None of what I say below is share advice. It is merely comment and no one should base their investment decisions upon it. If they do, then they are daft.
I put the word loss in inverted commas above because often it is only a paper loss, seen with the benefit of hindsight. Often it is more properly thought of as an abortive gain, which disappears because the investor does not cash in their shares at the right time.
In practical terms a shareholder’s net worth might reduce as a result of falling share values but until they cash in and sell up, the loss does not become concrete.
In addition, even where a share price is at a certain level, there are situations where the mere act of selling or trying to sell one’s shares would itself depress the share price.
After that preamble, let us look at Rangers International Football Club PLC.
Its shares reached their highest price on 27th December 2012. On that day the price reached 95p per share. That was not the closing price and the highest closing price was 94p on 2nd January 2013. However, at some point on 27th December the shares reached their highest value (so far).
RIFC PLC’s biggest shareholding is in the hands of Mr Charles Green. He has 5,071,629 shares.
At the exact point on 27th December his shareholding was “worth” £4,818,047.55.
Today saw the lowest closing price for the shares – 65.9p.
At that his shares are “worth” £3,342,203.51.
A paper “loss” over 3 1/2 months of £1,475,844.04!
Should Mr Green and the Board decide that his time there should end, then his share lock-in may be released.
However, the arrival on the Stock Market of 7.79% of the issued capital, coupled with what might well be the messy departure of Mr Green and possibly Mr Ahmad (although no wrongdoing is to be taken as having been committed by either of them), and rumours of uncertainty about the financial position of the company (which are clearly without foundation due to the highly successful raising by Mr Green of £35 million for the team – as described by Mr Ahmad in the press today) would likely lead to the share price plunging further.
On the principle of an “ill wind” however, if someone wanted to acquire a lot of Rangers shares, then next week it might be possible to do so at a fraction of what they cost at the float and at even more of a discount from the high water mark just after Christmas.
Mr Ahmad too is a major shareholder with 2.2 million shares making up 3.38% of the capital. His holding has gone therefore in value from £2,090,000 at its peak to £1,449,800 – a paper “loss” of £640,200.
Mind you, as Mr Green might point out in his no-nonsense manner, bearing in mind how much he invested, and how much he has been deservedly paid for his sterling efforts, he would still come out with a very healthy profit for a year’s work if he were to go now, having done much to stabilise this great Scottish institution.
Posted by Paul McConville