The Mystery of the 22 Million Rangers Shares by Ecojon

The mystery of the 22+ million shares issued to mystery shareholders prior to Rangers Flotation and a question mark posed over how ‘public’ the issue is.

Well all the signs are that we’ll be getting more details of the Rangers AIM Flotation this week which hopefully will dispel the fog  created by a raft of contradictory statements surrounding it.

What seems extraordinary to me is that shares appear to have been  issued in advance of the flotation date. I don’t know a lot about public share flotations but I didn’t think you could buy and sell shares until they were actually floated on a recognised trading exchange.

Of course perhaps they haven’t actually been bought or sold and if that is the case I’m unclear as to how a Rangers director can quote a 50p to £1.50 range – but if they aren’t listed on an authorised public exchange does that mean they have been traded privately so set the price? All very confusing to a boy from the scheme like myself.

Charles Green and Imran Ahmad provided info to a meeting of potential Bear investors at Ibrox last week and the minute states: ‘22,690,000 shares have already been issued – these are with the initial backers (consortium). IA (Imran Ahmad a Rangers director and MD of Zeus Capital which is an investor in Rangers) estimates a further 22M+ in the next round.

‘The minimum investment is 500 shares. IA was asked what price will one share cost? He explained that a bunch were traded at 50p early on, and more recently 1M were traded at £1. He estimates somewhere between £1-£1.50 per share, it will be finalised when the value of the club is established’.

It is also recently a matter of public record stated by Green that he has Rangers shares.

Whether or not shares have already been sold it doesn’t feel right for people who are in possession of confidential company information to publicly release it when a flotation is imminent and I wonder if it could create share ‘ramping’.

I’m not suggesting for one moment that anything illegal is going on but I am aware that in the UK the definition of market abuse is wide enough to include unintentional violations and this would appear to be backed by the 2004 case involving Winterflood Securities, part of the Close Brothers investment bank, which was fined £4 million after the Court of Appeal noted there was no allegation that Winterflood or its traders deliberately committed an offence but their actions led to serious losses for investors and damaged market confidence.

Certainly all the recent feel-good statements from chico seem designed to ‘gonflez’ the Bears into buying millions of shares at £500 a throw to save their club.

Now I know chico has had previous problems with French and the meaning of ‘bigoterie’ and picked up a censure from the SFA on that one. So, I will help him this time and explain that the dictionary meaning of ‘gonflez’ translates as ‘inflate’ in English.

However, the colloquial meaning is nearer to ‘fill with hot air’ in a bid to gee-up someone and stiffen their backbone. A Yorkshire man like chico would probably translate that as being ‘full of wind & p*sh’ and I wouldn’t disagree with him.

However down to business. The official minute of chico’s meeting with the NI fans on 28 September 2012 stated:

‘2: Charles then brought up the question of Rangers Shares.

‘He explained that Rangers Shares will ONLY be available direct from Rangers F.C. They will be sold at first to Rangers Fans and Rangers Fans only, as in Season Ticket Holders registered Supporters Clubs and Members of the Rangers Family. No other option for buying shares will be available’.

However the Daily Mail reported on 28.09.12 Green stating that the group who could buy shares is: ‘Existing season ticket holders, former shareholders, former bond holders, employees and members of the fans’ groups. They are the only people – other than institutional investors – who will be allowed to buy shares’.

So the offer was either immediately extended from ‘The Rangers Family’ to include ‘institutional investors’ possibly because someone remembered the 22.269 million shares already issued – some perhaps held by institutional investors like the mystery company behind Blue Pitch Holdings which has a 23% stake in Rangers from cash provided by mystery investors. But perhaps chico forgote to mention the ‘institutional investors’ who currently hold 100% of the shares issued to the Ulster Bears.

But bigger shocks lay ahead for the ‘Rangers Family’. Within a week of his NI trip with Imran Ahmad, chico held a meeting of fans at Ibrox and the minute states:  ‘There would be an order of priority with the offer, in the first instance, current season ticket holders and old shareholders will be offered first dibs, then after that it would be open to the public’.

So at long last all is actually revealed which is anybody, even a Celtic fan, can buy shares in Rangers 🙂   Personally all I have to say is: ‘Thanks, but No Thanks’.

