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.

Luis Suarez looks towards the crowd during the 2-1 victory over England
Life and Style
Cheesecake frozen yoghurt by Constance and Mathilde Lorenzi
food + drinkThink outside the cool box for this summer’s frozen treats
John Barrowman kisses his male “bride” at a mock Gretna Green during the Commonwealth Games opening ceremony
peopleBarrowman's opening ceremony message to Commonwealth countries where he would be sent to prison for being gay
Sir Bradley Wiggins removes his silver medal after the podium ceremony for the men’s 4,000m team pursuit in Glasgow yesterday
Commonwealth games Disappointment for Sir Bradley in team pursuit final as England are forced to settle for silver
Alistair Brownlee (right) celebrates with his gold medal after winning the men’s triathlon alongside brother Jonny (left), who got silver
England's Jodie Stimpson won the women’s triathlon in the morning
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

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

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Trade Desk Specialist (Linux, Windows, FIX, Finance, Networks)

    £60000 per annum: Harrington Starr: Trade Desk Specialist (Linux, Windows, FIX...

    Associate CXL Consultant

    £40000 - £60000 per annum + BONUS + BENEFITS: Harrington Starr: CXL, Triple Po...

    Project Manager - ETRM/CTRM

    £70000 - £90000 per annum + Job Satisfaction: Harrington Starr: Project Manage...

    C#.NET Developer

    £300 - £350 per day: Harrington Starr: C#.NET Developer C#, WPF,BLL,MVVM, SOA...

    Day In a Page

    Backhanders, bribery and abuses of power have soared in China as economy surges

    Bribery and abuses of power soar in China

    The bribery is fuelled by the surge in China's economy but the rules of corruption are subtle and unspoken, finds Evan Osnos, as he learns the dark arts from a master
    Commonwealth Games 2014: Highland terriers stole the show at the opening ceremony

    Highland terriers steal the show at opening ceremony

    Gillian Orr explores why a dog loved by film stars and presidents is finally having its day
    German art world rocked as artists use renowned fat sculpture to distil schnapps

    Brewing the fat from artwork angers widow of sculptor

    Part of Joseph Beuys' 1982 sculpture 'Fettecke' used to distil schnapps
    BBC's The Secret History of Our Streets reveals a fascinating window into Britain's past

    BBC takes viewers back down memory lane

    The Secret History of Our Streets, which returns with three films looking at Scottish streets, is the inverse of Benefits Street - delivering warmth instead of cynicism
    Joe, film review: Nicolas Cage delivers an astonishing performance in low budget drama

    Nicolas Cage shines in low-budget drama Joe

    Cage plays an ex-con in David Gordon Green's independent drama, which has been adapted from a novel by Larry Brown
    How to make your own gourmet ice lollies, granitas, slushy cocktails and frozen yoghurt

    Make your own ice lollies and frozen yoghurt

    Think outside the cool box for this summer's tempting frozen treats
    Ford Fiesta is UK's most popular car of all-time, with sales topping 4.1 million since 1976

    Fiesta is UK's most popular car of all-time

    Sales have topped 4.1 million since 1976. To celebrate this milestone, four Independent writers recall their Fiestas with pride
    10 best reed diffusers

    Heaven scent: 10 best reed diffusers

    Keep your rooms smelling summery and fresh with one of these subtle but distinctive home fragrances that’ll last you months
    Commonwealth Games 2014: Female boxers set to compete for first time

    Female boxers set to compete at Commonwealth Games for first time

    There’s no favourites and with no headguards anything could happen
    Five things we’ve learned so far about Manchester United under Louis van Gaal

    Five things we’ve learned so far about United under Van Gaal

    It’s impossible to avoid the impression that the Dutch manager is playing to the gallery a little
    Screwing your way to the top? Good for Lana Del Rey for helping kill that myth

    Screwing your way to the top?

    Good for Lana Del Rey for helping kill that myth, says Grace Dent
    Will the young Britons fighting in Syria be allowed to return home and resume their lives?

    Will Britons fighting in Syria be able to resume their lives?

    Tony Blair's Terrorism Act 2006 has made it an offence to take part in military action abroad with a "political, ideological, religious or racial motive"
    Beyoncé poses as Rosie the Riveter, the wartime poster girl who became a feminist pin-up

    Beyoncé poses as Rosie the Riveter

    The wartime poster girl became the ultimate American symbol of female empowerment
    The quest to find the perfect pair of earphones: Are custom, 3D printed earbuds the solution?

    The quest to find the perfect pair of earphones

    Earphones don't fit properly, offer mediocre audio quality and can even be painful. So the quest to design the perfect pair is music to Seth Stevenson's ears
    US Army's shooting star: Lt-Col Steven Cole is the man Hollywood calls when it wants to borrow a tank or check a military uniform

    Meet the US Army's shooting star

    Lt-Col Steven Cole is the man Hollywood calls when it wants to borrow a tank or check a military uniform