Gli Finance Share Price (GLIF)

Company becomes principal funder of a range of early stage companies, company ceases to fund said businesses following a change in management, but refuses to sell positions regarding bids as too low, platforms one by one go out of business.

Today's profit warning should not come as a surprise; the core problem for GLI is its cost of capital. Having destroyed its share price and investor base with it over the past three and a half years, the cost of equity is now way too high to contemplate providing support for its invested companies from its own resources and thus one by one they fail.

The "growth" side of the business is the lending of monies at a similar rate that the company borrows, increasing debt in the business, and thus risk, with a return way below its weighted cost of capital (see above comment on the equity).

Net result is a downward spiral of value destruction, whilst the management strives to recognise "profit", regardless of whether the return is in excess of the cost of capital (thus actually delivering value to shareholders) or below the cost of capital (and thus destructive to shareholder value).

Avoid like the plague.

Todays announcement, at 16.52 on a Friday afternoon (timing of which tells you the news is unlikely to be shareholder friendly) removes any remaining chance that management's remuneration will ever be reined in.

Firstly, after a sizeable shareholder revolt (27% of free float voted against the remuneration report) the Board has introduced what, on the face of it looks like investor protection - they will only pay bonuses based on "profits" in future. Two problems with this:

1) The statement admits, de facto, that the Board has destroyed shareholder value by allowing the management to pillage the business for years, but is not seeking any repayment, despite the fact that they have ample grounds to do so; and

2) There is no definition of "profit" in the announcement. Certainly management will not expect to be paid against statutory profit (unless they engineer upward valuations of investments) and will instead come up with convoluted adjusted profit numbers to justify future bonuses that will be beyond criticism since they are based on "profits".

The second huge problem in the announcement is that the largest shareholder, Somerston, now has a representative on the Board. He is unable, as he is only one vote on the Board, to exert the same degree of influence as he could as a shareholder, given his 26.6% stake. He will also be bound by Board decisions and cannot dissent in any way whilst on the Board. In other words, the management just neutered the only voice who could possibly bring the situation under control.

It's a shocking mess and management have played their hand brilliantly. They are now free to continue to reward themselves the remaining value of the business, whilst the shares continue to plummet and there is nothing anyone can do about the situation.

How Liberum, as Nomad, can continue to sit by and watch such wanton distraction of shareholder value and utter disregard for corporate governance is extraordinary. That they did not insist on a definition of "profits" in the announcement would suggest that they are failing in their duties under the AIM rules.

As predicted, huge bonuses despite continuing to destroy shareholder value. Really does beggar belief.

http://www.p2pfinancenews.co.uk/2019/04/17/gli-bosses-received-over-750k-in-bonuses-despite-2018-loss/

Judging by today's announcement of "share purchases", it looks like its bonus time at GLI again.

The share price shown for the "purchases" is substantially above what the shares were trading at today, post the horrific profits warning, and thus the only explanation can be an off-market transaction, and traditionally the management seem to pay themselves annual bonuses half in shares and half in cash.

So, after once again destroying huge amounts of shareholder value, the management are paid bonuses whilst the share price continues to plummet.

I assume that the management strategy is to run the company into the ground until the zero dividend preference shares are up for redemption in December and then offer to buy Sancus out for next to nothing. With no other offers on the table, the Board will have to accept and it will be game over.

Spotted the RNS feed for GLIF. I used to hold GLIF back in the day of 50p+ share price and dividends too. When the new board came onboard, it was noticeable, how quickly things plummeted despite they words of confidence being spouted........Although I sold out at a loss, I am so glad I no longer hold GLIF, as it reads as if things have become extremely dire since.