The latest Investing Matters Podcast episode featuring financial educator and author Jared Dillian has been released. Listen here.
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OofyProsser
"As to the rights of shareholders - they own the business and hire the management. If the latter are so dishonest or incompetent as to drive it to bankruptcy, the shareholders are always the ones who carry the can. They can’t expect to benefit from the potential upside in their investment without accepting the risks. If they lose their investment following the creditors’ needing to safeguard their own interests by appointing a receiver"
I get that but the process hasn't been followed. Finablr has never officially gone into administration. Yes, the fraud has been discovered, and yes, it was investigated. But no actual administration. At some point Prism Group just made the bid paying $1 and the deal was simply accepted by the Finablr board. How? This clearly isn't right, is it? There is a process to it and there is a process for creditors to follow too: pursue legal action, obtain judgement, force company into administration, enforcement, recover what's left, sue management and BOD individually (misappropriation / insider fraud). All bankrupt companies go through the process. I still can't see how it is possible (let alone legal) to proceed with sale for $1 without any shareholders vote while the company is still operating (clearly BOD was, if they approved the sale)?
Am I missing something?
ELREY: well, I sympathise very strongly with you and with other investors who’ve lost money in this. It’s quite an unusual set of circumstances though. A largely overseas company headquartered in the UAE, majority-owned, even after listing in London, by individuals who are nationals of neither the UK nor the UAE. And with the means, if they should need it, to salt money away and to cover their tracks as they do it. It’s also wrong to place much confidence in the opinion of any professional experts, in any walk of life, whether auditors in an investment context, surveyors when buying a house or “competent persons” lending their reputations to a resource company’s prospects. There’s been a number of dodgy companies brought to the London market in the last twenty years or so which should never have been allowed. The investment banks introducing them have clearly had a far greater interest in the fees they’ve earned than in protecting the interest of investors or the reputation of London as a place where fair and honest dealing is the norm. And you’re right, the overseers in London are toothless, as a result of being either grossly underfunded or else wholly incompetent. Someone needs to be made an example of, to discourage the others.
As to the rights of shareholders - they own the business and hire the management. If the latter are so dishonest or incompetent as to drive it to bankruptcy, the shareholders are always the ones who carry the can. They can’t expect to benefit from the potential upside in their investment without accepting the risks. If they lose their investment following the creditors’ needing to safeguard their own interests by appointing a receiver, then they are de facto disenfranchised and lose control of the company, along with any financial interest if there are insufficient funds remaining to meet the claims of the creditors - and the claims of the accountants, lawyers etc. who swarm over companies in this situation.
I think the investment banks introducing such companies to the market should be required to examine their businesses and accounts in detail, and give an opinion on them, for failures in which they should be liable, at law and in a financial sense.
PS. And the EY....they has resigned as the auditor as if nothing happened.....No problem, no questions asked. Oh yes, I forgot, they "do not take responsibility for the financial statements on which they form an opinion".....It would be nice if at least they took responsibility for their opinion based on which the investors form their opinions......
"But whatever the legalities, the fact is it was bust and the Prism deal was the best offer they got"
I know but I think that's not the point...Bust or not, rules / laws are there for a reason. You can't be just making a decision to sell something without owners (shareholders) approval.... And yes, shareholders in the original version of Finablr are no more likely to see a return on their investment, but again, that's not the point.
I personally took a hit, wrote it off and moved on already. It is what it is. There is not viable way for me to pursue / recover the losses. It is what it is But to be honest these two (FIN and NMC) completely changed the way I look at investing in any shares and risk in general. Unthinkable. Just unthinkable. The way it happened and the way it's been handled. And how easy it is to just get away with it. Any financial statement audited by any accounting firm (even the biggest and the most reliable) is potentially worthless. And any BOD in the world can do exactly the same tomorrow. And there is a good chance that they will get away with it. Regulators are worthless too. And so are lawmakers / judical system. Unbelievable. It completely changes the way one assesses the risk associated with investing in anything. After that I no longer hold any stocks, I moved on to investing in things I can control. Stock markets are no longer an option. A lawless land, fkn jungle. No, thank you.
ELREY: there’s been almost no news on this company for more than a year, has there, until the FCA notice that they’re not permitting it to de-list from the LSE? But the fact appears to be that it’s been sold for £1. I can understand the Board’s desire to tidy up the Group but I’m not sure what real difference the FCA’s decision will make. Finablr clearly doesn’t want to maintain a London listing and its shares have been suspended for nearly two years. It’s very late in filing its accounts as well. Its registered office is in London but the bulk of its business and its focus appears to be in the Middle East. If I were the CEO, I’m not sure the FCA’s ruling would make any difference to me. If they’re not filing their accounts, the distinction between suspension and de-listing is probably academic, the potential cost of a fine balanced by the end of paying listing fees. I dare say they’ll just be struck off sooner or later. Typical of the FCA though, tilting at windmills instead of investigating and prosecuting wrongdoing.
