frusset
08 Apr 2018
Re: Looking back "For us investors, there must be valuable lessons to be learnt from this story, of which I have not followedI am wondering what they are..."It's already been said that you shouldn't invest in something just to reduce tax, e.g. investing in an AIM stock to avoid inheritance tax. It should look like a good investment even without the tax benefit.There's a good piece in the latest Investors Chronicle titled "The warning signs that Aim investors can't afford to ignore", by Chris Boxall, a co-founder of Fundamental Asset Management. FAM exited CVR due to some warning signs. I don't want to give all of them away, but two concerned changes of policy. One departure was to grow through aggressive acquisition, following a lack of growth through the retail franchise operation.Chris doesn't use the term "competitive advantage" (which I commented about earlier), but if the original business had one, it would have grown market share. I mentioned Accrol's lack of competitive advantage in my previous comment. Chris's article mentions that the risk section of Accrol's AIM admission document includes the risk of parent rolls going up in price and affecting the business. If I'd bothered to read the document and seen the risk, it would have confirmed my suspicion that the business lacked a plausible competitive advantage, that would have given it some pricing power. A related point from Chris is that mature safe-looking businesses can be very unsafe. Also see "Private-equity backed listings underperform rest of IPO market" [link] think if you want safety you should avoid acquisitive companies that pile up debt, though I suppose most won't be as inept as CVR about managing the cash flow. I think avoiding companies with lots of debt can be tricky because ones in safe industries like utilities tend to compensate by piling on debt to juice up returns, while a recruitment company (for example) holding a lot of cash is likely to be doing so because the business is highly cyclical. You want a strong balance sheet relative to the company's risk, and it helps if there are grounds to believe management will keep it that way.The previous paragraph isn't as relevant if you're investing for growth and accepting risk. Back in US history, Rockefeller took on a lot of debt, but he had a big competitive advantage, using all the fractions of crude oil when small operators extracted gasoline and dumped the rest. The Greek shipping magnate Aristotle Onassis used "other people's money", and said he only put his hand in his pocket to scratch his b***s.Maybe some investors shouldn't be picking stocks (megaloss made a similar point). I believe there are strategies with a reasonable chance of beating the market. One is to invest in a low-volatility ETF, if you can find a good enough one. Possible problems are, It isn't absolutely certain that low-vol will continue to outperform (in the long run), most of the research on low-vol is US-based, and the choice available in the UK for factor-based ETFs isn't as good.
Fokisi
08 Apr 2018
Bibendum shareholders, with hindsight Just for my interest, how have former Bibendum shareholders fared in in this debacle?Not such a wise move to have taken Diana Hunter's purchase offer?
megaloss
07 Apr 2018
Re: The carcrash is over - shareholders ... I don't think you should feel too badly for private investors, meanbugger. Yes I lost 2/3rds of my investment in this and was lucky to sell out before suspension, but we all go into these things with eyes wide open. It was a small percentage of my portfolio and anyone who lost more than that should have been sticking to unit trusts, frankly..I will be more careful in future to invest only in the businesses I really understand. I am really happy that at least the employees' livelihoods have been safeguarded by this rescue and that a safe set of hands seems to have been found, I'm an enthusiastic consumer of the craft beer products in my local Wine Rack and the kids working there deserve to be treated properly..let's all learn and move on..FSA enquiries won't tell us anything we don't already know, the ex-Board of Conviviality are probably pretty well unemployable now anyway, surely?
Meanbugger
06 Apr 2018
Re: The carcrash is over - shareholders ... As expected Bestway have bought Bargain Booze for an absolute song. They were by far the most suitable purchaser with the management to handle such an extensive operation. From an industry point of view C&C and Bestway are much more responsible homes for £2 billion of turnover than Conviviality's management.Tiger you say the big investors have taken their eye of the ball big style. I would argue that the big investors - the Schroders and the Blackrocks generally gave this a wide berth. As a consequence the shareholder list was mainly inheritance tax planning portfolios who thought they were being risk averse and probably didn't look too hard under the bonnet. I feel for the private shareholders who've lost money here. It just shows that having a better quality NOMAD and institutional shareholders (although not the top ones) is no protection from a corporate disaster.
