Vodafone and Verizon – how will they use the cash?

ShareSoc has issued a press release on the likely deal for Vodafone to sell its stake in Verizon Wireless (see www.sharesoc.org/pr50vodafone.html). This might realise over US$100bn in cash so the key question is what the company will do with it. Will it waste it on other acquisitions or return it to shareholders? And in the latter case in what form?

Vodafone is a company that appears to love share buy-backs like many FTSE-100 companies. But ShareSoc suggests that it would be better returned via special dividends or tender offers. Ideally shareholders should have the option to receive it as either income or capital so they can choose which is more tax efficient.

Roger Lawson

Dunedin Enterprise – Chairman stepping down

Dunedin Enterprise Investment Trust announced its half-year results this morning. They were unremarkable. But the good news in the announcement was the mention that David Gamble is retiring from the board, and hence as Chairman, at the next AGM.

ShareSoc attacked this company for the introduction of a performance fee in October 2012, under Mr Gamble’s chairmanship. It seemed totally unnecessary to compensate the fund manager in the way chosen because of a change in investment policy, with the risk of substantially higher management fees. Read our press release here: www.sharesoc.org/ShareSoc_Press039_Dunedin_Enterprise.pdf

At the subsequent General Meeting, it was disclosed, in response to questions, that Mr Gamble had 8 directorships and 2 other consultancy roles. This is surely excessive and contrary to ShareSoc’s guidelines for non-executive directors which suggests a limit of 4 or 5 roles (see www.sharesoc.org/Non_Execs_Code.pdf ).

So ShareSoc cannot but welcome this change of Chairman.

EuroFinuse attacks lack of retail investor representation

Guillaume Prache of EuroFinuse (of which ShareSoc is a member) has been attacking the lack of adequate retail investor representation on European bodies that devise financial market regulations. Specifically he has attacked the European Securities and Markets Authority (ESMA) and its Securities and Markets Stakeholder Group where only a few of the 30 members on the committees are consumer advocates (i.e. retail investors). He complains the big banks are dominating policy development on European financial market regulations which of course now dictate local national regulations. EuroFinuse have also raised a complaint to the European Ombudsman on this matter.

The issues were covered in a lengthy article in the FTfm supplement on 26/8/2013, which can be read here:

www.ft.com/cms/s/0/c93b2a36-0bfa-11e3-8f77-00144feabdc0.html?siteedition=uk#axzz2dFzFVouu

Media Corporation – Cessation of Business

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Media Corporation – Cessation of Business

One of the first “problem” companies that ShareSoc reported on (and got involved with to a limited extent, although it always appeared to be somewhat of a basket case) was Media Corporation (MDC). We first covered it in our June 2011 newsletter when the share price was about 1.5 pence. After various changes of strategy and management upheavals, the shares were suspended from AIM (not for the first time) in April at 0.095 pence, after much dilution from new share issuance in the meantime. That implied a market capitalisation of £1.2m, so you can see why the AIM listing might be more valuable that the operations of the company.

On Friday 23rd August, at 5.45 pm, the company announced with the headline “Cessation of Business” that it was disposing of its remaining operating businesses and transmogrifying into an investment company – to be called Leopard Oil Plc. Yes it will be focussing on “oil and gas opportunities”, which sounds like even more speculation.

It’s always a good time to make a major announcement after the market has closed and just before a bank holiday is it not? Although with the shares suspended it may not matter a great deal. But this is what one might expect from past goings-on at this company.

The company’s previous activities have been primarily in the gaming sector, and they had been working on a new platform called “Intabet” but they report that this has proved beyond their financial resources to launch. They also have “legacy issues” apparently, without spelling out what they are.

A General Meeting to approve the proposed change of direction has been called for the 16th September. It should be an interesting meeting for anyone still holding shares in this company.

Roger Lawson

RSM Tenon Pre-Pack: an odd connection

ShareSoc has made many representations in the past about the abusive use of pre-pack administrations. In the case of publicly listed companies, they usually mean the ordinary shares become instantly worthless. The latest case of a pre-pack in a listed company is that of RSM Tenon. This company (an accountancy practice oddly enough) got into difficulty by taking on excessive debt for a growth strategy. Baker Tilly were negotiating to buy the business for a rock bottom price. But yesterday it was announced that instead the company had been put through a pre-pack and sold to Baker Tilly by the administrator. You can tell it’s a pre-pack (i.e. one arranged before the administrator had been formally appointed) by the wording of the announcement issued by RSM Tenon which says “Immediately following their appointment, the Joint Administrators [Deloittes] agreed a sale of the Company’s trading entities to Baker Tilly”.

Whether any better deal could have been done, or the interests of ordinary shareholders protected in this case, may be debatable. But there is one odd connection.

Vince Cable’s BIS Department have launched yet another inquiry into pre-pack administrations (in this case an “independent one”) because there have been continuing concerns about their operation.  For example, he recently said “You do have these so-called phoenix companies where owners typically shut down their companies in order to wipe out their debts and start again the following day under a slightly different name”. This inquiry will be led by Teresa Graham and will report next year – the terms of reference have yet to be announced. Teresa Graham is an accountant who has been involved in other Government quangos – she chairs the Administrative Burdens Advisory Board of HMRC at present, but also has some non-executive directorships in smaller companies. More interesting perhaps is that she previously worked for Baker Tilly! Will she be examining this particular example of a pre-pack one wonders?

Note that there is a lot more information about pre-packs and ShareSoc’s representations on the ShareSoc Members Network where there is a “Forum” dedicated to the subject here: http://sharesoc.ning.com/forum/topics/prepack-administrations

Roger Lawson