SIGN UP NOW” after entering your address. Thereafter you will receive emails once a day advising you of any new posts.

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Please note that we now have similar facility for our events: https://www.sharesoc.org/events/ Click on any ShareSoc event (not 3rd party events) and you will find a similar sign up form on the right hand side. If you submit your email address to that form, you will be notified whenever we post a new event.

We hope you are enjoying our blog and look forward to welcoming you on our new website!

 

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How To Make Money on Losers, and the Monitise Bid

After the takeover bid was announced yesterday for Monitise (MONI) at 2.9p per share (valuing the business at £70m when it was once worth £1 billion, I thought I would look at my past holdings in this company. Surprisingly my total return over the years according to Sharescope was a positive 8.8% per annum compound in this company’s shares. That may annoy many past holders because it’s quite likely that many people lost their shirts on this stock.

Monitise developed on-line banking apps and other e-payment products. Revenues bounded ahead up to £95 million in 2014, but losses increased in line. Pre-tax losses were £63 million in that year and £243 million two years later after the bubble collapsed when customers decided to build their own apps and a partnership with Visa was cancelled. Major write-offs resulted.

More latterly the company has been promoting a development kit for banking applications, but have had difficulty in selling it apparently. I was sceptical about the prospects for this because selling “tools” rather than ready make applications is always difficult and I have a holding in a private company that has faced the same difficulties. There may be some value in it though because the bidder, Fiserv, are knowledgeable in this area and may be a more credible seller of the new product.

I first bought a few shares in January 2012 at 29p and more later. But I sold that initial tranche in 2016 at around 60p. Why? I did not like the continual fund raising, the persistent losses, the excessive pay of the CEO, general profligacy and unkept promises of future profitability. That was combined with poor cash flows plus general over-optimistic noises emanating from the business.

But I did buy back some shares in early 2016 at less than 2.00p which I am still holding when I considered the “legacy” revenue and future prospects justified, and after the CEO was changed. At the time I wrote an article for the ShareSoc newsletter about this and two other companies which I called “real dogs” and questioned whether they could recover (Feb 2016 Informer Newsletter). Incidentally I did declare my interest in the shares for those who worry about such matters.

So what are the morals of this story:

  1. Be wary of companies which never show they have a profitable business model. Sales are not enough! Monitise eventually had to change that and combined with technology and market changes, these combined to undermine the business.
  2. Are the management conservative or consistently too bullish about the prospects for the business?
  3. Avoid companies that need to keep raising cash rather than generate it themselves.
  4. But there comes a point sometimes in technology businesses where after a change of management the business may be worth reconsidering when all the speculators have long gone and it’s one of those unloved stories that many would prefer to forget about.
  5. Investors in this stock would also have found it useful to read the reports of the company’s AGMs in 2012,2013 and 2016 written by me, Alex Lawson and Mark Bentley that are available on the ShareSoc Members Network.

Roger Lawson

It’s Getting More Difficult to Vote

It’s certainly getting more difficult to vote of late, and I am not talking about voting at General Elections but just for resolutions at the General Meetings of companies we own. This seems to be a particular problem with Capita Registrars. Here’s some examples:

  1. Whitbread: As a personal crest member, I am on the register and expect to be sent an annual report and proxy voting form (and at least the latter on paper). But no longer it seems. Whitbread only sent me a single page letter advising me that the Annual Report and AGM Notice were available on-line and I could vote on-line. No paper Annual Report when I had not opted to not receive it. So I phone them up to ask for a paper copy and a proxy voting form. They (twice) sent me the previous year’s annual report by mistake and no voting form until reminded.
  2. National Grid. Similarly I only received a single page letter. So I tried to vote on-line. Even though the instructions were unclear, after speaking to Capita on the phone, they could not advise me how to get it to work. Simply rejected my ID. They seem to have a technical problem and clearly the system has not been adequately tested.

Is it not ridiculous that one should have such difficulties with voting, getting a notice of the meeting or an Annual Report? This is another example of how shareholder democracy is being undermined.

I will be raising these issues at the AGMs of these companies. But it is really annoying to have to waste time on such matters. If everyone on the register (or in a beneficial holding) was sent a paper proxy voting form, that would be one simple solution and should be mandated in law.

Roger Lawson

RBS payout may trigger other group litigations

RBS £200m payout could lead to similar group litigation brought by small investors in other companies.

