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Using the services of their 3 PR firms and 2 brokers, no doubt, the wretched directors of AIM listed Lighthouse Group (LSE:LGT) has issued another statement imploring shareholders to support plans for a de-listing. A proposal that has caused the share price to plunge. Remember these swine need 75% support. I reckon that they are worried and fear defeat. If the proposal is rejected as it should be, an honourable board would step aside. This s not an honourable board but their hand could be forced.
Today’s statement contains nothing much new. The company says it will arrange for a matched bargain share dealing facility post AIM. That is no good. All that facilitates is directors offering to buy stock for peanuts and having a facility to do this as increasingly desperate shareholder give in and sell. This is a mechanism for a cheap partial MBO ( i.e. directors increasing their holdings, these guys are too cheap to launch a full bid) not a liquid and proper market for the shares.
The board gives three reasons for de-listing:
1 The conventional attractions of being admitted to trading on AIM (such as raising funds and using quoted shares as currency) have not applied to the Company for some time and are not likely to in the short or medium term.
2. The Board believes that the perceived value of the Group imposed on it by its stock market listing does not reflect the true value of Lighthouse, and distorts the relative value of the Group compared to unquoted comparators.
3. There is currently considerable negative sentiment in the financial services industry in general, and for IFA groups in particular, and the Board does not expect this to improve for some time.
Taking these points in order. 1. So what? Your company does not need to raise cash it has £11 million in the bank. There is the attraction of allowing investors who the board persuaded to buy the shares (using 3 PR firms, commissioning research , etc) the right to buy and sell. That is treating shareholders fairly in the same way the FSA expects Lighthouse to treat its customers. 2. So what? Are we demanding that you realise value by a trade sale or make acquisitions? As a vendor I’d rather have quoted paper as a currency anyway. 3. Yes and post RDR this will dissipate. Indeed as we well know big groups like Lighthouse will win from RDR as small groups are squeezed out by increased regulatory costs. The directors are using this bad sentiment to scare shareholders into a de-listing which will allow the directors to reap the benefits of life post RDR.
The cost of being on AIM ( if you do not piss money away on numerous advisors as Lighthouse does) can be as little as £150,000 per annum. The company generated an EBITDA of £1.6 million last year even after a 5 man board snaffled more than £1 million.
The statement reiterates that Lighthouse is profitable and cash generative. In other words this is not about “saving the company.” The directors say that some have alleged that the delisting is a ruse for them to take control of Lighthouse. I do not think that is what anyone is saying. We critics merely say that we reckon that post delisting directors will buy shares at dirt cheap levels and will continue to show scant regard for shareholder value when it comes to eating all the pies (i.e. paying themselves very generously). If anything I expect this to get worse.
There is no mention in the statement of maintaining the dividend let alone re-investing the savings from de-listing in an enhanced dividend.
There is nothing in today’s statement to change my view. If anything the innuendo and confirmation that Lighthouse is trading well makes me more certain that this de-listing is an appalling idea and is the in the best interests only of the directors not of shareholders. It can be rejected if shareholders stand firm and ensure that they send in proxy votes for a NO vote for the EGM on 31st July. Better still attend in person and demand that Chairman David Hickey stands down with immediate effect and that former CEO Allan Rosengren be brought back and gives a commitment to curb PLC/boardroom costs and to use the savings to more than double the dividend.
It can be done. The Lighthouse board sucks. They know that shareholders know they suck and they are panicking. Stand firm. And Allan Rosengren, I know you are reading this it is about time you ( as the owner of 14% of the equity) made a public statement that you will vote no on July 31st.
