Derek Pain: Lighthouse's Aim exit plan is simply dim
No Pain, No Gain
Saturday 21 July 2012
Lighthouse, a wealth-management firm that was once a constituent of the no pain, no gain portfolio, is planning to abandon the stock market and become an unquoted vehicle. Shareholders are asked to gather at the company's City offices later this month to approve the move. I hope that it is rejected.
Any out-of-town shareholder will have to be up at the crack of dawn or book an expensive hotel room in the Olympic Games period if they want to be present for the 9am meeting. I suspect many will use their proxy votes rather than struggle to attend. It seems to be a frequent occurrence in investment life these days that when a controversial decision is proposed the resultant meeting is called for a difficult time or held in an out-of-the-way venue.
David Hickey, the chairman and 4 per cent shareholder, maintains that cancellation of the Aim quote is "in the best interests of the company and its shareholders".
Well, Lighthouse shares have taken a knock since the off-market proposal became known, at times losing almost half their value.
Clearly Mr Hickey's plan has disadvantaged shareholders. And Lighthouse has not made arrangements for any alternative investment platform. Instead of moving to one of the fringe markets – or creating a matched bargains facility for any investor who wants to buy or sell – the directors are "to explore whether it is possible to set up a matched bargains arrangement". Surely such a platform, enabling shareholders to deal, should already be in place.
The reasons advanced for deserting the stock market are familiar. They include the group's low profile, lack of trading in the shares, the price (4.88p before the announcement) and the time and cost of maintaining an Aim presence. The problems besetting the financial community are also cited.
There is no doubt that trading circumstances have changed since Lighthouse arrived at the turn of the century. The shares have not performed. Once as high as 60p, they were sold at 7p last year.
Mr Hickey said Lighthouse has not issued any shares since 2008. Then it splashed out £44m buying a rival group for £12.6m in cash and shares. Some options were also satisfied that year.
Although Lighthouse has been an appalling investment, the company is profitable and pays dividends. I realise it faces an uncertain future, but its action is a slap in the face for shareholders who have stuck with the shares.
It is interesting that the move requires 75 per cent of the votes to be cast in favour. The directors have only 7.1 per cent and former director Allan Rosengren is the biggest stakeholder with 14.7 per cent.
As readers are aware, I invest in portfolio shares. When they are sold, I – depending on my circumstances at the time – sometimes hang on to my own holding. I regret not selling Lighthouse when the portfolio unloaded, but at least I can vote against this astonishing proposal. I hope others, in this so-called shareholders' spring, do so as well.
From a former constituent to existing participates. Animalcare and Hargreaves Services both issued trading updates that made little difference to earlier profit warnings, and stockbroker Shore Capital decided the shares of the Booker cash and carry chain were too high and said "sell". My advice remains that investors who followed the portfolio into the stock should sell half their stake.
The other constituent making news is, of course, G4S, the security group that is – or was – responsible for the Olympics. It seems the group will suffer another financial hit following its Olympian misadventure. Last year, it lost some £50m on its abandoned bid for ISS. There have been stockbroker suggestions that the shares were heading for 350p. I suspect such comments have been quietly withdrawn and any new targets will be much less inspiring.
The portfolio paid 264p for its shares; they fell to around 220p in the ISS débâcle. Just how well G4S survives the obvious damage from this latest trauma remains to be seen. There seems little point in selling now but I may have to consider it.
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