You may recall that investors alleged that RBS had misled them over the state of its health before a £12bn rights issue in spring 2008. Most of that investment was wiped out soon after, when RBS required a £45.5bn taxpayer-backed bailout.

Thousands of retail investors and institutions worked together to bring a court case that was due to start in May. But over the previous few months, a number of institutions and other investors — representing nearly 90 percent of claims by value — agreed to a settlement worth between 41p and 43.2p per share.

The deal struck in early June with thousands of retail investors at double that price is a sign that individuals can successfully pursue a group litigation case. So expect similar action in the future.

Other group litigation cases with similarities to RBS are already in the pipeline. A case against Lloyds Banking Group, which was only freed from the shackles of government ownership last month, is due to commence in October. Again, it is being brought by thousands of investors who complain about the bank’s rescue of the beleaguered HBOS in 2008. Annoyingly the action group is no longer open to new members so I cannot join it! I found out too late.

Investors allege they lost about £400m as a result of the deal and that HBOS shares were “valueless” at the time. They claim they were misled into approving the HBOS merger as key information over the true financial health of the bank was withheld.

Stephen Rosen, a partner at law firm Collyer Bristow was quoted as saying “there are litigation funders who are actively looking to fund shareholders’ actions.”

With more litigation funding readily available, the success of the RBS investors could inspire more small shareholders to take action.

Cliff Weight

Potential Claim vs Media Corporation

ShareSoc member Steven Egan is leading a campaign seeking redress against the former Media Corporation plc and its directors.

Details of that campaign can be found here: https://www.crowdjustice.com/case/defrauded-purple-lounge-registered-customers/

Please note that ShareSoc has not investigated the allegations made by Mr Egan’s campaign and cannot vouch for their accuracy. For that reason, ShareSoc does not endorse the campaign and this post is for information purposes only.

The former Media Corporation and its directors dispute those allegations.

Fusionex – Another AIM Company Disappears into the Night

In an announcement late Friday afternoon, after market close and just before the long weekend, AIM listed Fusionex announced that it will seek to delist from the AIM market. It’s not clear why this is good for private investors, the company is profitable and has no need to raise funds. The RNS says that a meeting will take place in Malaysia on 15 June to vote on the matter, and that all of the Directors representing 41.93% of shares are in favour. Almost all of these are in the hands of the CEO, Ivan Teh.

Unfortunately for investors, this would leave them with no official market in the shares. While there is an intention to put in place a matched bargain settlement facility, this is unlikely to provide much, if any liquidity. Syqic, another profitable Asian company which recently delisted itself, has a matched bargain facility. The trading volume in the last few months? Nil.

It appears that the cancellation notice has already been delivered to AIM in anticipation, with cancellation expected on 27 June, less than a month away. A further RNS before the market open this morning saw the resignation of joint broker Peel Hunt, as well as Chairman John Croft. The share price reaction today was brutal, with the shares down 64% by the close. Investors participating in the IPO in 2012 have lost two-thirds of their money – so far. Shareholders will soon be in grave danger of being faced with a ‘lowball’ bid for their shares if they want to realise any value at all.

Unless many of the non-Board holders vote against this delisting, it is sure to happen. While this is a Special Resolution, requiring 75% of votes cast, Mr Teh and a colleague control 54% of the shares. In order to be defeated, at two fifths of the remaining 46% of shares need to be cast against them. Unfortunately, voting turnouts are typically low for listed companies, allowing this type of behaviour to persist; it would take a concerted effort to defeat this resolution. The nominee system makes it difficult for shareholders to obtain timely information about corporate actions, and voting can be difficult or even impossible. This is particularly true given that the meeting is only 2 weeks away. All of this works to the benefit of the CEO who wishes to delist his company, and who will soon be safely away from regulatory scrutiny and market discipline.

The net result will be that yet another name is added to the list of Asian based companies which have turned out to be a disaster for investors. Naibu, Camkids, Hirco, Jiasen, Taihua, Asian Citrus, Syqic, and many more. In the absence of any support from AIM for investors in these cases, investors would do well to be ever more wary of foreign companies listed in London.

Please support our shareholder rights campaign to reform the nominee account system, and make it harder for managements to use the barriers this system throws up to discourage shareholders from voting in their own interests.

Mark Lauber