Shore Capital unveiled plans to set up a company yesterday in which its directors of the boutique investment house will be able to buy shares, allowing them to benefit from an upturn in the stock market.
The company said about 10 senior employees would collectively be able to buy up to 25 per cent of the new vehicle, which will incorporate Shore Capital's corporate finance, stock broking, market-making and research departments.
Investment houses have been desperate to find ways to incentivise key employees at a time when gloomy markets have wiped out fat bonuses and kept many share options schemes under water. Shore Capital's own shares, many of which are owned by employees, have fallen from a high of over 60p at the height of the dot.com boom to 13.5p yesterday.
Shore Capital, which has used the tough market conditions to snap up high profile bankers from larger institutions, said it would soon be sending a circular to shareholders requesting permission to set up the new division.
Directors who will be entitled to buy shares include Simon Fine, who joined Shore Capital as managing director of its equity capital markets from Lehman Brothers. The company said that part of its negotiations to hire Mr Fine included considering "new structures, which might facilitate the growth of the company's equity capital markets".
The new entity should enhance shareholder value, Shore Capital said, because senior employees would be "appropriately incentivised".
Shore Capital has also hired former employees of ING Barings, which has folded its small-cap research department. Some of these employees will also be able to buy shares in the new company.
Howard Shore, the chairman and founder of Shore Capital, said: "This is to incentivise people because it will allow them to buy shares in a business they think is exciting and which they are directly involved in."
Mr Shore said he was considering a number of options for the future of the new company, including in due course floating it on the stock market.
He added that a "large proportion" of the balance sheet would remain outside the new entity, including fund management and Shore Capital's hedge fund of funds.
Shore Capital reported pre-tax losses of £702,000 for the last calendar year in March. It did not pay a dividend.Reuse content