MHM and a small group of individual investors were recently successful in driving positive change at Bidstack Group plc, resulting in board changes and actions to improve investor communications.
Sadly, ineffective corporate governance across UK companies is destroying the value of individual investor portfolios . Therefore, MHM is evolving its service to provide a shareholder engagement platform to ignite positive change and deliver results.
On the back of the successful case study at Bidstack, the goal for MHM is to empower individual investors and become the driver of individual investor-led change at underperforming UK plc boards.
Why are we doing this?
- On the back of investor unrest and an underperforming share price, retail investors took it in their own hands to pull together and called an EGM to drive board changes at Bidstack- a real ‘David vs. Goliath’ action.
- This resulted in positive change with two board directors stepping down and the company committing to improved investor communications. This is fantastic news for shareholders who are now excited about the future, and it is a great credit to the board that they have embraced investor feedback and taken action.
- This, however, is the tip of the iceberg. There are many other listed companies where the issue of poor corporate governance has led to significant shareholder losses.
- Recent examples of corporate governance failure that could have been avoided include: 4D Pharma, Deepverge, Napster and WANdisco (more details below)
- MHM is, therefore, evolving its proposition to incorporate proactive shareholder engagement to ignite positive change and deliver results.
- We are currently identifying opportunities for engagement with companies where corporate governance is ineffective.
- MHM has the ‘IP’ and knowledge to take demonstrable action and, should it be required, we are prepared to help members exercise their shareholder rights.
- The goal for MHM is to empower shareholders and to become the driver of change for underperforming UK plc boards.
The full story
- A group of individual investors called an EGM to drive board changes at Bidstack in a pathfinding ‘David vs. Goliath’ action, resulting in positive change.
- Two directors have agreed to step down, further board roles are being reviewed and the company has announced an investor event as part of committing to improved investor communications.
- To our knowledge, this is the first time a group of individual, retail investors has successfully requisitioned a plc EGM to remove and appoint directors.
- Highlights that UK shareholder rights that can be utilised to effectively bring about change – it is not just the purview of institutional shareholders.
- While Bidstack’s market cap doesn’t currently make it a Goliath, the issue of poor corporate governance on AIM is certainly a behemoth. Common issues include:
- Mis-leading statements from management.
- Poor investor communications allowing share prices to fall without support.
- Poor cash management controls and processes.
- Ill-timed and poorly executed financings that are overly dilutive.
- Poor financial controls that provide the opportunity to perpetrate frauds.
- Some recent examples include:
- 4D Pharma – a minimum cash level covenant was beached that led to the lender enforcing its security and the delisting of the company. Cash levels and financing solutions should have been managed well in advance of coming close to the covenant.
- Deepverge – a new management team reviewed major contracts to reveal that revenues were expected to be 45-50% lower than previously announced and a low cash balance subsequently made continuing as a going concern impossible. The company is now suspended, and redundancy notices were issued to all employees.
- Napster – despite significant assets generating >$100m of revenue, the board recommended a delisting of the company in order to realise its value privately rather than for the current shareholders, citing that a listing was too onerous.
- WANdisco – a seemingly open and shut case of fraud, apparently by a single salesperson, where financial controls and processes apparently failed to identify $115m of false sales bookings vs. $11.4m of actual bookings.
- We believe that these incidents were avoidable with effective corporate governance. We understand that shareholders of 4D Pharma and Deepverge are organising legal claims against the directors of these companies. Our goal at MHM will be to identify and bring about change before shareholders suffer such losses.
- MHM is, therefore, evolving its proposition to incorporate proactive shareholder engagement for positive change and is currently identifying opportunities for engagement with companies where corporate governance is ineffective.
- Boards can be closed to input from individual investors with a focus on large, institutional shareholders. This fails to recognise the diverse background of individuals who have expert insight and can help increase or realise shareholder value. MHM is a platform for its members to provide insight and feedback on their investments that can be advocated through a ‘single voice’ on their behalf.
- Should it be necessary, MHM has the ‘IP’ and knowledge to take more demonstrable action, and we are prepared to help members exercise their shareholder rights. For those seeking change at their investee companies, we can collectively engage to secure demonstrable results.
- There are, of course, excellent companies with strong and effective boards that we highlight as investment ideas, and it is with those companies that we seek to engage with on a more regular basis to deepen the knowledge base for members. MHM aims to launch exclusive video content with management, focused on value drivers, to complement our investment idea memos and help companies get their message out to our long-term oriented membership.
- MHM does not provide stock ‘tips’ or short-term trade ideas. We are focused on patient, long-term compounding of capital. Equally, we do not aim to be a shareholder association advocating for over-arching legal and regulatory change. Rather, we are focused on targeted engagement with undervalued companies to help identify and realise shareholder value.
- Our goal is for MHM to become the UK’s leading, independent source of long-term, independent investment ideas and shareholder engagement platform for individual investors. By combining investment opportunities with proactive, collective engagement, we aim to help individual investors generate returns from the closing both of fundamental valuation gaps and governance expertise gaps.
