Rsv Shareholder's Action Group

The time is approaching fast when both sides to this dispute
must realistically examine the strength of their arguments
and decide if they are ready to agree an out-of Court settlement or
ask the Courts to make rulings on the disputed issues. My understanding of
this complex sequence of events is incomplete but below I tried to make sense
of what appears to have happened :

It seems to me as an outside observer on the sidelines
that both sides have been playing a reckless game of chicken
by wild speculation in their share dealing. In its recklessness
it seems not too far away from the game of chicken one sees
in the movies where two contestants line up trucks on a straight
road and race towards each other in a daredevil game to drive
the other party off the road. More often than not, when such
perilous games are played both trucks end up upside down in
the ditch and nobody wins . That’s what happened when these
reckless gamblers clashed .
In the speculative frenzy of RSV share dealing in mid-October
the shareholders wrongly assumed that this game was to be
played fairly by Queens rules . They were probably aware that
massive short-selling was taking place but(the shares being so cheap)
thought that they could beat the short-sellers by buying up the
available pool of shares in the market and thereby putting the
short-sellers in a bear-squeeze , forcing them to close their
deals at a higher price to bring instant speculative profit to
the punters/buyers. They were so sure that this tactic would
work (on a level playing field it might !) that they were prepared
to buy shares at prices well above the likely intrinsic or
fundamental value of this company . Apparently they were
not aware , however, that the people selling shares to them
( whether real, covered shorts or naked shorts) were not on
the whole other traders but overwhelmingly ,as the trading
frenzy developed , the market makers themselves who
control the trading and the game . The punters speculation
was therefore futile and doomed to failure in the same way
that a gambler in a casino risks losing his shirt if he plays
against the casino (especially one controlled by the Mafia) .
The three market makers , led by the massively involved
Evolution Group , were equally reckless in their speculation .
They soon realised that the huge demand for shares on
October 15th etc could not be met by share sellers attracted
into the market at current prices . Theoretically they had three
choices choices , namely a) tell the brokers that the
buy-orders can not be filled (they rarely do that)
b) raise the offer price of the shares to attract more
sellers into the market or
c) issue and sell shares not yet in the market in the hope
of buying them later more cheaply to settle the deal .

They opted for option c) since their financial interest and
ultimately greed made that their preferred option . But selling
shares naked when there is such strong demand and no cover
is very risky since a buy-back later when a bear squeeze is on
would expose them to heavy losses. Yes, but only if they played
the game by ethical trading standards . No such losses were
likely, though , the way they had chosen to play the game .
They knew when the buy-orders were rolling in that they had
the punters on the rack since the game was all stitched up as
on many other previous occasions . As market makers they were
supposed to facilitate trading but loop holes in the City trading
rules allowed them to take on a trading position of their own and
generate IOU notes for non-existing shares . Ultimately these
would have to be converted but their exit strategy was already
in place . Through the Old Boys network and insider information
they probably knew that a City vulture , offshore-based
Chiddingfold , had acquired the company debt and was planning
a take-over which gave them decisive leverage to mount an
uncontested take-over bid for the cash-starved shell company .
The market makers actions aided that take-over . They
probably had contact behind Chinese walls with the vultures
(my speculation; no proof) which would ensure that shares from
later share placings in the take-over would roll back to them
for settling against fake IOU’s . Such horse-trading behind closed
doors , if it did take place, would make the market makers a
concert party in the company take-over battle.
The RSV company tried to come to an arrangement with the
new creditors . An AGM was scheduled for October 20th with
resolutions to accept two directors from Chiddingfold to the
RSV Board and issue shares to settle the debt. In the days
leading up to this crucial meeting the game of chicken reached
its climax . The market makers knew that share deals done
during 15/10 to 17/10 , followed by a weekend, could not be
settled before the AGM . This gave them carte blanche to set
the printing press for the IOU’s of fake shares rolling. So the
market makers managed to outsmart the punters. Instead of
being subjected to a bear squeeze , they themselves exerted
a bull squeeze sucking in the hard cash from the punters as
fast as the computers could issue the electronic IOU’s (very fast !) .
The more deals done in fake shares the better since with so
many shares just bought or just sold it left the majority of
private shareholders in limbo and unable to vote and affect
the outcome of a crucial AGM . Some tried, clutching letters
of representation from their nominee brokers , but the company
refused them access to the AGM and /or a vote if their holding
was not registered with the company registrar . They based their
decision on company law which had not foreseen an artifical
situation such as the exclusion of a majority of contracting-in
would-be shareholders and the inclusion of major blocks of
contracted-out ex-shareholders . The legality of the company’s
decision to exclude votes is now hotly disputed by both sides.

