Derek Pain: Democracy in action is such a refreshing thing, even if it isn't fair to all

No Pain, No Gain

I have often condemned private share placings as inequable exercises that disadvantage small shareholders and shame the City. Invariably, only a privileged few, including directors, are invited to buy the new shares, often well below the then ruling stock market price.

It can be a highly lucrative exercise for those who take part. But the vast majority of shareholders are left out in the cold, merely envious onlookers.

So I applaud the recent move by little Manx Financial, running Conister, the Isle of Man's independent bank, which celebrates its 75th anniversary this year. The company needed to raise £1.9m. It was unable to conduct a private placing and decided to launch a one-for-three open offer at 9p a share. Small shareholders, deemed as those with less than 0.5 per cent of the capital, were given priority. The issue was comfortably oversubscribed. And the whole exercise – in effect a rights issue – cost about £90,000, demolishing claims that such cash raising excursions are too expensive.

Although the Manx exercise was not expensive, it did take longer to complete than most placings. The whole operation lasted more than eight weeks, although a mix up at the company's registrars prolonged the offer by some two weeks. Defenders of placings say they are the cheapest and quickest method of raising cash. Manx, headed by the entrepreneur Jim Mellon, is one company prepared to consider small shareholders and has struck a blow for their welfare. Its experience underlines that only businesses in a desperate rush to raise extra cash can justify adopting the placing method rather than open-to-all rights issues or open offers.

It could be argued that placings allow companies to reduce the size of their shareholder bases and consequently save cash. I recall some directors taking such a dislike to modest investments that they attempted to block or buy them out on the pretence that they increased the bill for maintaining share registers. But the stock market is supposed to be a democracy with equal rights for all. I realise that is not strictly true; the machinations in the City and the influence of major investors make a nonsense of any suggestion of equality. Still, placings are a blatant example of ingrained favouritism.

My imagination could be running riot but I get the impression that nowadays we are witnessing much sharper share movements, with no immediately apparent explanations. Maybe it is a reflection of the tense atmosphere that appears to exist in the stock market. It could also indicate that insider trading is more prevalent than ever. Unexplained swings are particularly frequent among small caps. Yet the fringe Plus Quoted market does not often feature wild gyrations. It enjoys something of a comatose reputation. I have discussed the problems facing the owner, Plus Markets Group, on a number of occasions. Possibilities that must be considered are that a sale of the Plus Quoted market occurs; or, calamitously, that it is discontinued.

I gather vague talks between PMG shareholders – and other interested parties – have taken place about the future of Plus Quoted. Quite unintentionally, the London Stock Exchange has provided an escape route for any disillusioned constituent. Under pressure from Brussels, the LSE has been forced to introduce more relaxed requirements for fully-listed companies. Already one Plus member, Aviation, is contemplating taking advantage of the new rules. Its shares have been on Plus for nearly four years and are one of the market's success stories, more than doubling to 58p in the past year. The company, which leases aircraft to airlines, is capitalised at £14.5m.

The LSE's junior market – the Alternative Investment Market (AIM) – has attracted three Plus shares in past weeks and could well win more converts. Another possible refuge for Plus constituents is the Channel Islands Stock Exchange, which handles approaching 200 securities. And there is also the JP Jenkins market for unquoted shares. It contains more than 30 constituents, ranging from Convivial London Pubs, with eight outlets, to Sheffield United Football Club. The Jenkins exercise has benefited from Aim delistings.

I don't think Plus Quoted will disappear. Despite heavy losses, PMG is not short of cash with, at the last count, £10.7m in the bank. It is striving – I think successfully – to recapture its old exuberance but its low share price of about 2p indicates City scepticism.

yourmoney@independent.co.uk

Independent Partners; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at VouchedFor.co.uk

News
Sir David Attenborough
people
Life and Style
Young girl and bowl of cereal
food + drink
News
Comic miserablist Larry David in 'Curb Your Enthusiasm'
peopleDirector of new documentary Misery Loves Comedy reveals how he got them to open up
Arts and Entertainment
Henry VIII played by Damien Lewis
tvReview: Scheming queens-in-waiting, tangled lines of succession and men of lowly birth rising to power – sound familiar?
PROMOTED VIDEO
Sport
football
Arts and Entertainment
'The Archers' has an audience of about five million
radioA growing number of listeners are voicing their discontent; so loudly that even the BBC's director-general seems worried
News
i100
Arts and Entertainment
Ready to open the Baftas, rockers Kasabian are also ‘great film fans’
musicExclusive: Rockers promise an explosive opening to the evening
Life and Style
David Bowie by Duffy
fashion
Arts and Entertainment
Hell, yeah: members of the 369th Infantry arrive back in New York
booksWorld War Z author Max Brooks honours WW1's Harlem Hellfighters in new graphic novel
News
advertisingVideo: The company that brought you the 'Bud' 'Weis' 'Er' frogs and 'Wasssssup' ads, has something up its sleeve for Sunday's big match
Arts and Entertainment
tv
News
i100
Environment
Dame Vivienne Westwood speaking at a fracking protest outside Parliament on Monday (AP)
environment
Life and Style
tech
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Ashdown Group: Market Research Executive

