Derek Pain: A small round of applause for Richoux's placing with a premium

No Pain, No Gain
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The Independent Online

Shares of Richoux, an unremarkable little restaurant chain, have more than doubled in a few weeks. Expansion hopes, plus some new blood and extra cash, are responsible, although it is just possible that an acknowledgement of shareholder rights has played a tiny role.

One of those private placings is providing the cash. Around £2m is being raised by issuing shares to a few subscribers. The main body of shareholders is, as usual, left out in the cold. I have criticised such placings as undemocratic but the Richoux exercise deserves a round of applause. For instead of offering shares at a discount to the stock market price, subscribers are being charged a premium. Not much of one – but it offers some consolation to neglected shareholders.

Richoux is the second example I have come across in recent months when some regard has been paid to the feelings of ignored shareholders when placings are undertaken. In August I commended Manx Financial, running the Isle of Man's Conister bank, for the way it handled a cash-raising exercise, giving priority to small shareholders.

Perhaps Manx and Richoux are setting a trend? I believe that many shareholders are fed up with being regarded as non-existent in cash-calls. It would be encouraging if other small caps acknowledged all shareholders when raising money. In the main, major groups embrace rights issues that include all. But small caps claim rights are too expensive and time-consuming. Indeed Philip Shotter, Richoux's chairman, echoes such thoughts. But he appears to feel that the premium is the answer to favouritism.

So, instead of the normal discount – often a hefty one – subscribers are paying a 4.9 per cent premium at 8p a share. Indeed, they are forking out an even bigger charge, although the subsequent share performance means they are, at the moment, quids in. As I write, the price has hit 16p, inspired by the expected cash and the arrival of the Hon. Robert Rayne in the boardroom. He is a director of LMS Capital, a well-established, fully listed investment group that is already a substantial Richoux shareholder. LMS does not appear to be taking up any placing shares but the new director is, lifting the Rayne/LMS stake to 25.2 per cent. Another subscriber is shareholder Phillip Kaye, the well-known restaurant entrepreneur, who has links with a host of eating out names. His interest will be 20 per cent.

Richoux has a long and not particularly impressive history. Its shares topped 200p four years ago. It has tried a number of formulas, including gastropubs. There are only four Richoux restaurants, but it is pinning its hopes on new family orientated outlets.

Nighthawk Energy, a constituent of the no pain, no gain portfolio, has already indulged in a string of private placings, all at a discount. But, reflecting the new management's thinking, it has arranged a £25m three-year borrowing facility. True, the deal allows the provider, a subsidiary of stockbroker Evolution, the possibility of buying shares at special prices and taking up warrants that can be switched into shares at agreed levels. But as the new chief executive, Tim Heeley, says, the group is trying to balance the needs of shareholders with its still high cash requirements. With the shares near an all-time low, yet another placing was probably impossible, hence the loan facility that Mr Heeley believes should be less dilutive.

Other constituents have enjoyed recent attention. Fully listed Whitbread and Booker produced rousing interim statements and Mears splashed out £4.8m buying a social housing business. Stockbroker Collins Stewart has lifted its target price for the support services group to 365p. The shares are about 300p., specialising in small items such as flyers and posters, has produced a relatively positive trading statement. It says operations in London and the South-east are running "slightly" ahead of last year but at a "slightly" lower level elsewhere. The group offers the highest yield, around 8 per cent, in the portfolio. Brewer Marston's comes next with a 6 per cent-plus return. But it may cut its dividend, whereas the payment seems likely to be maintained.

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