Furious Plus shareholders claim management have misled the market

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Shareholders in Plus Markets, the embattled junior stock exchange, say they feel misled by the company’s management over its financial health. The comments come amid growing investor anger over the proposed sale of the stock exchange to interdealer broker Icap.
Furious Plus investors claim they were ‘misled’

Plus Markets announced it was winding down on May 14 after a formal sale process, announced on February 3, failed to produce a deal. Following the May 14 statement, interdealer broker Icap emerged as a bidder for Plus SX, the company’s stock exchange business which principally comprises its recognised investment exchange license that allows it to list companies and products. On Friday May 18 Plus announced that it had entered into an agreement to sell the SX business to Icap for £1.

Speaking to Financial News, Richard Jennings, a private investor with a 2% stake in the company and editor of Spreadbet Magazine, said: “There is no doubt that the management categorically misled the market as to the finances of Plus Markets. At the time of the announced sale there was no mention that the company was running up against its liquidity buffer and that it would be forced to shut down if a sale was not successful. In an announcement in December the company said it was recruiting.”

Simon Chapman, a private investor with a 3% stake, said: “From my point of view, I am furious with the Plus board for misleading the market about the health of the company. The first indication we got that Plus stock exchange was in trouble was the regulatory news service on 14 May announcing that it was being wound down. The regulatory news service on February 3 announcing the formal sale process included no warning that Plus stock exchange was at risk if the process were to be unsuccessful. In that regulatory news service there was no mention of looming closure and no mention of any risk in earlier (or subsequent) announcements either.”

A spokesman for Plus Markets said: “We refute the comments and will reply formally by regulatory news service.”

The deal – which will see the executive directors walk away with £423,000 in compensation between them, in addition to six months’ salary, according to a circular issued by Plus Markets on May 31 – has provoked anger among several shareholders, who claim that the Plus Markets’ management ought to have informed them prior to May 14 that the company would be closed were a bidder not found.

Chapman and Amara Dhari Investments, Plus Markets’ second biggest shareholder with a 17.23% stake, jointly filed an ordinary resolution this morning with the company’s chairman calling for the removal of Cyril Théret, chief executive of Plus Markets. An ordinary resolution is the means by which a director may be removed under UK companies law. The motion must be passed by 51% of shareholders.

In the resolution Chapman and Amara Dhari said: “We are…concerned that Mr Théret did not see fit to alert shareholders in advance of the formal sale process or upon its commencement, that there was a clear risk that Plus-SX would have to be wound down if the sale process were unsuccessful”. Calls to Théret’s mobile were not returned.

The resolution added: “We believe that this risk must have been apparent to Mr Théret on or before the date of the formal sale announcement on February 3, 2012 and yet that regulatory news service failed to mention the risk.”

The resolution, which has also called for the removal of interim chairman Malcolm Basing, said that the message published by Plus Markets on February 3 gave the “clear impression that the formal sale process was a process to grow the company rather than one which, as subsequently became clear, was a final throw of the dice for a company which could not survive without a takeover or cash injection”. Attempts to contact Basing were not successful.

Alan Barker, another private shareholder, told Financial News: “What went from ‘SX is losing money and we’re devising new revenue streams’ quickly became ‘we’re selling the business’. There is too much unexplained.”

On December 29 the company reiterated its commitment to its fledgling derivatives business and said it intended to recruit further staff in that unit. Jennings said that this message effectively created “a false market in Plus Markets shares between December and May 14”.

Plus Markets has been loss-making since its inception in 2005. The company undertook a strategic review in February 2010 and in the following August said that it had two years of working capital left and that it was looking to increase revenues in order to break even by summer 2012. A source close to the situation said: “It’s therefore clear that if they did not achieve increased revenues they would run out of money by August. The company’s cash position was clear.”

Chapman, Amara Dhari, Jennings and Barker have said they plan to reject the Icap bid at a meeting on June 18, despite a statement released by Plus Markets on June 1 favouring the Icap proposal. Chapman said yesterday that he believed small investors accounting for over 40% of the company’s equity indicated they also planned to reject the deal.

Some shareholders hope that rejecting the Icap bid will force the management to fully explore a counter-offer made by Dubai-based Gulf Merchant Bank on May 31.

Speaking to Financial News on Friday, Spencer Wilson, a representative of Amara Dhari, a Middle Eastern investment syndicate and second-largest shareholder in Plus Markets with a 17% stake, said: “I see no reason to vote for the Icap bid.” He added: “I continue to be shocked and disgusted at the way the management has run the business and I am surprised they have the gall to accept enhanced pay packages and that the directors won’t waive their fees. They have spent £1m on professional and financial advisers to sell the exchange for a £1. I don’t know how they can face shareholders.”

Jennings said: “If Icap want Plus SX and it is clear that it has meaningful value to them, then they should pay fair value. There is no incentive for shareholders to vote this through and it looks almost certain that it will not be.”

Icap declined to comment. However, one source close to the situation said that the payment of a £1 did not reflect the broker’s full investment since it will be forced to spend around £6m recapitalising the stock exchange.

—write to michelle.price@dowjones.com


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