OUTLOOK: Essar Energy's investors never had a chance with a big brother calling all the shots

 

Outlook To look at Essar Energy's trading update, you could almost believe this was nothing out of the ordinary. Move along, nothing to see here, business as usual.

Not a particularly pretty business, as evidenced by the trading update, but every company hits a bit of a sticky patch now and then, don't they?

So why is the City so cross? Behind closed doors, institutional investors are giving off more steam than one of Essar's refineries.

Well, there is the Ruia family's potential takeover bid, and the trading didn't give much of an update on that other than to say that, yes, they might buy the shares they floated at 420p back for just 70p.

Hence all the bluster (in private). If there's a part of your pension, ISA or unit trust in there, you can be reassured. Your fund managers have got your back. At some point they might even publicly say so.

Amid all the howling and gnashing of teeth, the company's independent directors have scurried to call in lawyers from Linklaters and establish a committee to consider the (potential) bid. So they're obeying the forms.

In reality, they know, and the institutions know, that the Ruias have them over a barrel. They either sell now for the pitiful price suggested or sit tight as the shares drift further down a black hole.

The question that really needs to be asked is why they let it get to this place. No one forced institutions to listen to the likes of JP Morgan and Deutsche Bank when they were selling the thing. The scale of the disasters at natural resources horrors Bumi and ENRC might not have been completely clear back in 2010 when Essar floated, but the dangers of having big, majority investors with the freedom to call the shots alongside you, ought to have been pretty clear.

It's true that the listing rules that allowed the float were too weak. They're still not tough enough. But that offers the institutions too easy an out. If big investors don't want to find themselves in the same place, they need to learn their lessons. The next time a someone comes with a similar offering they should be sent packing.

Start your day with The Independent, sign up for daily news emails
Sport
football
News
Hillary Clinton comments on viral Humans of New York photo of gay teenager
Arts and Entertainment
The gang rape scene in the Royal Opera’s production of Gioachino Rossini’s Guillaume Tell has caused huge controversy
music
Sport
wimbledonScot will face Ivo Karlovic next
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Sales Assistant / Buyer

£15000 - £17000 per annum: Recruitment Genius: This company offers a range of ...

Recruitment Genius: Customer Service Advisor

£15000 - £16000 per annum: Recruitment Genius: Customer Service Advisors are r...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £45K: SThree: SThree were established in 1986....

Recruitment Genius: Compliance Manager

£40000 - £60000 per annum: Recruitment Genius: A Compliance Manager is require...

Day In a Page

Is this the future of flying: battery-powered planes made of plastic, and without flight decks?

Is this the future of flying?

Battery-powered planes made of plastic, and without flight decks
Isis are barbarians – but the Caliphate is a dream at the heart of all Muslim traditions

Isis are barbarians

but the Caliphate is an ancient Muslim ideal
The Brink's-Mat curse strikes again: three tons of stolen gold that brought only grief

Curse of Brink's Mat strikes again

Death of John 'Goldfinger' Palmer the latest killing related to 1983 heist
Greece debt crisis: 'The ministers talk to us about miracles' – why Greeks are cynical ahead of the bailout referendum

'The ministers talk to us about miracles'

Why Greeks are cynical ahead of the bailout referendum
Call of the wild: How science is learning to decode the way animals communicate

Call of the wild

How science is learning to decode the way animals communicate
Greece debt crisis: What happened to democracy when it’s a case of 'Vote Yes or else'?

'The economic collapse has happened. What is at risk now is democracy...'

If it doesn’t work in Europe, how is it supposed to work in India or the Middle East, asks Robert Fisk
The science of swearing: What lies behind the use of four-letter words?

The science of swearing

What lies behind the use of four-letter words?
The Real Stories of Migrant Britain: Clive fled from Zimbabwe - now it won't have him back

The Real Stories of Migrant Britain

Clive fled from Zimbabwe - now it won’t have him back
Africa on the menu: Three foodie friends want to popularise dishes from the continent

Africa on the menu

Three foodie friends want to popularise dishes from the hot new continent
Donna Karan is stepping down after 30 years - so who will fill the DKNY creator's boots?

Who will fill Donna Karan's boots?

The designer is stepping down as Chief Designer of DKNY after 30 years. Alexander Fury looks back at the career of 'America's Chanel'
10 best statement lightbulbs

10 best statement lightbulbs

Dare to bare with some out-of-the-ordinary illumination
Wimbledon 2015: Heather Watson - 'I had Serena's poster on my wall – now I'm playing her'

Heather Watson: 'I had Serena's poster on my wall – now I'm playing her'

Briton pumped up for dream meeting with world No 1
Wimbledon 2015: Nick Bollettieri - It's time for big John Isner to produce the goods to go with his thumping serve

Nick Bollettieri's Wimbledon Files

It's time for big John Isner to produce the goods to go with his thumping serve
Dustin Brown: Who is the tennis player who knocked Rafael Nadal out of Wimbeldon 2015?

Dustin Brown

Who is the German player that knocked Nadal out of Wimbeldon 2015?
Ashes 2015: Damien Martyn - 'England are fired up again, just like in 2005...'

Damien Martyn: 'England are fired up again, just like in 2005...'

Australian veteran of that Ashes series, believes the hosts' may become unstoppable if they win the first Test