Derek Pain: There may be fringe benefits now Plus Markets is on sale

No Pain, No Gain
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The Independent Online

Is Plus, the City's rather sleepy fringe share market, set for a new, more active lease of life? I ask this question following the surprise announcement that its parent company has, in effect, put itself up for sale. There is, of course, a danger that the process could lead to the little stock market suffering acute damage. But I don't think that will happen. There is no doubt the Plus share-trading facility deserves to continue and could grow much stronger under new ownership.

The Plus market, where about 160 shares and bonds are traded, is owned by an AIM-traded company, Plus Markets. To many investors outside the City it is by far the most important segment of the group. But the company also offers a derivatives market and the ability to deal in a vast range of shares including many foreign stocks as well as fully listed and AIM shares.

It has spent huge sums developing what it hoped would be a full-blown stock exchange, a miniature version of the London Stock Exchange. However, its ambitious expansion has produced losses with profits not even in sight.

Certainly Plus has strayed a long way from its original structure. It was set up by a veteran City stockjobber, John Jenkins, when the LSE, in its infinite wisdom, decided to end its off-market, matched-bargains operation. Mr Jenkins, whose father launched a jobbing firm just after World War Two, created a market for the displaced constituents that did not want a quote but, as public companies, felt the need for a share-trading facility. His fledgling platform was also aimed at young, ambitious companies with cash calls in mind. He called his venture Ofex (Off Exchange).

As a fringe market, under the Jenkins guidance, Ofex attracted many groups, including such heavyweights as National Car Parks and Weetabix. Both have disappeared from the market. The fringe player had its problems but arrived on AIM and the shares topped 40p. However, the Jenkins AIM reign was short lived and new investors (with pots of money) and managers moved in. In 2007, its shares were above 30p. And, to emphasise that the company's new role would be much more than running a fringe share market, the name Plus was adopted.

But the group's ambitions, which overshadowed the original Ofex market, failed to generate commercial success. Losses piled up. The last recorded year's deficit, not bad by Plus standards, was £5.7m. In the first six months of last year, the last figures available, the loss was reduced from £2.5m to £1.4m.

Discontent grew among the group's backers. In October Amara Dhari Investments called a shareholders' meeting aimed at removing chairman Giles Vardy and electing Simon Brickles, who developed AIM and had already enjoyed a stint at Plus, to the board. City veteran Mr Vardy departed and the meeting was called off.

Now the sale process is under way. Certainly the fringe element should attract considerable interest with, I suspect, a number of City firms knocking on the Plus door. But whether there will be much interest in acquiring the rest of the group remains to be seen. Last year there was a conditional approach for the derivatives business but the mini-stock exchange, which has been described as a platform for City professionals to play around at minimum cost, could have little attraction.

Amara Dhari, a Kuwaiti group with 17.2 per cent, will have a major say in the fate of Plus. Interestingly it says the sale decision is "regrettable". The City's main representative on the shareholders' register is merchant bank Close Brothers with a near-20 per cent stake. serial investor, Bruce Rowan, who has built a 15.6 per cent interest largely as Plus shares have collapsed into the penny-dreadful category, is another important player. Mr Rowan, noted for his involvement with small caps, was quoted as describing the shares as a "gambling stock" during his early days on the Plus scene. As I write the shares are around 1p, providing a £3.2m capitalisation.

The Plus operation has in recent years become an authorised stock exchange. But official recognition has not served it well. Perhaps it should have stayed on the fringe.

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