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Governments just don't pick winners - companies that boast of grant wins are an auto sell

By Tom Winnifrith, The Sheriff of AIM | Saturday 26 March 2016


 


Call this one of the unwritten Tom Winnifrith golden rules but a company that boasts of grant wins from the State is in general a sell. This may be a tad unfair but the fact is that Government's are invariably the worst investors - they make your average Bulletin Board Moron look like Warren Buffett when it comes to spunking cash on losers.

Good companies can secure funding in the private sector. I don't suppose I can blame a company for taking a grant from the state if such a grant is going. If some dome schmuck offers you a stack of (other people's)money it would be churlish to say no. But there does seem a good correlation between those companies that pick up grants and long term failure to generate cash/shareholder value destruction.

A second rule is that the more distance there is between Westminster and the body giving the grant the more likely it is to be money wasted. Thus the EU or the Welsh Assembly are better at picking losers than the Westminster money wasters.

Evil Banksta today flags up AFC as a grant winning financial black hole HERE. Other big grant winners include Avanti Communications (the EU) - HERE - and of course Reneuron (RENE) the most expensive jobs creation scheme in the history of Wales, see HERE.

Perhaps as a list of stocks to avoid, readers could flag up any other serial winners of State grants in the comments section below.


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Comments

1 comments

  1. Interesting golden rule, Tom. RE: Avanti I note that an offer of a government grant was withrawn [or Avanti may have withdrawn?]. See Regional Growth Fund report here (no. 6 in the list):

    http://www.parliament.uk/business/publications/written-questions-answers-statements/written-statement/Commons/2015-09-11/HCWS188/

    K.


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