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

Finacial products from our partners
Property search
  • Get to the point
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: Editor-in-chief - Financial Services - City, London

    £60000 - £70000 per annum + benefits : Ashdown Group: A highly successful, glo...

    Ashdown Group: Junior Application Support Analyst - Fluent German Speaker

    £25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...

    Guru Careers: Management Accountant

    £27 - 35k + Bonus + Benefits: Guru Careers: A Management Accountant is needed ...

    Guru Careers: Project Manager / Business Analyst

    £40-50k + Benefits.: Guru Careers: A Project Manager / Business Analyst is nee...

    Day In a Page

    General Election 2015: ‘We will not sit down with Nicola Sturgeon’, says Ed Balls

    'We will not sit down with Nicola Sturgeon'

    In an exclusive interview, Ed Balls says he won't negotiate his first Budget with SNP MPs - even if Labour need their votes to secure its passage
    VE Day 70th anniversary: How ordinary Britons celebrated the end of war in Europe

    How ordinary Britons celebrated VE Day

    Our perception of VE Day usually involves crowds of giddy Britons casting off the shackles of war with gay abandon. The truth was more nuanced
    They came in with William Caxton's printing press, but typefaces still matter in the digital age

    Typefaces still matter in the digital age

    A new typeface once took years to create, now thousands are available at the click of a drop-down menu. So why do most of us still rely on the old classics, asks Meg Carter?
    Discovery of 'missing link' between the two main life-forms on Earth could explain evolution of animals, say scientists

    'Missing link' between Earth's two life-forms found

    New microbial species tells us something about our dark past, say scientists
    The Pan Am Experience is a 'flight' back to the 1970s that never takes off - at least, not literally

    Pan Am Experience: A 'flight' back to the 70s

    Tim Walker checks in and checks out a four-hour journey with a difference
    Humans aren't alone in indulging in politics - it's everywhere in the animal world

    Humans aren't alone in indulging in politics

    Voting, mutual back-scratching, coups and charismatic leaders - it's everywhere in the animal world
    Crisp sales are in decline - but this tasty trivia might tempt back the turncoats

    Crisp sales are in decline

    As a nation we're filling up on popcorn and pitta chips and forsaking their potato-based predecessors
    Ronald McDonald the muse? Why Banksy, Ron English and Keith Coventry are lovin' Maccy D's

    Ronald McDonald the muse

    A new wave of artists is taking inspiration from the fast food chain
    13 best picnic blankets

    13 best picnic blankets

    Dine al fresco without the grass stains and damp bottoms with something from our pick of picnic rugs
    Barcelona 3 Bayern Munich 0 player ratings: Lionel Messi scores twice - but does he score highest in our ratings?

    Barcelona vs Bayern Munich player ratings

    Lionel Messi scores twice - but does he score highest in our ratings?
    Martin Guptill: Explosive New Zealand batsman who sets the range for Kiwis' big guns

    Explosive batsman who sets the range for Kiwis' big guns

    Martin Guptill has smashed early runs for Derbyshire and tells Richard Edwards to expect more from the 'freakish' Brendon McCullum and his buoyant team during their tour of England
    General Election 2015: Ed Miliband's unlikely journey from hapless geek to heart-throb

    Miliband's unlikely journey from hapless geek to heart-throb

    He was meant to be Labour's biggest handicap - but has become almost an asset
    General Election 2015: A guide to the smaller parties, from the the National Health Action Party to the Church of the Militant Elvis Party

    On the margins

    From Militant Elvis to Women's Equality: a guide to the underdogs standing in the election
    Amr Darrag: Ex-Muslim Brotherhood minister in exile still believes Egypt's military regime can be replaced with 'moderate' Islamic rule

    'This is the battle of young Egypt for the future of our country'

    Ex-Muslim Brotherhood minister Amr Darrag still believes the opposition can rid Egypt of its military regime and replace it with 'moderate' Islamic rule, he tells Robert Fisk
    Why patients must rely less on doctors: Improving our own health is the 'blockbuster drug of the century'

    Why patients must rely less on doctors

    Improving our own health is the 'blockbuster drug of the century'