The UK consumer is weighed down with more than £1 trillion of debt, so it is no surprise that insolvency practitioners should have been among the most successful stock market investments of the year.
Debt Free Direct, Accuma and Debtmatters are the currently listed trio specialising in individual voluntary arrangements (IVAs), an alternative to personal bankruptcy. But they are about to be faced with an aggressive new rival, which plans to float within a month via a reverse takeover of the cash shell Carrwood.
And if the founder of ClearDebt, the Manchester-based insolvency practitioner and serial AIM company director David Mond, is correct, then his company could be the beneficiary of a big shift in the market that would seriously affect the profitability of his more established rivals.
The Government is planning to introduce "simple IVAs" that are meant to be easier to organise and cheaper. If lenders see less of a cut being taken by the IVA arranger, they will therefore be keener on using them rather than pushing customers into bankruptcy. ClearDebt cuts down on the administration by getting debt-burdened customers to fill in most of the required information online.
Mr Mond is reversing ClearDebt into Carrwood, the shell company that used to be called Downtex before its operating business, a textiles company, was sold in 2003. Mr Mond is a board member at Carrwood.
ClearDebt is still in start-up phase, arranging about 25 IVAs a month, and the flotation will raise up to £1m to tide it over. City institutions have promised more next year if the low-cost IVA business model takes off. The start of trading is pencilled in for 4 January.
Ofex shuts the door
Carrwood would have faced delisting from AIM next year if it did not do a reverse takeover deal, and the London Stock Exchange is expecting many of those dormant shells to move to the rival small companies stock market, Ofex. But when Small Talk wrote last week that Ofex was "salivating" at the prospect, we were over-egging its enthusiasm. Simon Brickles, head of Ofex, telephones to say: "People mustn't assume that just because a company has been quoted on another market, it will also be welcome on Ofex. Many will not."
Unlike AIM, which puts the onus for ensuring probity on companies' advisers, Ofex vets every single application, to make sure shell companies are not just get-rich-quick schemes for the directors. We hear that one shell company's application was declined very recently, and two more were " headed off at the pass".
Langbar cash hunt
Langbar International was trumpeted on flotation as AIM's biggest cash shell but now looks like AIM's biggest scandal, since forensic accountants say they can't establish the existence of the money or any other assets at any point in the company's history. Small Talk has written on several occasions about the people behind Langbar, and we were in touch over the weekend with Stuart Pearson, who took over as chief executive in June after being persuaded that Langbar had assets of £365m in a Brazilian bank.
He said that he has been in back-to-back meetings with lawyers since the Serious Fraud Office was called in, although there will be a board meeting convened tomorrow or Wednesday to examine the progress of the investigation. "My time is very precious with lawyers at the moment recovering our funds. I am also receiving about 50 calls and e-mails a day from private shareholders. All RNS announcements were issued after proper due diligence and were supported in writing. I can assure you I have all the original evidence safely secured. I feel as angry as other shareholders at this outcome, but I believe we have a number of targets and I am totally committed to the pursuit of our money. We have approximately £3m in liquid assets for the recovery programme."
It was a very crackly line, but Small Talk hears from the Far East that EBT Mobile China, a mobile phone retail chain, is trying to auction a stake in the business to a Western telecoms player. The AIM-listed company operates 93 outlets in 13 Chinese cities, notably Shanghai, which is proving the hub for foreign involvement in the rapidly industrialising country.
Our caller says that a stake of up to 40 per cent in the business might be up for grabs, and that Carphone Warehouse is ahead of a pack of potential investors that also includes Vodafone.
Even Nicholas Tod, the ousted chief executive of cash machines operator Scott Tod, thinks he is likely to fail in his bid to get his job back. Institutional investors have indicated they don't want the chairman, David Massie, to quit, so Mr Tod's proposed new non-executive directors have withdrawn their agreement to join the board.
Now Mr Tod has requisitioned a second shareholder vote, to put himself and his father Roger, the company's founder, back on the board. It seems unlikely the institutions will abstain, as he hopes.
The company is losing money and can ill-afford the cost of an extraordinary general meeting. The best way now for the Tods to safeguard the future of the company they love is to desist from the requisition.
Mysti the fairy works her magic for Galleon
A magical little deal for Galleon, the kids' television and toys business. It has bought all the rights to Mysti, the fairy sent to live on Earth, whose adventures were a big hit on Saturday morning telly last year. A related series of books, aimed at 10- to 15-year-old girls, have already sold 100,000 copies.
The £1.5m cash and shares acquisition will be accompanied by a further equity fundraising of £1.25m. The cash, from a placing at a 31 per cent discount to the current share price, will fund Galleon's toys business.Reuse content