Re the legality of the sale, there’s no update on it since about December 2020 and no one seems to be raising a stink about it, other than the few contributors here - for whom I have huge sympathy. But whatever the legalities, the fact is it was bust and the Prism deal was the best offer they got. It seems to have preserved a lot of jobs on the sub-Continent and in the UAE. If the deal were to be overturned (which must be highly unlikely) the shareholders in the original version of Finablr are no more likely to see a return on their investment.
Re Travelex, they bought it in 2019 and, if I remember right, one of the conditions was that it remain a separate business, a subsidiary, not a branch network of Finablr’s existing businesses. I don’t know enough to be able to say how their management put the Travelex business up for sale! I was as surprised as you are when that happened. Oddly, the ransomware hack, which started in late December and was resolved (allegedly on payment of $2.3mm) happened at Travelex. The Finablr management had been warned of software vulnerabilities at their new acquisition several times over the months between acquisition and the hack. Odd that they chose not to address it. I’d have been frantic to resolve it asap if I’d been the CEO.
OffyProsser
True, the brothers could as easily have done it without his knowledge (at least in theory) but I just find it difficult to believe that amount of debt (well over 1$ billion) can simply be "hidden from its board" by a couple of individuals but again we don't know the particulars (time, scale, involvement of others etc). You are also right about that "serious systems outage lasting many months" - a perfect cover up to buy time needed to cover the tracks and disappear....
I'm not quite clear on that sale though - could you clarify? Leaving aside the obvious debt, was it actually legal to proceed with sale for $1 without a shareholders vote? And was it actually decided by the Court? And was $1 "the best bid" (where there any others)? Is that what's happened? I thought at some point Prism Group was making the bid for Finablr Ltd the deal was simply accepted by the Finablr board in December with the consortium paying $1? I don't recall any actual administration there, I know shares had been suspended and e.g Xpress Money (one of FIN businesses) had its authorisation to operate withdrawn by FCA at some point, but no actual administration. I just find the whole process extremely dodgy, feels almost deliberately engineered and masterminded in advance.... But again it could just be me not understanding the process.
The same with Travelex - how can Travelex (effectively a division of Finablr) just announce that "it had placed itself up for sale with immediate effect" and ""communicated this intention to Finablr"? How is tat even possible? And then PwC announcement stating that a so-called "pre-pack" administration deal for Travelex had been reached, with the company being taken over by a consortium of its creditors. How come FIN shareholders did not even have any say?
ELREY: yes, it’s quite possible Shetty was involved, though the brothers could as easily have done it without his knowledge. He seems to have become a bit of a figurehead and a glad-hander. He was always essentially a salesman, not an accountant.
There will be no chance of redress for the shareholders in terms of their having no vote in the sale. Once a company’s liabilities grossly exceed its assets and it’s unable to cover its debts, as was the case with the old Finablr, it’s the courts that decide these things. Equity shareholders are the owners of the business which has borrowed all that money. There’s little point in offering them new shares in a rights issue, they’d need to be priced at a multiple of the the share price (even of the share price before the problems blew up) and no one would want to take them up. So the business is sold by the Receivers to the best bidder, in consultation with the creditors, who do have a say in it. Any money found subsequently is shared by the secured creditors, then by the unsecured creditors, employees (outstanding wages etc). Anything left goes to the shareholders but there’s seldom anything left.
Only specialist investment managers and hedge funds have the investment analysis resources needed to do the kind of work required to spot this kind of fraud as it develops. Only Muddy Waters seems to have taken the time and trouble. So much money is now invested through low-margin index funds these days too - they’re generally required to invest pro rata in the stocks in the index they’re replicating, so would have had a full weighting in Finablr (if they were FTSE250 Index funds) and in NMC. The law of unintended consequences.
And by the way.....we all know that the company was effectively robbed and ruined by its management / majority owner. EY saw anything wrong, FCA did absolutely nothing. Then it ceased trading, its business operations effectively ceased to exist (pandemic didn't help, did it?) and was sold to Prism for $1.
First of all, was that sale for $1 without a shareholder vote even legal? Could anybody shed some light on it? Seems dodgy too me considering the circumstances.
And even if it was there is clearly no assets in the business anyway. It is a one huge pile of debt. Creditors lost millions, shareholders lost their investments. Even if by some miracle some of the money will be recovered (i don't believe it will, it's been laundered in the middle east / asia a long time ago) it will go to creditors first. Shareholders get paid last and there won't be much to share.
The only chance for shareholders seems to be in questioning the validity of sale transaction of the company and start from there. And then you still need to recover losses from those who perpetrated the theft. And yes, the process will take years and will be extremely expensive with little hope for any meaningful results. Otherwise it's over. We've all been victims of humongous well planned fraud perpetrated by the management of the company.
Yes, FCA is a joke and so is the EY. I understand that. I'm not sure however why would anybody even hope that the shareholders of Finablr could get any shares in Wizz? Or in anything else? Why would they? The company was sold without shareholder vote, if anything we should be complaining to (suing) those who sold it on our behalf. And most importantly try to prosecute those who perpetrated the fraud.