I have confessed confusion about shares apparently being issued before the Rangers Flotation and have had a look at the AIM Regulations – such as they are in a largely self-regulated market.

UK law on public offers of securities is governed by the Prospectus Rules published by the Financial Services Authority which, among other things, determine whether a proposed AIM fundraising will constitute an ‘offer to the public’.

Broadly speaking, it seems an offer directed at no more than
100 persons or to ‘qualified investors’ will not be an offer to the public under the Prospectus Rules. And, indeed, most IPOs on AIM
are structured as placings to institutions and possibly a small number of non-qualified investors, so that the fundraising is not an offer to the public and the invitation to subscribe for shares falls within exemptions to the FSMA restrictions on financial promotions.

It is worth remembering that an AIM Company has:

* No minimum market capitalisation
* No trading record requirement
* No prescribed level of shares to be in public hands
* No prior shareholder approval for most transactions

As AIM is designed for smaller, growing companies, there are no requirements in the AIM Rules for a prospective company to be of a certain size, or to have an established trading record.

However a strong AIM candidate would be expected to have:

* A record of sustained growth over at least three years – Ah that History could be a problem!
* forecasts that show sales continuing to grow
* A record that compares favourably with its peer group – What is the Peer Group? Is it the Champions League or SFL3?

The primary reason for most businesses considering an AIM  flotation is to raise capital for expansion and well-recognised that for shareholders seeking to realise their investment, a trade sale or sale to an institutional buyer or a management buy-out team may well be a better solution.

Whilst AIM is an effective source of capital for smaller companies, finance may also be available from private equity providers, possibly on better terms than would be available through an IPO on AIM. I suppose that we get back to the main question and that is why does chico feel a flotation is necessary and what exactly is the capital raised going to be spent on.

I have never ever seen that spelt-out by chico or his mystery shareholders and I keep wondering whether the main effect of the flotation will be to allow the existing holders of the 22+ million already issued shares to exit their holding and for chico to pick up his 10% commission check on the flotation and leave as he has always said he would ‘when the job is done’. The problem is no one seems to know when he considers the job will be done.

I note that very recently chico has stated that he actually has some shares although the number hasn’t been revealed but then that could be a good things as it could ‘lock’ him in for 12 months after the flotation. Of course that requirement apparently can be waived if ill-health strikes and I don’t mention that because chico is getting on a bit and has been talking about retiral recently.

No it’s more to do with the fact that lightning can strike in the same place more than once as chico knows with the personal  experience of his business associate Paul Fraser, chief executive at middle east developer Panceltica – which only lasted 18 months before its AIM listing was cancelled after investors lost £ tens of millions – chico had been deputy chairman at Panceltica and also a director at the Royal Haslar Hospital development, where Fraser also put in a brief appearnce, prior to his ill-health and where all work now seems to have ceased last time I heard.

Generally all new applicants to AIM must produce an ‘Admission Document’ which provides certain specific info and carries a duty of disclosure.

I have selected a few items almost at random:

1) History of the company – well there we go again with that history bit.

2) Historical financial information relating to the company and its subsidiaries – usually audited accounts for the last three years, or a shorter period of time if the company has been in existence for less than three years.  Now that might be a tricky one  🙂

3) Information about share capital, including rights attaching to the shares and authorities to issue

4) Directors’ interests in the company, directorships of other companies and involvement in previous personal or company insolvencies

5) Name of any person who, so far as the directors are aware, holds an interest of 3 per cent or more in the company’s issued share capital, and the level of that interest

6) Any ‘lock-in’ statement required by the AIM Rules or the Nomad

7) Terms and conditions of any offer for the sale of shares

The general duty of disclosure required by AIM Rules requires the company to ensure the Admission Document contains ‘any other information which it reasonably considers necessary to enable investors to form a full understanding of:

* The assets and liabilities, financial position, profits and losses, and prospects of the applicant and its securities for which admission is being sought;
* The rights attaching to those securities; and
* Any other matter contained in the Admission Document.’

I will finish with the usual Health Warning, loosely-based on Newton’s Law, for those who fancy a spin in the AIM casino:

‘What goes up can also burn a hole in your wallet’ 🙂

Posted by Ecojon