    £23000 - £26000 per annum + Benefits: Ashdown Group: Market Research Executive...

    Recruitment Genius: Technical Report Writer

    £25000 - £35000 per annum: Recruitment Genius: A Technical Report Writer is re...

    MBDA UK Ltd: Indirect Procurement Category Manager

    Competitive salary & benefits!: MBDA UK Ltd: MBDA UK LTD Indirect Procurement...

    Recruitment Genius: Web Developer - PHP

    £16500 - £16640 per annum: Recruitment Genius: This fast growing Finance compa...

    Day In a Page

    Isis hostage crisis: Militant group stands strong as its numerous enemies fail to find a common plan to defeat it

    Isis stands strong as its numerous enemies fail to find a common plan to defeat it

    The jihadis are being squeezed militarily and economically, but there is no sign of an implosion, says Patrick Cockburn
    Virtual reality thrusts viewers into the frontline of global events - and puts film-goers at the heart of the action

    Virtual reality: Seeing is believing

    Virtual reality thrusts viewers into the frontline of global events - and puts film-goers at the heart of the action
    Homeless Veterans appeal: MP says Coalition ‘not doing enough’

    Homeless Veterans appeal

    MP says Coalition ‘not doing enough’ to help
    Larry David, Steve Coogan and other comedians share stories of depression in new documentary

    Comedians share stories of depression

    The director of the new documentary, Kevin Pollak, tells Jessica Barrett how he got them to talk
    Has The Archers lost the plot with it's spicy storylines?

    Has The Archers lost the plot?

    A growing number of listeners are voicing their discontent over the rural soap's spicy storylines; so loudly that even the BBC's director-general seems worried, says Simon Kelner
    English Heritage adds 14 post-war office buildings to its protected lists

    14 office buildings added to protected lists

    Christopher Beanland explores the underrated appeal of these palaces of pen-pushing
    Human skull discovery in Israel proves humans lived side-by-side with Neanderthals

    Human skull discovery in Israel proves humans lived side-by-side with Neanderthals

    Scientists unearthed the cranial fragments from Manot Cave in West Galilee
    World War Z author Max Brooks honours WW1's Harlem Hellfighters in new graphic novel

    Max Brooks honours Harlem Hellfighters

    The author talks about race, legacy and his Will Smith film option to Tim Walker
    Why the league system no longer measures up

    League system no longer measures up

    Jon Coles, former head of standards at the Department of Education, used to be in charge of school performance rankings. He explains how he would reform the system
    Valentine's Day cards: 5 best online card shops

    Don't leave it to the petrol station: The best online card shops for Valentine's Day

    Can't find a card you like on the high street? Try one of these sites for individual, personalised options, whatever your taste
    Diego Costa: Devil in blue who upsets defences is a reminder of what Liverpool have lost

    Devil in blue Costa is a reminder of what Liverpool have lost

    The Reds are desperately missing Luis Suarez, says Ian Herbert
    Ashley Giles: 'I'll watch England – but not as a fan'

    Ashley Giles: 'I'll watch England – but not as a fan'

    Former one-day coach says he will ‘observe’ their World Cup games – but ‘won’t be jumping up and down’
    Greece elections: In times like these, the EU has far more dangerous adversaries than Syriza

    Greece elections

    In times like these, the EU has far more dangerous adversaries than Syriza, says Patrick Cockburn
    Holocaust Memorial Day: Nazi victims remembered as spectre of prejudice reappears

    Holocaust Memorial Day

    Nazi victims remembered as spectre of prejudice reappears over Europe
    Fortitude and the Arctic attraction: Our fascination with the last great wilderness

    Magnetic north

    The Arctic has always exerted a pull, from Greek myth to new thriller Fortitude. Gerard Gilbert considers what's behind our fascination with the last great wilderness