Derek Pain: 'City of London Group was forged in the dotty.com boom and is still fighting for redemption'

The investment trust has been in need of a cash injection for some time

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The Independent Online

I keep an eye on past constituents of the No Pain, No Gain portfolio. Often I am mortified by their progress after being dumped. Avon Rubber, Anglo Pacific and Stagecoach spring to mind. On the other side of the coin dramatic deficits have occasionally been avoided, although in some cases the shares in question have more than recovered.

It is difficult to slot City of London Group into any category. In the madcap internet explosion at the turn of the century, the shares surged into the stratosphere, hitting 950p and netting the portfolio a handsome profit if only I had sold. I did eventually unload the stock but at a much reduced price.

Even so, since their departure the shares have been through terrible times. Last year they slumped to 17p; as I write they are 24.5p.

Two cash-raising exercises – at 102p and 83p – have occurred since the heady "dotty.com" boom. At least one private placement has been negotiated and another is under way with proposals to raise between £3m and £4.5m on the agenda.

City of London Group was formed by an old colleague of mine, John Greenhalgh. We worked together in the 1960s in the City office of the now near forgotten London Evening News. He went on to form a public relations agency that floated on the stock market in 1988.

Many of its clients were Australian resource companies and John became quite an expert on this rough, tough and often unpredictable business; through City of London Group he built an impressive portfolio of mining and oil stocks. The group also invested, not very successfully, in internet operations.

But it changed shape. PR was sold, the internet abandoned, and with John taking a back seat – he died in 2013 – the company embarked on becoming a financial business, aiming at small firms and providing funds for legal and other professional services. The once extensive portfolio has almost disappeared. And in April the company sold its interest in a litigation fund for £3.4m.

City of London Group, not to be confused with a much bigger investment trust of a similar name, has been in need of a cash injection for some time. Losses have piled up and last year a fundraising exercise failed to materialise.

This time round two parties – Cain Hoy Enterprises and Harvey Bard – are putting up most of the cash, with John's estate making a contribution. There are hopes that others will display interest and, perhaps, the cash raised could reach £6m.

Cain Hoy is a US property investor and Mr Bard is said to be City of London Group's largest creditor. The cash is being raised at 30p a share, comfortably above the present market price. The company is also abandoning its fully listed status and moving downmarket to Aim, which is of course cheaper than the main market, where it has existed since its flotation.

The cash-raising proposals and move to Aim come as City of London Group reveals it has reduced its losses from £5.2m to £1.6m.

I cannot help wondering that had the group, with a capitalisation of nearly £5m, stuck to its original policy of PR and a share portfolio, it might possibly have avoided its dramatic share decline. Recent years must have been the hardest since its creation – and dividends have dried up.

yourmoney@independent.co.uk

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