The Lighthouse Group, the UK independent financial advisor network that proposes to de-list amid a sharp fall in its share price, sought to rebut any suggestion that some or all of its management wish to take full control of the business.

The Lighthouse Group, the UK independent financial advisor network that proposes to de-list amid a sharp fall in its share price, sought to rebut any suggestion that some or all of its management wish to take full control of the business.

A shareholder meeting is scheduled for 31 July. If the vote is “yes”, the firm will cease Alternative Investment Market membership on 8 August, the company had said in a statement on 9 July.

The firm listed in 2000. Its share price, which at the flotation was 160 pence per share, has sunk to around 3.0 pence. The fall highlights how financial firms, even if their underlying business model is relatively strong, can be hit by swings in market sentiment. The IFA industry, for example, has suffered in market perception due to expected rising regulatory costs from the UK’s forthcoming Retail Distribution Review. The RDR aims to stamp out use of commissions and rebates.

However, since the original statement on 9 July, there has been controversy about the move. One analyst, Paul Mumford, senior investment manager at Cavendish Asset Management and owner of Lighthouse Group shares as part of his AIM Fund, has criticised it. In a statement sent to this publication, he wrote: “The Lighthouse Group management clearly thinks that there might not be much of a future for the company once the RDR reforms come into effect. Whether this fear is justified or not, the manner in which they are going about de-listing for AIM is shoddy to say the least, and will disproportionately hurt the majority of shareholders in order to benefit the few," he said.

“The company is in a decent situation at present, with a market cap of £6 million and £11 million in cash. The directors only hold seven per cent of the business and may be looking to get a quick sale following the de-listing; yet since the announcement the overall share price has plummeted from 5.75p to 3p. The least the management could do for the other 93 per cent is table a cash offering at the value at the time of the announcement. Should no offer be forthcoming I would urge fellow shareholders to vote against the de-listing, as given the way in which it is being done it can only hurt their interests,” Mumford had said.

Defence

But the Lighthouse Group, in a statement today, insisted its move is in shareholders’ interests.

“Since the announcement on 9 July 2012 there has been some speculation that it is the intention of some or all of the Group's management to take control of the company.  The board confirms that there is no such intention,” it said in a statement.

“The conventional attractions of being admitted to trading on AIM (such as raising funds and using quoted shares as currency) have not applied to the company for some time and are not likely to in the short or medium term,” it continued. “The board believes that the perceived value of the group imposed on it by its stock market listing does not reflect the true value of Lighthouse, and distorts the relative value of the group compared to unquoted comparators.”

The firm said financial services firms are enduring “considerable negative sentiment”, a problem in particular for independent financial advisors at a time of mounting regulatory pressures.           

“The board is not currently aware of any shareholders who cannot hold shares in an unquoted company,” the firm said.

After de-listing, Lighthouse Group intends to set up a “matched bargain arrangement” with a regulated stockbroker or other specialist to enable shareholders to trade ordinary shares, it said, adding it has been approached by a “number of specialist entities” on the matter.

The firm added that its departure from the AIM market will not reduce its high standards of corporate governance. To that end, it will continue to hold regular shareholder meetings; maintain non-executive representation on the board; operate the audit, remuneration and risk committees, and review feasibility of restoring dividend payments based on future profits.