[miningmx.com] — IT would seem Plus Markets, an alternative stock exchange in London, is the new buzzword amongst South Africa’s smaller unlisted companies that regularly dangle a stock market listing in front of investors.
In addition to the endeavours of a South African firm Sunair Holdings – the airline without wings – to secure a listing on the Plus Markets, an unlisted marine diamond mining venture called Wealth 4 U (W4U) now also appears to be investigating it. W4U is a small, shallow water diamond miner on South Africa’s West Coast.
Initially the Alternative Investment Market (AIM) London was the preferred destination for a couple of unlisted hopefuls. How exactly these companies would venture onto AIM was beyond me, particularly when it was blatantly clear these contenders had a practically no chance (in current forms) of qualifying for a main board or AltX listing on the JSE.
The Plus MarketPlus Markets plc is a relatively new and privately-owned stock exchange based in London. It is not associated or affiliated to the LSE. There are around 210 small and mid-cap companies listed on the Plus-quoted market segment – and the market is being punted as an alternative to AIM.
According to W4U’s website, CEO Louis Liebenberg recently travelled to London to obtain a listing on the AIM Market of the London Stock Exchange.
At an AGM in September last year Liebenberg reportedly told W4U shareholders that the “recent turmoil on the international stock markets had adversely affected the possibility of securing a listing by October 2007 as intended.’
After taking into consideration that costs involved, the company decided that “seeking a listing on the AIM market was not an option’.
According to the minutes from the company’s AGM, “as an alternative it was recommended that Wealth 4 U rather seek an interim trading on the lower level Plus Market, which would also give the shareholders a tradable share and the cost to the company would only be in the order of £50 000 (±R700 000).’
AIM listing was not an option
“In terms of the latter a deal was negotiated in principle with an investment broking firm, Aster Security (sic), to purchase a shell company and endeavour to trade on the Plus Market within the next six to eight weeks. A subsequent listing on Aim would then be scheduled for the 2nd Quarter of 2008.’
The AGM minutes were scribed in September last year, which means that nearly 20 weeks have passed since the Plus Market initiative was bandied about to shareholders. As far as I can see W4U is not listed on the Plus Market, nor has there been any progress report to shareholders since the AGM.
It is the unfortunate habit of smaller unlisted companies to rattle on about a potential listing – especially when there are shares to be sold to the public (as is the case with W4U). But effecting an actual listing is another story entirely.
With W4U, a listing is of critical importance to shareholders as part of an earlier trade off on the company’s dividend policy.
What I did find most interesting when perusing W4U’s AGM minutes was that unaudited financial statements were presented to shareholders. I don’t think – in my nearly 20 years as a financial journalist – I have ever attended an AGM where shareholders were presented with unaudited financial statements.
One key aspect of an AGM is for shareholders to ratify or approve the audited financial statements, which should present an accurate account of the company’s financial position. Presenting unaudited financial statements waters down the purpose of the AGM markedly, and one would naturally wonder why such statements were not signed off by auditors.
W4U’s minutes show that while the financial statements were accepted as being read, it was agreed that the auditors’ report be approved on a deferred basis – “subject to the condition that they are audited without any substantive variation.’ Jeepers, are they serious?
The minutes also noted that an additional director with a financial background was still to be appointed.
The lack of financial statements is more worrying when realising (as reported previously) that W4U has deviated from its promised dividend policy.
Readers may remember W4U had suspended dividend payments to shareholders because it purportedly needed to shore up its balance sheet as part of a requirement of an AIM listing.
Shareholders were presented with a trade off in that W4U directors argued that suspended dividends would be more than compensated for by a listing on AIM where shares could be traded in an unrestricted environment. W4U even mooted an opening share price of 30p on AIM – which would translate into a share price of around 300c (three times higher than what W4U shares are being offered to investors in South Africa!).
The minutes from the recent AGM also offered another compromise, noting that “with regard to the lack of dividend payments and the dissatisfaction of a minority of the shareholders Mr. Liebenberg stated that a structure would be put in place to assist those that needed to dispose of their shares.’
If no audited financial statements are available it’s going to be very difficult for shareholders to sell their shares to other investors. Readers of this column will know that I regard buying shares without having access to audited financial statements as the height of investment folly.
Until such statements are produced I would disregard W4U’s claims of R2.6m profit from turnover of R11.2m.
Of course, my favourite, line from the AGM minutes is Liebenberg’s contention that that W4U “will unfortunately remain in a catch-up mode with regards to its diamond production until such time that it has the capital required to expand into the mid-water and develop its own concession areas.’
Want capital? Present the company’s figures audited before attempting to issue shares for cash.
