What have Coutts Consulting, corporate travel agency Hogg Robinson, Allied Textiles and FTSE 100 ret...
What have Coutts Consulting, corporate travel agency Hogg Robinson, Allied Textiles and FTSE 100 retailer Kingfisher all got in common? They have all considered de-listing, quitting the acclaim of public status for somewhere pleasantly obscure, where their beleaguered CEOs can get on with running businesses which, by and large, they passionately believe in. For many public company directors, the people they loathe more than lawyers or journalists are fund managers. On the irritation scale of one to 10, a fund manager, or institutional investor, as they like to style themselves, has a must-swat rating of 20, on a good day. Crabby, brash, young, dim and baffled are all epithets applied to 'eff-ems' as they swarm over the books, the staff and the director's office during all too frequent company visits.
The prize for this intrusion? The honour of having them as your shareholder, the opportunity to endure further analytical assaults and perhaps a two-par mention at the end of an article in some trade rag. For many companies, the sparkle of a public listing is fading. Many shareholders and CEOs are locked together in uncommunicative and unhappy matrimony until de-listing doth them part. That, say directors, cannot come too soon. Fund managers just don't understand them. There is a flush of go-for-glory flotations at the moment, but for those spurned stocks not at market centre stage the lure of de-listing is strong. Companies are getting very fed up at the way their share prices are being trashed by arbiters of investment fashion with untested credentials, a great deal of power and very short time horizons.
There are all sorts of benefits of being out of the public gaze. Going public used to be the main way of raising finance, but this is obviously no longer the case. Private companies have more control of the business, can pay for better staff, deliver more focused service and move more quickly. Some sectors, particularly service providers such as consulting and 'knowledge' projects, just don't work with an innately suspicious public partner looking on.
But going private for the wrong reasons is equally hazardous. Running from a low valuation is not going to solve basic structural and strategic problems. Banks and private backers are just as interested in performance, even in the short term, as shareholders.
The beauty of a de-listing is, it's reversible. Car rental group Avis floated in 1986, went private in 1989 and then refloated in 1997, all under the same CEO, Alun Cathcart. However, given the choice, most CEOs would not opt for such exhausting action. One option is the halfway house of a share buyback to tighten up the shareholder base,
By reducing the shares available, a company can boost the price and broadcast to the market that the managers be!ieve the stock is worth buying, But a lot of announcements of buybacks come to nothing, or not much, For a while it was a cheap way of lifting the share price but those institutional investors got wise to it, and now failed or withdrawn buybacks are punished heavily. There is certainly no shortage of companies willing to take a shot at a listing, and 'upstarts', as the City sages call start-ups, continue to have a certain allure. Fund managers are being urged to back more new and unlisted stocks, giving them access to even private boardrooms. CEOs are finding they can run but they can't hide. The only solution, it seems, is early retirement.
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