One of the things you read all the time from the Sevco fans, on the subject of the Takeover Panel, is that it won’t ultimately cost King anything because nobody will sell their shares for a lousy 20p. Believing that has always required wilful stupidity or a fundamental misunderstanding of the mechanics of the offer, and the makeup of Sevco’s shareholder base.
But let’s for a moment imagine that these people know what they are talking about; even at a conservative estimate the very act of making the offer and putting together the share prospectus is likely to cost King a low seven figure sum.
That’s no joke for a guy who told the judges he was skint at the initial Court of Session hearing.
King will struggle to scrape that kind of money together for what is, in his eyes, a paper-shuffling exercise. But his reluctance to do it doesn’t come from the likely cost of the prospectus itself but the very high likelihood that he is, in fact, going to need to find a large sum of money to actually buy shares when all this has run its course.
See, a lot of people seem to be under the misapprehension that it would require every shareholder to snap this offer up before it cost King any real money; that’s not the case. The legal “trigger” which compels King to actually spend more comes when the number of people who accept, combined with his concert part 30%, equals the magic number of 50% plus one.
In short, if just 20% of the club’s other shareholders – out with King and the Three Bears – decides to accept the 20p per share, he is legally obliged to buy them.
King and his concert party are a mere 13 million shares from reaching that point. Based on the 20p share price, the minimum it will cost him if the 50% threshold is breached is £2.6 million on top of what the share prospectus comes to.
But are there enough people out there holding shares who might want to cash in on them, and which would take Dodgy Dave above the magic number?
Well as it just so happens, there are.
Let’s take the Easdale’s, who are no friends of King and who have been utterly excluded from any part of the board’s activities over the last two and some years.
They, alone, account for somewhere between 5.75 million shares and what Sevco’s own website says they own; around 6.4 million. Even at the lowest estimate, if those guys decide to sell King is a chunk of the way there.
But the Easdale’s aren’t the only ones who might have an incentive to sell. Ally McCoist owns 1 million plus shares. Might he fancy cashing in? That’s worth a cool £200,000 to cut the tie once and for all and walk away one last time with a chunk of change.
Glenmuir bought their shares back in 2012, and have seen them undergo a rollercoaster ride of ups and downs. This is their last chance to make a profit on them … they own 1 million.
River & Mercantile are an investment group who hold 3.5 million shares in the club. In 2015, as King was launching his boardroom coup, they expressed their view that the club was still an undervalued business and said they were in for the long haul.
But heck, quite a lot has happened since then, right? For openers, the club changed hands and far from stabilising it King put it on a trajectory of uncertainty, legal wrangling, fall-outs great and small and not a little scandal. River & Mercantile are also, I believe, one of the companies Sevco approached for emergency financing … only to be told no.
Do they reckon it’s time to bail out? Would you keep those shares if you were in their shoes? That’s a cool £700,000 they are sitting on there, no questions asked. Just to walk away.
And for King that’s the end of the good news because if the Easdale’s sell he’s on the brink and the next set of companies, all “institutional investors” have connections with Charles Green which are so flagrant that Sevco went to court to prevent them using the voting rights that go with the shares … in other words, these are guys who wield no influence at Ibrox, accrue no benefits and who have no reason to do Dodgy Dave any favours.
Blue Pitch Holdings have 4,000,000 shares. Margarita have 2,600,000 shares. Norne Ansalt have 1,200,000 and Putney Holding have 700,000 … a combined total of 8.5 million between them and combined with the Easdale’s enough, without a single other shareholder agreeing to the deal, to compel King not just to make an offer but to get out the wallet.
The total cost, if all of the above decided to sell?
£4 million easy. On top of the operating costs for setting the whole thing up. Which is all before you calculate what the legal expenses for this farce were.
And beyond the 50% point, every single ordinary fan who doesn’t like King and doesn’t think he’s spent enough of his own money on the club, and who decides it’s time to get paid will. On top of that, the £11 million for making the offer has to be deposited, in full, in a bank before this goes ahead. If he can raise it and satisfy the tax man over the water as to its origins.
Who knows what the final bill is going to be when all’s said and done?
No wonder he wasn’t keen on doing this.
Which brings me to the consequences for Other People On The Board.
Sevco has long operated on the principle that it’s director’s “soft loans” will be converted into shares. The document which King’s people are now compelled to produce will, amongst other things, tabulate what the actual value of a Sevco share should be, if they were being traded on an exchange like any other business.
Now, if Phil and Rugger Guy and those of us who believe the current valuation is nonsense are correct – and there are serious people in this group, like David Low – then the other members of King’s board are very soon going to find out what their loans translate to in terms of total shares they’d need to reimbursed by.
Here’s the thing; the lower the cost of a share, the more shares they’ll need to get.
The more shares they get the more danger they’re in that their own share threshold breaches the 30% high water mark of danger which necessitates another offer … and if they have to make that other offer, depending on the conditions attached, there might well be an individual called King who will be sitting on a minimum of 17% and perhaps as much as 30% of the total number of shares … who will be delighted to take their legally binding offer.
And they are not stupid, these people. They know this. That would let King do walking away having made back his money and then some.
In the event these shares are priced at or below the 20p mark these guys are looking at a major problem; do they take the shares worth their loans and cross that 30% threshold or do they do what King and others hope they will … write part of those loans off completely?
These people already feel like absolute mugs. King has made fools of them all, forcing them to keep on the lights because they “love the club” and don’t want to have their hands on the wheel when it veers into a wall. A few may even have accepted that none of that money is ever coming back, but this will make it official and put the tin hat on it.
King’s decision to do things his way has put all these people under the legal spotlight and in potential jeopardy alongside him. The costs to everyone involved are going to run into the millions, even before you consider that failure to convert debt to equity – and how long have we been hearing about this plan? – puts them on a collision course with UEFA.
The media has gone out of its way not to scrutinise the likely effects of this on anyone but King; but it impacts on every member of his concert party and every member of the board. It removes soft loans from the table completely. It certainly takes King himself out of the picture when it comes to financing the future of the club. It puts any future share issue in immediate jeopardy and creates confusion and uncertainty which they don’t need. It leaves an enormous cash shortfall for the next campaign … and nobody willing to make it up.
The dominos do not stop falling when they reach King’s door.
This is a disaster on so many levels, and it could all have been avoided had King not done what he always does, and set about making enemies and lying to the authorities and pissing up against the regulations which he simply didn’t like.
It makes you wonder what else he’s done that we don’t know about, right?
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