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

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165 Comments

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165 responses to “The Mystery of the 22 Million Rangers Shares by Ecojon

  1. Brian J

    Chico is once again being disingenuous in the extreme. He is selling this to the fans as an opportunity to invest in their club. When it suits his purpose he is content that the club and the company are one and the same. When it doesn’t suit his purpose he is at pains to distance te two as entirely separate entities. The truth is that what he is offering here is a chance for the fans to invest in his company not in their club. Those who invested in oldco found that out to their cost.

  2. ecojon

    WORKING CAPITAL

    In accordance with the AIM Rules, the admission
    document is required to contain a statement from the
    company’s directors as to the adequacy of working
    capital. This statement, which must be clear and
    unambiguous, requires the directors to confirm that
    the company has sufficient working capital to last at
    least 12 months from the date that it is admitted to
    AIM. The wording of the statement can vary but is
    typically phrased along the following lines:

    ‘The directors are of the opinion, having made due
    and careful enquiry, that the company and its group
    has sufficient working capital for its present requirements, that is for at least 12 months from the date of admission.’

    This working capital statement is considered one of the
    most important statements made within the admission
    document. Furthermore, the requirement for this
    statement to be made after ‘due and careful enquiry’
    places a relatively onerous burden on the directors.

  3. ecojon

    BUILDING THE STORY – FROM AN AIM HANDBOOK

    It is stating the obvious to say that companies need to have a strong credible story, but the story needs to be just as compelling to an investor as it does to a journalist, and the two audiences often view AIM
    companies in different lights.

    Journalists, analysts and investors will look for the positive core story but they will also be sceptical. In smaller AIM companies, a journalist often takes on an investigative role and becomes less of a reporter and more of an investment adviser. He may pick up on issues that matter less to an analyst but could detract from the core story.

    Good communications around the IPO becomes as much about anticipating questions and having robust answers as it is about the overarching narrative. The company should start by thinking about how the story might be heard in the newsroom and on a trading floor. When the correspondent has one minute to pitch his story to the editor in morning conference, what angle will he take to make the story a ‘must read’.

    And when the analyst briefs his sales desk, what will they say when they pick up the phone to their clients? The equity story will focus on the growth and the ‘uniqueness’ of the company. It may be the appeal of the sector in which it operates that makes the equity story attractive.

    One PR issue specific to AIM is that small companies often come with big personalities and as a result, the track record of the company and its
    management will be closely scrutinised. This may be the case, but it shouldn’t detract from the core story although it may be an issue to be managed.

    Part of the story is the management’s track record and conviction. Are you committed to joining AIM and are you ready for the new levels of transparency and disclosure? We have seen executives hesitate at this
    question or talk about other options and it looks awkward.

    Having the mindset to embrace transparency and governance as a public company is a giant step in the IPO process. If a journalist believes
    market conditions to be difficult and receives a less than confident reaction to the question, his confidence that the float will be taken up at the right price will evaporate and he is likely to find that a story in itself.

  4. Chris_gretna

    I cant see the flotation not happening. raising some money,mainly from Rangers fans. Which institutional investors see it as a “safe “long term investment is harder to fathom.Mike Ashbey has been frequently mentioned,his policy at Newcastle seems to have been balance the books,rather than massive cash injection.The fact that some of the money is for working capital tells its own story. I hope it all works for Rangers fans but like a good many non rangers supporters i CAN see the woods for the trees

    • ecojon

      @ Coybig

      Check the comment: Also worth noting, from an investor perspective, is the fact that Rangers Football Club Ltd has no corporate history whatsoever. The club may have been founded in 1872 but the company it has hermit-crabbed into has only existed since May and has never published a single page of accounts.

    • Coybig,
      That article sums the deal up nicely

  5. A few points if I may. Raising money to finance working capital is not a bad thing, if that working capital is used to expand the business as is the objective of most companies seeking a listing on AIM. The prospectus needs to be clear on what that expansion is, otherwise those concerned that it will just dribble away as running costs will have a point.

    If it is the intention of Rangers not to seek re-entry to the SPL, that needs to be covered in the prospectus.

    The risks section of the prospectus will need to be long and comprehensive and cover HMRC, D&F, BDO risks including the sale of assets points. If it is so comprehensive it will rule out anyone who invests with their head. That leaves only heart. The ordinary supporter is being asked to have an act of faith in something they don’t really understand and we all know how that usually turns out.

    It has been said that Mr Green is the only game in town, but is he. Rangers could get rid of Ibrox to Tesco, ground share with Partick Thistle or Queens Park (more likely given their support) and rise like Ross County and ICL through the divisions. They could bring on what look like a great group of youngsters and eventually build a new ground in Govan. It would take a while, but think how worthwhile it would be. And, it could be owned wholly by the supporters. Fanciful maybe; but possible.

    • ecojon

      @ Violet Carson

      What a helluva lot of sense you talk and if they got rid of the baggage as well then I would actually pay money to see them when Celtic visit at some stage in the future when the current circus has rolled outa town looking for new investment opportunities.

    • Wow – i like ur style …why has noone advanced this scenario before !? fans of the former Rangers could forge a new history and walk tall –
      If they dropped their historic reactionary stance to all things Irish and Celtic and accepted their predicament , concentrated solely on football and dropped the politics. They could consider themselves rehabilitated and be proud of their team. Scottish football would be better for it. it does sound a little too good to be true but one can dream.
      .

  6. COYBIG

    EXCLUSIVE! EXCLUSIVE! EXCLUSIVE! EXCLUSIVE! EXCLUSIVE!

    Here at Yorkshire Ripoff Daily, we pride ourselfs in getting you, our readers, the very best exclusives. So, throught one of our ‘insiders’, we have managed to get a copy of the front page of The Rangers Prospectus for their upcomming share issue:

  7. mcfc

    Financial observers have already labelled Green’s Snake Oil sale as “not for profit”, strictly “only for fans”. With further caveats about many unanswered questions.
    Pritchett was able to paint a strong narrative in about 100 words. Green has come nowhere close to a narrative in 100,000 words so far. I may be wrong but I’m expecting the disclosures to be minimal.
    Who would underwrite such a venture? The shorters are circling already.

    • ecojon

      @ JimBhoy

      Ah don’t blame the Zombie maself – ah mean has naebody told ra poor demented craitor that Rangers can’t play at Parkheid any mair?

      Still good result in terms of sanity especially with the doctoring of the evidence and despite my own personal thoughts on the matter 🙂

  8. Davie

    Rangers give rangers fans the right to buy shares at a reasonable rate over a period of time please this will be an offer taken up by most fans as well as myself don’t bloke us out

  9. Davie

    Rangers will alway be a great club to follow and will never lose its followers as a name to me it Will remain Glasgow Rangers the teddy bears of ibrox

  10. mick

    there there davie dont worry everything will get better

  11. Pingback: Ship of Theseus seeks flotation | FT Alphaville

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