By Tom Winnifrith | Friday 13 December 2013
Disclosure: I own shares in one or more of the stocks mentioned. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.
Adam Reynolds began his City career as a stockbroker in 1980 but in recent years he has shot to prominence rescuing AIM listed companies which were on the point of insolvency. I met up with him the other day to put a few questions to him about his views on AIM and his stable of interests.
Q.In purely ideological terms, as a good capitalist why do you not accept that some companies fail and should thus be allowed to go bust?
A. It all depends on where the liabilities sit, in the past I have looked at Plc’s and realised that they cannot be saved, a particular case as an example was SP Holdings Plc. This was a business involved in sports marketing an area I knew well through IBL, SP had run into trouble required an injection of £1m, however the problem was that a number of the liabilities including the lease had cross guarantees with the PLC, I walked away the PLC went into administration and I bought two of the subsidiaries. Therefore the only PLC’s I would rescue are the ones that are clean and technically have no liabilities from their subsidiaries.
Q.At a general level once again, do you accept that AIM is not exactly perfect? What three changes would you make at once to ensure that private investors get a fair crack of the whip?
A. I agree AIM is not perfect and to me the most important point is that Private Investors should get the same amount of information and briefings as institutional shareholders, the areas I would improve are the following:
1. If a Company has an institutional road show total transparency should be made available via that company’s website the day of the meetings either by webcam / presentation or the brokers notes
2. Brokers notes should be readily available to all shareholders and prospective shareholders, the FCA have this rule about whether or not you are a professional investor or a private client investor and such certain research is not allowed to be published on a company’s website, this is ridiculous if it has a health warning on it and non-recourse (buyer beware) why shouldn’t this be available to all ? This is not just AIM but the whole market and the current rules. I feel sorry for private investors my analogy you invest in a business yet you are restricted on the published information which professionals have !! my analogy of this is that it is liking buying a first class ticket yet travelling economy !!
3. Regarding Placing’s often the private shareholder is completely left out in the cold and its your company ! Any Placing’s should have an element of an Open Offer or Rights attached – this has to be improved
Q. In terms of AIM listed companies where you have gone in and recapitalised them as they teetered on the brink, what is the average gain to date for those who have followed you?
A. Very good question and they vary a lot – so far I don’t think anybody has lost money – IBL for example I bought in and raised money at 12.75p initially followed further funding at 15p and 20p, today they are 32p and capitalised at £90m. With Orogen I got involved at 0.1p saw them to 1.25p when Gold was at $1,800 an ounce and today they are 0.3p. With Hansard that was floated at 25p and most investors got out at the equivalent of £1.50p and with Table Mountain I was in and all investors got in at 5p and we sold out to Cairn at 13p – so overall investors have done pretty well.
Q. Mining is a very specialist area and you are not a mining specialist. What attracted you to Orogen Gold (ORE) where you are now chairman? How did you get involved?
A. At the time I had just rescued a busted shell called Medavinci and I was looking for something exciting. Through Anton Bilton and Glyn Hirsch (Raven Russia Plc) they introduced me to the Orogen team that needed funding – I went to see the Serbian project, liked it, but more importantly liked the management team and the structure and it made sense, so I did the deal
Q. Why should Orogen fly when most mining juniors seem to be dead in the water?
A. Because we have been sensible with the cash and have two interesting projects and in particular on a limited budget we should have a maiden resource next year from Armenia, which if that is the case it is a game changer. If you look after your overhead and have decent projects the market should look after you, so many businesses and their Boards spent far to much, keep the overheads under control - when you are junior explorer you have zero revenue so you have to be mindful of costs – this is often forgotten.
Q.You are also involved in what was Ceres Media, now Ducat Ventures – where I declare I own a few shares -. What got you into that business?
A. It was a clean shell, albeit it had £150,000 of creditors, however I thought it was worth having a go and taking control and reversing something exciting into it at some stage
Q. And how will Ducat go forward? It is just a cash shell now – what will you be doing to create value for investors and when?
A. As above via a reversal
Q. Your most recent appointment is at Vialogy where you joined the board this month. The old board had failed – was that a tough conversation with your dad who was on that board?
A. An interesting conversation as he is a tough operator, but I have the utmost respect for him, often in life and in business you need a fresh pair of eyes or a lateral thought process in moving a business on or changing its direction.
Q. Do you see value in the Vialogy IP? How will that be preserved or monetized for existing shareholders in the company (including of course me)?
A. Yes I think the existing IP has value, however historically Vialogy funded this all the way through, the new remit is that Vialogy owns 75% and has no further on-going operational costs, which historically was in excess of £3m per annum. The future will be that this is now an investment and hopefully has value, I will use the PLC for building another business and shareholders will have two opportunities
Q. Do you have plans to add value to the AIM entity which is Vialogy and will current shareholders get to participate in that upside?
A. As per the above, I will use the PLC as a vehicle to acquire a business and shareholders will have the opportunity to subscribe to the new boards ideas going forward, I would like to try and get shareholders some money back over time.
Q.Finally, as an ex-stockbroker this should be an easy one, what is your bull and bear tip of the year for 2014?
A. Great question I like Advanced Computer Software – huge growth and superb management, I believe this has big upside and also I very much like the Helium Special Situations Fund – tremendous growth since inception in 2006 and should do very well in 2014
On the bear tack haven’t got one
Thank you Adam, let’s catch up again soon. Merry Christmas. And I agree on Advanced BTW.
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