Derek Pain: Plus market's fans have fingers crossed for a new beginning

No Pain No Gain
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The Independent Online

the destiny of Plus, the City's struggling fringe share market, should be resolved in the next few weeks. It looks as though the parent company, the AIM-traded Plus Markets Group (PMG), will succumb to a takeover bid or at least attract one or more investors to give it more firepower.

The problems at what was once perceived to be a potential rival to the London Stock Exchange (LSE) are brutally illustrated by the dire performance of its shares, which have for long been in penny dreadful land. They are, as I write, just over 1p, capitalising the company at £3.3m. Some of the companies on its share market, such as Arsenal football club and the brewer Shepherd Neame, command far greater values.

In February PMG surprised many when, in effect, it put itself up for sale. It has now reported that "a number of indicative proposals" are under consideration. There is no indication of the nature of the suggested deals; or whether the interested parties are already connected to Plus. It contents itself with the standard proviso that there is no certainty that a deal will be concluded.

I have followed the Plus story since the market was created in the 1990s when the LSE, in its infinite wisdom, decided to close its off-beat matched bargains facility, leaving many substantial but unquoted companies with long shareholder lists high and dry. A well-respected City stock jobber, John Jenkins, came to their rescue. He launched Ofex (off exchange) as a fringe share platform for the abandoned former matched bargain players and for up-and-coming businesses that needed a share facility to help raise cash or put through deals.

Slowly Ofex grew until it felt strong enough to float on the junior AIM market, with the shares at one time topping 40p. However the Jenkins-AIM reign was short-lived and new investors (with pots of money) and managers moved in. Ofex became Plus and an ambitious programme of expansion was adopted. The fringe market would be developed, other activities added and Plus would emerge, so the thinking went, as a serious but smaller rival to the LSE.

Many small investors are attracted to Plus. And I have recruited a number of its constituents to the No Pain, No Gain portfolio, although not all have proved profitable excursions. If PMG had stuck to its fringe share market it may have enjoyed a rather more profitable time. But it ventured into such areas as derivatives as well as LSE and many foreign stocks – and the losses piled up. Some even say it became a facility where City professionals could play around at minimal cost, producing little or no profit for PMG.

In the four years to the end of 2010 the group stacked up a deficit of about £27m. In the first half of last year, the latest figures available, its fortunes improved although it was still in the red – to the tune of £1.4m against £2.5m previously.

Evidence of discontent among shareholders grew. One called a shareholders meeting to dismiss the chairman, Giles Vardy, and appoint Simon Brickles, a former Plus man who had earlier developed AIM, to the board. Mr Vardy departed and the meeting was called off.

The merchant bank Close Brothers, with a near-20 per cent interest, is the biggest shareholder and Amara Dhari of Kuwait has 17.2 per cent. The serial investor Bruce Rowan has in recent times built a 15.6 per cent shareholding.

I – and I suspect most investors who have climbed aboard Plus companies – hope PMG's lingering agony will soon end and the fringe share market, still representing a significant slice of the group, will be able to settle down to a more enjoyable future. The City deserves a thriving second market and Plus, an authorised stock exchange, undoubtedly performs a valuable service.

When John Jenkins severed his and his family's links with Plus he went on to develop another fringe market. The JP Jenkins matched bargains platform is really out on the City's edge.

This month it achieved its fourth owner as the Plus-traded Rivington Street Holdings, a former portfolio constituent, sold JPJ, with 23 constituents, to a German legal and acquisition consultancy called ECK & Partners for £110,000. Rivington paid £15,000 a few years ago. Who knows? Under its new German owner perhaps JPJ will become a threat to Plus.

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