Derek Pain: Crunch time share sale for growing SnackTime
No Pain, No Gain
Saturday 05 December 2009
Another constituent of the no pain, no gain portfolio is tapping the stock market for cash. SnackTime, recruited in September, is raising £5.8m through a placing at 170p a share against a then ruling 182.5p.
Readers know how I feel about such share sales. Once again a privileged few have been invited to subscribe for shares although I must admit that in this case the placing discount is rather narrow and, with the market in SnackTime's shares exceedingly thin, could quickly disappear.
I do not understand why old fashioned rights issues or placings and open offers are not adopted more often. I expect the tired old defence about the cost and timescale of such exercises would be trotted out. But such special pleading cuts no ice with me. Placings ensure that many existing shareholders are left out in the cold, suffering dilution, and a selected gathering allowed to pile in.
Shareholders outside the charmed circle are often left watching their shareholdings surrender value as short-termers from the placing extract their profits.
Two portfolio constituents have indulged in placings in recent times. City institutions and in-the-know shareholders on the books of selected stockbrokers probably took up the stock – at favourable prices. Some were clearly long-term shareholders but the subsequent performance of the shares suggests that quite a few were in for a quick and no doubt rewarding killing.
The redeeming feature of SnackTime's cash raising, which is still subject to shareholder approval, is the modest discount. Those taking up the shares are embracing something of a risk whereas too often the gap between the placing and ruling prices is sufficient to make the element of speculation outrageously comfortable.
I believe all shareholders – big and small – deserve to be treated equally. There is no doubt that major shareholders, institutions and private individuals, still, despite mountainous regulations, get the bigger bite of the investment cherry.
The portfolio cannot take part in any cash raising exercise. Under its rules of engagement it has to confine each investment to £5,000. And don't forget the portfolio is a notional exercise. Although its imaginary wallet is sealed, many buy and hold investors would, I suspect, appreciate the chance to avoid dilution and plough more into a company they have decided represents a good home for their money. The fact they are denied such an opportunity makes a nonsense of any claim the City makes to equality and, indeed, shareholder democracy.
The narrow SnackTime discount indicates it has attracted longer-term shareholders – institutions only, according to its statement – than many other placings. The company, which owns the snack machines it installs in factories, offices and shops, is clearly eating up cash. It needs the extra funds to continue expanding its spread of chilled vending machines and grow its newly developed hot snack operation.
And SnackTime, headed by serial investor Michael Jackson, is also on the look out for acquisitions. It recently swallowed its main domestic rival, MBM, in a £1.5m deal. More takeovers are on the agenda with overseas buys a possibility.
The group arrived on AIM towards the end of 2007. It raised around £3.4m through its flotation and a subsequent placing. About £600,000 was pulled in by issuing convertible loan stock.
In its last full year the company produced profits of £202,000, up from £123,000. It says MBN has been successfully absorbed and current trading is "strong". Interim results will be announced on Christmas Eve, a notorious stock market session when meaningful trading is almost non-existent as many inhabitants either stay at home or indulge in some early celebrations. Very little transpires in the few hours the stock market is open. Indeed, the festive trading atmosphere is so somnolent that it is ideal for burying dreadful tidings – a temptation some companies find difficult to resist. SnackTime's figures should be impressive – an exception to the rule. Probably the mechanics of the placing forced the Christmas Eve announcement.
The portfolio alighted on the shares at 119p. They subsequently reached 135p and then relapsed to 111p. The price rallied to 145p before internet tipster Tom Winnifrith on t1ps.com added to the momentum with a buy recommendation that sent the shares to around 185p.
With the placing fixed at 170p, SnackTime must be grateful for the Winnifrith involvement.
Independent Partners; request a free guide on NISAs from Hargreaves Lansdown
- 2 Pope Francis issues top 10 tips for happiness – including don’t try to convert other people
- 4 Disney heiress Abigail disowns her share of family profits in West Bank company
- 5 Israel's propaganda machine is finally starting to misfire
The secret report that helps Israel hide facts
Land for gas: Merkel and Putin discussed secret deal could end Ukraine crisis
Woman and two children killed by mob in riots over 'blasphemous' Facebook post in Pakistan
Richard Dawkins tweets: 'Date rape is bad, stranger rape is worse'
Putin is 'thuggish, dishonest and reckless', says British ambassador to US
Boozy, ignorant, intolerant, but very polite – Britain as others see us
- < Previous
- Next >
iJobs Money & Business
£20000 - £24000 per annum: Harrington Starr: A leading provider of web based m...
£28000 - £32000 per annum: Ashdown Group: Secretary (Sales Team Support) - Mat...
Competitive (DOE): Guru Careers: We are looking for an Assistant Management Ac...
£600 - £700 per day + competitive: Orgtel: Senior Investment Accounting Change...
Day In a Page
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village
A one-bedroom, luxury apartment with private gym and concierge service in Moorgate
A four-bedroom house in Hermitage Gardens with three reception rooms and landscaped gardens
A seven-bedroom Grade II-listed property with a separate self-contained apartment
A five-bedroom Victorian house with three reception rooms and galleried landing, £695,000
A six-bedroom farmhouse with five acres of land in a former cloth-making village
A secluded seven-bedroom detached house with large private garden, £490,000
A three-bedroom cottage overlooking Sarratt village green with open fires and solid oak floors
A three-bedroom maisonette flat in a Grade I-listed, Georgian townhouse in a sought-after location
A one-bedroom apartment located within a private gated development, north of Turnham Green
Look forward to a brighter future at two-bedroom Sunny Cottages, ideal for Londoners looking to downsize
A three-bedroom red-brick cottage with outbuildings and pretty gardens, £200,000
This three-bedroom flat within a former textile factory spans the corner of the fourth floor and has a balcony
A charming four-bedroom Oxfordshire cottage with oak floors and chunky-beamed ceilings, £465,000
A beautiful one-bed flat in a sought-after portered block, with access to Norland Square communal gardens
A one-bedroom flat within a Sixties school conversion with high-spec design and open-plan kitchen, close to Lambeth North Tube, £435,000