To secure their prey the vultures put the squeezers on the
company threatening liquidation proceedings . It seemed to all
go their way while the MM’s were counting their winnings, having
sold fakes to the punters for XX p (corrected; not sure of relevant price)
or more , while getting ready to
deliver the new diluted 1p shares when available at a large profit
in a blatant rip-off operation .
The take-over seemed in the bag, the cash leeched out of the punters.
That’s when the truck of the MM’s started to veer off the road.
The irregularities of the short-selling started to surface and the
shares were suspended on AIM on 22nd October . With the
shareholders feeling cheated and clamouring for their share
settlements , the squeeze reverted from the bull-punters to the
MM’s who were short of real shares and unable to settle as per
contract . When the Action Group was formed and the game unraveled
it became clear that the short-selling had been a bit too blatant .
More shares than ever issued by the company had been traded
in 2/3 days of trading frenzy . The media jumped on the bandwagon
exposing the scandal . The City regulators clearly also were
embarassed to see their regulatory failure exposed . They did ,
what they always do very well, i.e. investigate behind closed doors
and hope that public attention will move to other issues. They also
ordered the MM’s involved to settle with the shareholders to get
this out of the limelight . A compensation offer has been made
which one side considers generous and the other as totally
inadequate . Then , with a regulator investigation under way ,
excess share settlement incomplete, some private shareholders
disenfranchised and with AIM share trading still suspended the
company take-over by Chiddingfold was completed on December 2nd
by a debt for equity deal involving massive share dilution as
though normal
due process and market activity can continue in the midst of
all this turmoil . Then they renamed the company . Good as new. New
image . New game .
They even connived to award the lucrative share placement
contract to Libra Investments Ltd , said to be an associate of
Chiddingfold . All this right under
the noses of the regulators. To top it all they even discovered a
legal twist to allow limited grey market trading of shares
outside the exchange "floor" while normal share trading was still halted .
Talk of brazenness.
You have to hand it to them .
They got cheek . Pity that their moral perception of what's right
and wrong is not as sharp as their entrepreneurial acumen .
Meanwhile the game of chicken continues. The MM’s have set a
January deadline (take it or leave it) . The shareholders ably
represented by their “Union” RSV Action Group are threatening
Court action , stoking the media fires, pushing the regulators
and pulling all political strings available . Who will blink first
this time ? Who will end up in the ditch (again) ?
Having drawn first blood in the latest phase of this battle, the
RSV shareholders clearly think that they can extract a better
offer. My sympathies are with them , the underdogs in this
high-stake poker-game of financial brinkmanship. However,
I do hope that they are not silenced too soon by a higher offer
to shut them up . It is them who have done the hard work of
detecting the evidence of market abuse . They are the ones
keeping public attention focused on the LSE market defects .
While their fight continues there is a chance that the “ Grand
Auction of Fake Ostriches” in the City of London will finally
be stopped or curtailed .Similar abuse is probably widespread
but not quite so blatant and not so easily proven . The City
fraud squad (SFO) and the regulators of the FSA and LSE
have a unique opportunity here with such clear evidence available
to stop such extreme market abuse by the professional market
operators and discourage future repeats by decisive revision
of rules and imposition of penalties where appropriate . The
punters may have been unwise to engage in reckless gambling
(please forgive my frankness) but their gambling was permissible
while the market makers clearly crossed the line of legality . They
breached rules and professional ethics and their action tarnished
the image of the City as a trustworthy financial Centre worthy of
safely keeping investors funds. They misused the privileges
granted to them as market facilitators . They took major
positions and traded against the other traders instead of bringing
holders and buyers together for trading as is their primary
market function and duty . In my books such market abuse
amounts to fraud . If the LSE wants to clean up its act then
such fraudsters should be shown the red card .

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