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By Nigel Somerville, the Deputy Sheriff of AIM | Monday 13 November 2017
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. 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.
ShareProphets AIM-China Filthy Forty play Asian Growth Properties (AGP) has announced that is it throwing in the towel on its AIM listing, and is to dispose of its assets and return the cash to shareholders. This is expected to amount to about 48p per share – to add to the huge dividends paid out over the last couple of years. It is, in many way, a startling result although the reasons behind the delisting cast a pall of shame on the AIM Casino and thus the London Stock Exchange.
As it turns out, it appears that this has been a cracking investment which looks to have been honestly and well run. But given the number of AIM-China frauds (with most of our original filthy forty having either been booted off the Casino in the wake of Nomad resignations or just failing to publish accounts) it is hardly surprising that investors took fright.
At the low point in Asian Growth’s share price in 2015, they sat at just 13.5p. Investors had given up on it.
During 2015 we saw the demise of Geong International (GNG), ARC Capital (ARCH), Sorbic International (SORB), Global Lock (GLOK), Naibu (NBU), Global Market Group (GMC), China Chaintek (CTEK), Camkids (CAMK), China Rerun (CHRR), Gowin New Energy (GWIN) and Gate Ventures (GATE) all booted off the Casino in the wake of a Nomad resignation. 11 out of forty companies in the space of a year – and the carnage continued and is still continuing even now.
It is hard to see how investors could tell the difference between a good one and a bad one – and the LSE was sending out their bods to scout for new Chinese companies to add to the list!
But since that low point Asian Growth’s shareholders have been rewarded more than ten times over, and now face another 48p per share coming in. Brilliant news for them.
So how can we tell the difference between a good Chinese company and an out-and-out abject fraud? Well, the problem is – as a member of the great unwashed – you can’t. You have to rely upon what you are told.
You have to be able to rely on the admission document – but you cannot: look at Naibu, which had undisclosed debts coming out of its ears but the bean counters were happy to sign off on £40 million of net cash. There are so many examples.
Asian Growth tells us that maintaining an AIM listing for just a couple of percent of its shareholders is not worth it. Liquidity has dried up and it can’t raise cash without huge dilution. Would that be the case had there not been so many AIM-China frauds? I doubt it.
So this is a good company which has, essentially, been forced off the Casino because the due diligence processes on AIM have been so badly found wanting – a process we warned of on these pages over and over again as the Filthy Forty scandal played out: the good companies would go and the bad ones remain.
Nobody has been sanctioned by AIM for those due diligence failures when it is perfectly clear that the processes were, to be polite about it, less than robust. The simple fact is that the majority of the Filthy Forty should never have got within a country mile of getting an AIM listing.
AIM, in the meantime, has gone all quiet – apart from Marcus Stuttard’s claim that his team of Oxymorons at AIM Regulation are not responsible for fraud.
But that is exactly what has happened – for all the paperwork and due diligence that AIM demands to get an IPO away. You can’t sign off on all that and claim no responsibility.
AIM would, I fancy, like to see the back of the Filthy Forty scandal. The number of Nomad resignations has dropped off recently, to be replaced by a series of delistings “in shareholders’ best interests”.
We also have executions pending this weekend for more Filthy Forty companies which used to have ZAI Corporate Finance as Nomad, and have been unable to find a replacement - companies such as Northwest Investment Group (NWIG), an investment company which has spent 7 years on the Casino, hasn’t made a single investment and is now running out of the £3 million first raised.
The truth is that the Filthy Forty exposed the due diligence required by AIM as hugely vacuous. Who knows, AIM’s regulators may have tightened up on it but we’ll never know because they would prefer to dust the whole thing under the carpet.
Alternatively, they may have simply done absolutely nothing. We simply do not know – there is nothing to go on. The result is that all this could happen again and I think investors know this.
Is that what the London Stock Exchange wants for the world’s most successful growth market?
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