On 19th October 2012 Charles Green, at that stage Chief Executive of The Rangers Football Club Ltd, agreed to transfer 714,285 shares owned by him to Laxey Partners Ltd once free to do so.
Under the terms of the lock-in agreement entered into by Mr Green with Rangers International Football Club PLC (RIFC) on 7th December 2012, Mr Green cannot transfer shares before 7th December 2013, without the consent of RIFC’s NOMAD, Cenkos Securities plc, other than in limited circumstances.
Some questions arise from that announcement.
How Can Someone Sell Shares in a Company Which Does Not Exist?
On 19th October 2012 there was no RIFC in existence. The share flotation was still almost two months away. Mr Green was facing another intervention by Craig Whyte, claiming he was responsible, rather than Duff and Phelps, for finding Mr Green as a buyer for Rangers.
Mr Green was also very busy at the time promoting the share sale, and announcing, on the day before the agreement, that over £17 million had been pledged in relation to the share issue.
But how, one might ask, could Mr Green reach an agreement to sell almost three-quarters of a million shares in a company which has not yet been incorporated?
There are two ways in which it could be done, I think.
Firstly, and most simply, the deal was agreed as stated in the announcement – namely that Mr Green agreed to sell over 700k RIFC shares, on the expectation that the share sale would proceed.
Secondly, the deal could have been one related to shares in The Rangers Football Club Ltd and when these shares were converted 1 for 1 into RIFC shares, the rights of Laxey Partners changed over to the PLC.
One wonders what price Mr Green is being paid for them. Is it market price as at date of sale? Or as at the date of agreement? Or at an agreed premium over what Mr Green paid for them? Hedge funds are not known for their charity – the acquisition of this part of Mr Green’s shareholding will be at a price which suits the buyer.
Mind you, it is only about 1% of the share capital which Laxey Partners are going to acquire, and still leaves Mr Green with over 4.25 million shares.
Why Announce the Share Sale Now?
As I have discussed here before, there are various duties incumbent on PLC directors regarding publicity. Normally any dealings in a PLC’s own shares by a director have to be publicised. Otherwise there could be risks of “insider dealing” and use of “inside information”. Directors’ dealings could affect the share price.
So how does the timeline work here?
When the deal was agreed, RIFC did not exist, so there could not possibly be a need to announce it in October 2012.
The deal was not announced in the Prospectus.
It has only been publicised, not when the sale takes place, nor when the intended departure of the CEO, Mr Green, was announced, nor when the sale is actually completed.
Instead RIFC have announced it now.
Should This Have Been In the Prospectus?
Here is what the Prospectus had to say, on Page 82, para 1.4, about outstanding deals which the Directors might have had at the time of the flotation:-
None of the Directors has, or has had, any interest in any transaction which is or was unusual in its nature or conditions or which is or was significant to the business of and which was effected by during the current or immediately preceding financial year or which remains in any respect outstanding or unperformed.
Maybe I am reading this too simplistically – but if Mr Green had agreed to sell 1% of the share capital of the soon to be floated company and the sale could not be completed until a year after the flotation – surely that is a “transaction which remains in any respect outstanding or unperformed”?
Now, it is unlikely that anyone will claim that the unreported sale agreement made any difference to decisions to invest or not, yet that is not really the point. There is a reason why the Prospectus runs to 122 pages. There is a reason why it is packed full of legal jargon – there is a reason why there are legal qualifications, disclaimers and exclusions.
The document matters, and what it says is important. Accuracy is required, both by good practice and by law.
Surely the fact that the person who is to become CEO of the company has already agreed a sale of 1% of the share capital is of enough importance to get a mention in the Prospectus, or at least to be mentioned at some point before the CEO has actually left?
Maybe someone should ask the NOMAD, Cenkos Securities, when they knew about Mr Green’s deal?
What about the Rumoured Sale by Mr Green to the Easdales?
The Easdale brothers are looking for a place on the Rangers Board. The EGM, now delayed for negotiations, was requested to place one of the brothers in the Blue Room.
This was on the back of the reports that the Easdales were buying Mr Green’s shares.
So – has Mr Green agreed a sale to the Easdales?
If he has, why has this not been confirmed in a Stock Exchange announcement?
If he has, what is the difference between the sale to Laxey Partners, and the sale to the Easdales?
As far as the rumoured sale to the Easdales goes, are they aware that they are not getting Mr Green’s full 5 million shares?
What sort of deal has he got from them – better or worse than that from Laxey Partners?
What About the Rest of Mr Green’s Shares and Those of Mr Ahmad?
There are 6.5 million shares in the name of Messrs Green and Ahmad, apart from those in the sale to Laxey Partners. One assumes that Green and Ahmad would be looking to sell. Two shareholders who, between them, hold 7% of the share capital form an important bloc, and provide people who want to expand their influence in the PLC a “one stop shop”, whether that is the Easdales, or Dave King or someone else …
Posted by Paul McConville