PS. I personally think that Shetty was involved in it. I don't buy the story about "number of current and former executives at both companies who carried out serious fraud and wrongdoing, including using his forged signature to write loans, personal guarantees, cheques and bank transfers without his consent".
"Is this not merely a housekeeping issue? The company has new owners, is it not they whose vote to de-list is required, rather than the original shareholders? Finablr has gone through receivership and a reconstruction in which the previous shareholders were disenfranchised and lost their investment."
Yes, that's my understanding too.
Denny: I’m no expert but it seems to me that the Finablr entity bought by Prism in late 2020 was Finablr Ltd, the Finablr Group’s operating company, with all the assets within it. The company that remains quoted, though suspended, and which is the subject of this dispute over its current status, is Finablr PLC, the Group parent, which, following its sale of Finablr Ltd, has no assets. Only if the missing money is found in amounts that exceed what remains owing to the old Finablr’s creditors will Finablr PLC shareholders see any of it. There’s no way of telling for certain whether sufficient money will be found but it seems pretty clear that the process will take years and will be expensive. If I’d been milking my company for years and that company were an fx company, and if it seemed I were about to be found out, I’d arrange a serious systems outage lasting many months and thus cover my tracks and I’d leave the country where I’d been doing it. Does any of this seem at all familiar?
I take it news by 11th March 2022, based on 2 months from 11th January?
"Finablr PLC (the "Company") has received notice from the Registrar of Companies on 11 January 2022 that, unless cause is shown to the contrary within 2 months of the date of the notice, the Company will be struck off the register and dissolved. The Company is currently in the process of resolving the queries raised by Companies House in relation to the striking off notice and will release further updates in due course."
Hopefully you are right Denny
I am fed up with this whole business
Can't remember but looks like it's updated with personell.
Its not a short term loan OofyProf, its a rebranding, meaning Fin should become released from suspension and trade as Wizz financial or if Wizz is listed we should be given Wizz shares for our sins
https://www.reuters.com/business/finance/finablr-re-branded-wizzfinancial-merged-into-leading-payments-group-2021-08-03/
FCA should be forcing some action and shareholders should be informed by Miller if were ****ed and have done with it.
As I understand it Prism and Wizz are not
currently listed on the stock market and I didn’t beleive finablr bas been liquidated, just sold
For $1 without a shareholder vote.
Finablr is still listed and the FCA obviously beleive the shareholders have a say because it cant be delisted without vote.
For a FTSE 100 company not to keep a shareholder abreast of the situation is shocking tbh, the FCA should hold there head in shame; maybe they’ve used all of there resouce chasing Amigo ffs
Indomie: yes, I understand that. The last reference I can see to the 25% was in December 2020. A maximum of $190mm. to be payable to creditors, then to shareholders. Maybe the hope of getting some payment in this regard is why Finablr plc is still extant. It’s got no business any more. But the chances of finding anything much in the rubble of this shambles are extremely low and, in view of the massive shortfall in its accounts when receivers were appointed, anything they do find is likely to go to the creditors - of whom there’s likely to be quite a number, with large claims - not shareholders.
I don’t want to appear a Job’s comforter though, so shall bow out.
..sorry, old iPad playing up. Finablr plc seems to be essentially defunct. Maybe there’s some loose ends to tie up and it needs to be kept as a corporate and legal entity until they are tied up, but it’s got no assets and any assets discovered from the alleged miscreants will go to the shareholders in Finablr Ltd. That’s my reading of it, anyway. Shareholders here, as in sister company NMC plc, have been the victims of lax regulation, but mostly victims of dishonest and unprincipled, or extremely stupid, management. You can’t blame yourselves, or even learn useful lessons from it. You’d have needed very extensive resources and expertise to have spotted wrongdoing here.
We have had our chips then
Bowlers12: i think shareholders here own shares in Finablr plc. That company, following all the events detailed in RNS’s over the past 18 months or so, has sold all its assets for a nominal consideration. The shareholders of Finablr Ltd. etc. are the Prism lot, not the Finablr plc shareholders, which appears to be
If that is purely the case prosser we might as well not bother to post anymore on here That is why I am awaiting companies house to tell me if Fin goes back on lse are we still able to trade in these shares otherwise we are ****ed
I sent this to Robert Miller on Monday, it’s apparently what you have to do to lodge a complaint-
Good morning Robert
Active — Active proposal to strike off Has been lodged at companies house, however this has not been communicated to shareholders. I will be writing to the Financial Obusman shortly if there is nothing RNS.
Is this not merely a housekeeping issue? The company has new owners, is it not they whose vote to de-list is required, rather than the original shareholders? Finablr has gone through receivership and a reconstruction in which the previous shareholders were disenfranchised and lost their investment.
I have just emailed Companies House to ask them hypthephetically whether they can force fin to relist without naming them, if I said fin, I think they would have said they were not allowed to answer
I will post their answer on here when I get a reply