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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:
- 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.
- Are the management conservative or consistently too bullish about the prospects for the business?
- Avoid companies that need to keep raising cash rather than generate it themselves.
- 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.
- 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.
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:
- 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.
- 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.
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.
Letter in the FT from ShareSoc Director Cliff Weight on why the SFO, CPS and/or BEIS should be given more resources and told to pursue problem cases much more speedily. Companies should not be allowed to hide behind expensive lawyers.
RBS case shows why trust must be rebuilt in business.