Rsv Shareholder's Action Group

You'll have to excuse me because I've been busily working on the shareholders database and didn't spot that there was a flurry of posts this evening. I spotted this one and I believe that I need to explain a little history.

src123 - 17 Dec'05 - 23:10 - 37702 of 37771
The Room Service group were very fortunate to have individuals who really forced the issue with the LSE. Without that pressure I don't think that the LSE would've been very forthcoming with suggesting refunds etc. It's unfortunate for us on this BB that there are quite a lot of posters who are trying their level best to ditract any responsibility away from the LSE. Any notion of nullifying trades is obviously also not in the interests of any shorters which again we have a number of on here.


There are some RSV holders amongst the Langbar shareholders, so the history I'm about to tell you, has been known to them for the past 2 years - intimately!

With the help of the RSV members - I was the one that forced the issue with the LSE and FSA and that's why at this moment, the LSE is on the verge of being dragged into court on charges that will astound most investors worldwide.

Let's be clear, the LSE did not arrange for share transactions to be nullified. They couldn't unwind the situation then and I doubt they could do it here either. I guess I need to explain a brief potted history of Room Service Scandal. If you want to read a more comprehensive history, you can do so here:



Room Service, like Langbar was a cash shell. They had sold their operating company off and were in debt. Effectively they had only one major asset - the listing on the AIM and a tax write off that might be useable.

Although the company had debts, it was not technically insolvent. The reason being that shells actually have a value for reversal purposes. Now we've had a university lecturer quantify these values for us.

The company agreed with the primary debtor, that they would convert the debt into equity. A D4E swap. Although the debt was far greater £219k, the sum initially agreed was £100k in 1p shares. In other words, the debtor would cancel their debt, for 10 million shares and become the majority holder of the company.

Christopher Potts, the head of market making at Evolution Beeson Gregory (EBG)saw the announcement and decided to see if he could get away with something.

According to the FSA Final Notice:



He checked with his superiors and EBG compliance department about the extent that he could sell the share. What he then did, is oversell Room Service shares at distortive levels in the run up to the AGM. On the 16 Oct 2003, more shares were sold than existed. The Nomad alerted the LSE that someone was distorting the market as there was no way that they could deliver the shares. He sold them just before the AGM, so that the majority of buyers could not use their voting rights at the AGM - because the transactions had not settled yet.

If you check the trade data:

You can see that the number of trades was way over the amounts that could be delivered by settlement dates and most were T3. It was not just EBG that was selling either. Both Shore Capital and Winterflood had matched EBG's distorted and abusive price and they were selling into the market too. Exacerbating the extent of EBG's market distortion. Shore Cap and Winterflood were both buying their shares from Evolution (or so they claimed) but EBG did not have the shares to deliver to them either. This meant that the Shore Cap and Winterflood shorts were 'covered' shorts and the EBG shorts were 'naked' shorts.

The necessary resolutions were passed at the AGM on 20 Oct 2003, to agree the share dilution. The day after, the share price nosedived down - even though there was no way that any of the MMs could deliver. In actual fact, the shareprice should have gone through the roof. The market was completely distorted and disorderly and still the LSE did nothing.

On the 22 Oct 2003, the company requested that the share was suspended, because the debtor disagreed with the amount of shares he was receiving. Very convenient for the MMs - in fact suspiciously convenient, because now the share was suspended, the MMs claimed that they could not deliver the shares. It appeared to be a convenient 'ploy' to force the market to wait until the dilution shares arrived and then these shares would be used to clear outstanding settlement obligations.

But there was a slight problem for the MMs and LSE (well more than one actually!). The PI shareholders were communicating to each other on ADVFN and other BBs and knew what was happening. We organised under one person (who happens to be an LGB shareholder) and when things were starting to move, I offered to take over - having had more executive experience.

Now, had the MMs completed their settlement obligations, the number of PI shareholders with notifiable holdings would have been enough to call an EGM and reverse the share dilution. Because we had not received our shares, we had been denied our voting rights.



The Action Group was very active in getting the LSE, the FSA and the media to focus on the case and we made a lot of noise in the press. In fact, because Langbar has lost more money, you've had a head start here.

The revised share dilution (30 million shares) took place on 2 Dec 2003 and triggered a Rule 9 takeover. This meant that all shareholders were eligible to the share offer. The problem (for the LSE) was that most of the 252% of shareholders had not even received their shares, so they were denied their right to partake in the takeover offer.

This is what forced the LSE down the route which will eventually lead to their being dragged into court on several very serious charges in the next couple of months. That is, if they don't make a settlement pretty fast.

Even though the Action Group had already requested a full conciliation between all the parties with the LSE/FSA acting as arbiters, the LSE refused. Instead, they came back with the Settlement Offer.

Now I could tell you the full history of this, as it has been subject of an official complaint against the LSE, but I will explain what the LSE offered.

The Settlement Offer was for anyone that had purchased shares from the MMs, but had not received delivery of them. The LSE/MMs/Brokers knew which transactions had failed and notified most (not all) of them by post over the Christmas period - except a few never received their notifications until after the Offer had already closed.

The Offer was two part. You could either take 11.2p per share or you could receive the price that you paid for the shares plus the dealing costs. The terms were such that if you took the money, you were surrendering all delivery obligations and rights (which our lawyers interpreted to mean all compensatory rights). The LSE stated that the Offer (and later on in letters and to the LSE Complaints Commissioner) was without prejudice to any legal rights. Later on the LSE took actions, which actually destroyed these legal rights to compensation. Thereby proving that the LSE acted in bad faith - Sec 291 FSMA.

The LSE declared that the valuation was by an independent third party. Now one would interpret this to mean that 'independent' meant not under control and that the 'third party' meant that the valuer was not of the LSE. But we later found out from the LSE Complaints Commissioner that the LSE had 'rigged' the valuation

Yes - you read it correctly they fixed the valuation unfairly. They gave instructions to the valuer that gave narrow parameters and guidelines within which the valuer had to determine the price. They did not give the valuer free reign to determine the correct and fair market price for the shorted shares - under the conditions of the short.

We believe that the valuer objected to this, as they requested that the LSE put it in writing. As the LSE did not give a letter of instruction on LSE headed paper (the instruction was verbal), they asked the LSE to sign a letter of engagement instead. Specifying the parameters that the LSE had Instructed.

When the valuer reported to the LSE, he made sure that the instruction was included in the report. We can surmise that the valuer wisely knew that there would be legal repercussions to this 'instruction' and that it was the wrong price. They obviously wanted to absolve themselves of any responsibility for it. The valuer spoke with the LSE Complaints Commissioner when he investigated the complaints against the LSE. This is text from the report:

"The independent valuers expressed to me the opinion that the short position in the market was so large that the act of buying shares to close the short position would have had a substantial upward effect on the companies share price, to an extent which he would have found it impossible to quantify. This restriction on the scope of the valuation was not revealed in any of the announcements made by the Exchange."

So in other words (and I'll make it large enough that the LSE can see):

The LSE cheated the shareholders out of the true market value

The LSE & FSA should hold themselves in shame and disgrace over this