Derek Pain: Plus market's 'penny dreadful' share price shows City worries
No Pain, No Gain
Saturday 26 June 2010
Plus, the fringe share market that houses two constituents of the no pain, no gain portfolio, is going through a difficult patch. Its shares, once above 40p, are changing hands at around 2p after the company incurred heavy losses.
Many stock markets have felt the impact of increasing competition as well as the recessionary pinch in recent years. Even the London Stock Exchange has encountered problems, with its fully listed and AIM platforms far from immune to the current tough economic climate. But Plus has the additional encumbrance of what can only be described as self-inflicted wounds. It is undertaking a strategic review and has identified remedial action.
It's all a far cry from last summer, when Plus won the right to provide a dealing platform for all AIM shares – it already handled some fully listed and AIM stocks. Turnover mushroomed in the final four months of 2009 as more and more City dealers used its facilities. But it was profitless prosperity. The bonanza produced little reward for the Plusmen.
I have followed the Plus story since the share market appeared in the mid-1990s. It was created by a veteran stockjobber, John Jenkins, who realised that the LSE's decision to kill off its obscure matched bargains operation left many unquoted but public companies without a market in their shares. So around the same time that the LSE launched its junior AIM facility he produced a fringe market he called Ofex (Off Exchange).
Ofex certainly fulfilled a need. It attracted many small, often cash-hungry companies as well as old-established and substantial matched bargain players with long shareholder lists such as the brewer and pub owner Shepherd Neame and Arsenal football club.
For a number of years Ofex seemed to perform satisfactorily, despite the occasional company disaster, and even floated its shares on AIM. It then encountered problems. A batch of City names came to the rescue, pumping cash into the group. New management, including the former AIM chief Simon Brickles, was drafted in, and the Ofex banner was surrendered in favour of Plus.
But despite notable victories, such as obtaining Recognised Investment Exchange status and enjoying the right to trade in more than 7,500 UK and European shares, Plus has woefully failed to generate profits. In the last four years it has lost more than £22m.
And competition is likely to get even more fierce, with the LSE – under pressure from the busybodies of Brussels – obliged to introduce new, more relaxed requirements for fully listed shares. Such a move could impact on its own more lightly regulated AIM market as well as the even more accessible Plus.
Clearly its cash haemorrhaging cannot continue. The company may have had £10.7m at the end of its last financial year but it desperately needs to cut losses.
A new policy appears to suggest that more energy will be devoted to what is its core operation: its Plus Quoted section, which is a distinctive entity from such operations as Plus Europe and the facility dealing with AIM shares. Plus Quoted is the original Ofex. It has, like most markets, been forced to endure a difficult run, with constituent shares losing value and market numbers declining. New issues have become increasingly rare. There is also criticism of what is seen as Plus Quoted's poor liquidity and cash-raising ability, as well as its wide spreads.
The fringe market has also to find a way of extracting profits from its other dealing platforms and make more of its existing European links. The group is also developing Arab connections and has won a £5m-plus investment from a Middle Eastern consortium. There are high hopes that this association will encourage overseas companies to flock to its banner.
Giles Vardey, an experienced City man, took over as chairman earlier this year and is heading the strategic review. He has said costs can be cut from last year's £8.75m to £5m, and has indicated that new revenue streams will be tapped and greater use made of the important RIE status.
Plus is an invaluable part of the investment scene. Its "penny dreadful" share price illustrates City worries. For investors and many companies Plus has provided a much needed facility. I hope it will continue to do so.
Independent Partners; request a free guide on NISAs from Hargreaves Lansdown
- 1 Woman and two children killed by mob in riots over 'blasphemous' Facebook post in Pakistan
- 2 Christians: The world's most persecuted people
- 3 The secret report that helps Israelis to hide facts
- 4 Danish TV reporter is all business up top, all party down below
- 5 Denmark bans kosher and halal slaughter as minister says ‘animal rights come before religion’
The secret report that helps Israelis to hide facts
A day in the life of Vladimir Putin: The dictator in his labyrinth
Were 'Poor Doors' added to mixed developments so wealthy residents don't have to go in alongside social housing tenants?
A new Russian revolution: The cracks are starting to appear in Putin’s Kremlin power bloc
Arizona execution lasts two hours as killer Joseph Wood left 'snorting and gasping' for air
Opponents of Israel's military operation in Gaza are the real enemies of Middle Eastern peace
iJobs Money & Business
Data Governance Manager (Solvency II) – Contract – Up to £450 daily rate, 6 month (may go Permanent)
£350 - £450 Per Day: Clearwater People Solutions Ltd: We are currently looking...
£500 - £560 per day: Orgtel: Java Developer FX - Banking - London - Up to £560...
£350 - £400 per day + competitive: Orgtel: My client, a leading bank, is curre...
£26000 - £30000 per annum + Benefits: Ashdown Group: Account Manager - (Produc...
Day In a Page
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village
A one-bedroom, luxury apartment with private gym and concierge service in Moorgate
A four-bedroom house in Hermitage Gardens with three reception rooms and landscaped gardens
A seven-bedroom Grade II-listed property with a separate self-contained apartment
A five-bedroom Victorian house with three reception rooms and galleried landing, £695,000
A six-bedroom farmhouse with five acres of land in a former cloth-making village
A secluded seven-bedroom detached house with large private garden, £490,000
A three-bedroom cottage overlooking Sarratt village green with open fires and solid oak floors
A three-bedroom maisonette flat in a Grade I-listed, Georgian townhouse in a sought-after location
A one-bedroom apartment located within a private gated development, north of Turnham Green
Look forward to a brighter future at two-bedroom Sunny Cottages, ideal for Londoners looking to downsize
A three-bedroom red-brick cottage with outbuildings and pretty gardens, £200,000
This three-bedroom flat within a former textile factory spans the corner of the fourth floor and has a balcony
A charming four-bedroom Oxfordshire cottage with oak floors and chunky-beamed ceilings, £465,000
A beautiful one-bed flat in a sought-after portered block, with access to Norland Square communal gardens
A one-bedroom flat within a Sixties school conversion with high-spec design and open-plan kitchen, close to Lambeth North Tube, £435,000
A 17th century four-bedroom house, with open fireplaces, cellar and pool, £600,000