CASTLEFORD TIGER
06 Apr 2018
Re: The carcrash is over - shareholders die,... I agree and add as follows.........Why did they need 125m ?What were the Auditors doing ?we spent 260m on 4 companies and sold it all for £1.00 plus 100m of debt.That pays the bank off.Then we sell the entire retail division for 7.50 mRemember this company was just a month ago making 55m EBITDA.Clearly this has been a shocker as no controls were in place. Problems must have been there as nothing unwinds so fast.The big investors have taken their eye off the ball big style. The BOD Were at best incompetent.A full enquiry is essentialTiger
pyueck
06 Apr 2018
The carcrash is over - shareholders die, the company lives You can see why the fundraising wasn't backed. They bought the company for £7.5m from administrators! Probably just about enough to pay PWC's fees for an afternoon's work as administrator. Shareholders won't get a penny. What a right royal mess.This is a prime lesson is how shareholders can get absolutely destroyed, while the directors, advisers and luckily staff get their pockets lined. Luckily I wasn't in this but if i was i would be sicker than after Carillion. At least with that you can tell yourself you should have seen it coming, with this it's happened so fast and it's still not really clear what happened. Went from a decent company, paying dividends to suddenly saying their accounts were not worth the paper they were written on and that they needed bucketloads of cash to stay afloat.Personally I think this company just had a cashflow issue, but because this was at the same time as they admitted their controls were useless, nobody could trust the numbers enough to give them £125m of their cash. So the end result is probably somebody has bought a decent business for next to nothing from shellshocked shareholders.
Up in Smoke
06 Apr 2018
bestway-snaps-up-bargain-booze-gbp75m-deal-conviviality [link]
Meanbugger
06 Apr 2018
Re: Looking back/we have been shafted Tiger, what puzzles me is why the board didn't realise cash was going to be tight and look to raise some extra funds when the share price was buoyant. I know it would have been earnings-dilutive replacing cheap debt with more expensive equity but it's better to be pro-active rather than waiting until it is too late. I can only conclude that the board and finance department were totally clueless and blinded by the strength in the share price and the value of their options.I think the reason there weren't any profit warnings for shareholders was because the board didn't realise what was happening. I can't see how the FCA can be expected to protect shareholders from management who are asleep on the job or from businesses with vicious swings in their peak cash requirements.
Meanbugger
06 Apr 2018
Re: The future? In the past I have made negligible value claims as soon as a company has gone into administration or receivership with no prospect of a return to shareholders and HMRC has accepted the claims. When a company is dissolved then it is a disposal and you cannot make a negligible value claim thereafter. HMRC produces a list of stocks with accepted negligible value status but there is nothing to stop someone claiming for a stock before it appears on this list. I'm not a shareholder in Conviviality however if I was I'd definitely be claiming negligible value as at 5/4/18 for the tax year just finished unless it turns out there is a prospect of some payment to shareholders. [link]
CASTLEFORD TIGER
05 Apr 2018
Re: Looking back/we have been shafted Simply put we have sold 2 companies bought for 250m plus for just £1.00They have taken on 102m of debt so I guess that's the true price ( secured via bank)That's not a sale its a friggin give away.T/O of over 1 billion given away.Shambolic.Remember company had no more than 150m of debt. Probably all secured.A right royal shafting.No warnings severe enough to sell. by the time that came shares were suspended.You live u learn but the directors want hauling before the FSATiger
schwee
05 Apr 2018
Re: The future? Meanbugger,I am not sure you are correct about CGT. Methinks negligible value status is only given by HMRC when a company is struck off the Register, and this only happens when the Administrator has distributed any available funds to the creditors. Even then the Court has to give a tick in the box. All this takes time.
Fokisi
04 Apr 2018
Looking back For us investors, there must be valuable lessons to be learnt from this story, of which I have not followedI am wondering what they are...
Meanbugger
04 Apr 2018
Re: The future? I'm thinking that we might get a statement tomorrow saying that based on the indicative offers for the retail businesses there is no realistic prospect of any return to shareholders. This would allow the shares to be treated as valueless for capital gains tax for the tax year ending tomorrow. It's of no benefit though to those with the shares in a SIPP or an ISA. Alternatively if they are not in a position to say that tomorrow then there might be an outside chance of a penny or two for shareholders. It's in no-one's interests to allow this to drag on so I'd expect the retail businesses to be sold rather being put into administration.
TX2
04 Apr 2018
Re: The future? Sadly not good for shareholders here as sale of trading companies to C&C has gone through & administrators will have been appointed to unlisted holding company .I expect work is going on to salvage the retail business via a buyer.
Fokisi
04 Apr 2018
The future? Excuse my ignorance...What is the blunt reality for existing shareholders? Complete write-off?(Ex-colleague once worked at Bibendum. His experience was that it was a successful & well-managed business, enjoying the benefits of operating as a privately-owned & managed entity...)
