Should the LSE act to force companies to be more accessible to private investors?

Monday, Mar 26 2012 by

Should the LSE act to force companies to be more accessible to private investors?

"The course of true love never did run smooth" as Shakespeare said. And if ever there was a relationship designed to test patience on both sides of the fence, it's that between listed companies and private investors.

Now as a private investor myself, you may expect me to be less than objective in my views. But I'm not … honest! But to say some companies stretch our loyalty would be putting it mildly.

There are so many examples from stock market history of companies trampling over the interest of the small private investor that it's a wonder any of us persist. From non-participation in discounted fundraisings to sudden de-listings or downright fraud, we get regularly abused. But when they want our capital, well, they want us.

Not all companies are like this. Most are either satisfactory or better. And a few really are great at sharing information with us within the bounds of legality.

Two-way street

It's a two-way street. From the companies' side, you can understand that it's difficult to concentrate on business whilst keeping everyone well informed. And we private investors can be a flighty bunch, with relatively small amounts invested, who will leave at the drop of a hat should another temptress turn our heads.

So when you read of a relationship running really well on both sides, it warms the cockles of your heart. And such was the case when I wrote about the creative communication efforts organised by private investor Paul Rutherford with New World Oil & Gas (LSE: NEW) in December. The company is drilling for oil in Belize and appears to have welcomed Paul's and 's involvement and communication to fellow private investors. Paul has also recently worked with Strategic Natural Resources (LSE: SNRP) to run an investor relations evening.

Previously, Paul had organised a strong and substantial private investor base to engage positively with the management at Xcite Energy (LSE: XEL). He met with the company last year and has established a relationship with the company since.

The North Sea-focussed oil exploration company announced its final results for 2011 last week. And the last 12 months hasn't been a happy one, share price-wise, after a meteoric rise in the second half of 2010. The fall has caused some angst amongst shareholders, who have aired their concerns, causing the company to respond in December, saying:

"We have received a number of messages from our shareholders expressing concern with respect to the current share price and requesting more information from the Company. The Board of Directors and management team recognise your concern and your desire for timely information."

Strange choice of venue

So it's perhaps a little "surprising" that Xcite has announced that its AGM will be held in Brussels on 24 May, at 9am!

Now let's be clear, the company is registered in the British Virgin Islands and this is a perfectly legal AGM location (even if it was domiciled in the UK, in fact). It could hold its AGM in Timbuktu if it chose to.

But it hardly accords well with "recognising your concerns". Xcite is listed in London on AIM and on the Canadian TSX market. But almost all the trading volume and the majority of individual shareholders are UK-based. So Brussels seems a rather odd choice of location.

Paul reckons there are 400 individual private investors currently in the share group, who now hold around 22 million shares between them; not far off 10% of the company. Understandably, he sees a moral obligation on companies registered overseas, but using London as their main listing, to make their AGMs as accessible as possible.

Time for a change

"Companies who are registered overseas should run an investor relations evening once a year which will not be bound by the overseas rule, and which will allow many more shareholders to meet with management," he says. "This would allow maximum access for private investors who need to organise work and travel arrangements etc.

"The question should be raised as to why the London Stock Exchange permits this to happen and doesn't ensure that all AIM-listed companies have at least one investor relations evening each year to engage with shareholders who, to a degree, fund them."

Hear, hear. We'll let you know if we get any response from the LSE or Xcite Energy.

Motley Fool


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New World Oil and Gas Plc is an oil and gas operating company. The Company's principal activities are to acquire a portfolio of direct and indirect interests in exploration, development and production oil and gas assets that are based in the Americas, Europe and in other areas. The Company's segments include Corporate and Exploration & development. The Corporate segment includes general business development. The Exploration & development segment includes the Company's oil and gas exploration operations. The Company's geographical segments include Denmark, Belize and Jersey. The Company holds working interest in the Blue Creek Production Sharing Agreement (PSA) in Belize. It intends to drill a well on the C South Prospect, which is located in the eastern part of the northern license block. Its subsidiaries include Gaia Resources Limited, Emery SARL, New World Oil and Gas (Belize) Limited and New World Oil and Gas (Belize) Operations Limited. more »

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Xcite Energy Limited (XEL) is a heavy oil development company focused on the development of discovered resources in the North Sea. The Company operates through the segment, which includes the appraisal and development of oil and gas reserves and the geographical segment in which it operates is the North Sea. The Company holds and operates Bentley field located in Block 9/3b (License P1078) in the United Kingdom North Sea through its subsidiary, Xcite Energy Resources plc (XER). The Bentley field is located on the East Shetland Platform in the United Kingdom Northern North Sea, over eight kilometers southeast of the Bressay Field, approximately 15 kilometers east of the Kraken Field and over 20 kilometers north-northeast of the Bruce Field. The Company also holds and operates blocks 9/4a, 9/8b and 9/9h (License P1979) in the United Kingdom Northern North Sea. more »

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Strategic Natural Resources PLC (SNR) is a United Kingdom-based company engaged in the acquisition and development of natural resources assets, initially coal, in South Africa. The Company is focused on the development of the coal resource of Elitheni. Its operating activity is the development of the coal mining assets in South Africa. Elitheni prospecting rights area in located in the Eastern Cape province of South Africa and covers an area of approximately 184,000 hectares. The 184,000 hectares has been demarcated into Phases 1, 2, 3, 4 and 5. The Company holds mining rights for phases 1 and 2. It holds prospecting rights for phases 3, 4 and 5. Phases 1 and 2 cover an area of 92 square kilometers. more »

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  Is New World Oil and Gas fundamentally strong or weak? Find out More »

2 Posts on this Thread show/hide all

emptyend 26th Mar '12 1 of 2


...from where I sit the answer is "yes and no".

On the one hand, you point out that:

From the companies' side, you can understand that it's difficult to concentrate on business whilst keeping everyone well informed.

This is indeed an important point, and one that shareholders would do very well to remember before pestering company managements for news updates that they know perfectly well the company would be unable to respond to without informing everyone via an RNS.

I would also add that there are very often circumstances where it is in the interests of shareholders themselves fo there to be no public knowledge or discussion. This includes matters in relation to potential corporate deals but isn't limited to such things.

On the other hand, this suggestion seems eminently reasonable:

"Companies who are registered overseas should run an investor relations evening once a year which will not be bound by the overseas rule, and which will allow many more shareholders to meet with management," he says.

If companies are going to benefit from having a UK listing then there should be a quid pro quo.

The Irish company of which I am a director has a policy of alternating the location of its AGM between Dublin and London - and even when the AGM is in Dublin there is usually an investor presentation in London too.



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john powell 14th Nov '12 2 of 2

When you log on to a company web site,you will see a tab for investor relations.Should you have any problems where they hold their agm's or any other queries you can contact them. Should the answers not be to your liking then you of course,you have the option to invest or not. I always access a company web site as part of my research to see who the directors are what are their holdings who are their largest investors,etc,etc.I have taken many holdings after this research and I have also turned away.

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