By and large, I’d characterise the mood of the UK stock market as cautiously optimistic. The overall global trend is a mildly bullish one with the next US earnings season about to kick off any day now. UK equities represent decent value but there’s the consistent worry about politics – Brexit, the defenestration of PM May and the impending arrival of JCorbyn as PM (!).
Given this cautious optimism, any big and/or divergent price moves (outside of the energy sector) always tend to draw my attention. Two small caps top the David Stevenson watch list this week. The first is Stanley Gibbons, which just a few weeks ago put itself up for sale. Potential bidders include Disruptive Capital, where Edi Truell is chair. Fincap is currently taking offers! The share price shot up to 13p at one stage – still well down on a 1 or 2-year basis. But in the last few days, the share price has drifted a great deal lower, hitting 10.5p today. A cursory perusal of the RNS list reveals some big share dealing notifications some featuring everyone’s favourite opportunist Toscafund plus a long list of other parties including Hamish Munro, Roger Guy, Anthony Banwell.
SG represents something of an enigma wrapped up within a puzzle, presented as a dog’s dinner. I’ve tracked it for many years now largely because it represents a supreme irony: it controls an asset class (stamps) but has singularly failed to work out a way of properly monetizing it. I admit to being a bit of a closet stamp fiend and one of my earliest FT columns looked at research involving LBS’s Prof Elroy Dimson which showed that stamps represented a viable alternative asset class – emotional, yes, less than liquid, undoubtedly but also potentially offering decent long term returns. At the centre of this global emotional alternative asset is SG, with its publishing business, its market making and its investment activities.
But therein lies the problem. Cynics like me were always suspicious that the market price seemed to be guided by the main market maker, the main publisher and the main buyer. Something seemed peculiar about this state of affairs. And then Stanley Gibbons started offering guaranteed investment funds. The word guaranteed always struck me as an inappropriate term to deploy with anything also involving the word investment. There is, beyond government-backed schemes, no guarantee of anything in investment, ever …except that there is no guarantee of any guarantee. So Stanley Gibbons’ various fund and investment initiatives always struck me, as, well…a bit peculiar again.
And then the inevitable fall from grace. To be fair the root cause of the original problem seemed to be that the underlying businesses weren’t performing as expected with the recent purchase of an interiors/auctions business the chief culprit. But as the Augean stables have slowly been cleaned out by the new executive team, other issues have emerged, not least that the business has inherited a large amount of stock it struggles to sell. A new management team have been put in place and they seem to be doing a great job which is why the announcement of a sale process possibly caught some of us off guard. Why not wait for another year to let the restructuring process work its magic? Or is the state of affairs worse than we first thought? Who knows, but Stanley Gibbons should be a great business – in the right hands. Which makes the recent sell-off in the shares even more peculiar. The cynic in me is starting to worry that there may be some hidden nasties.
On a completely unrelated score, I note that the share price of specialist finance outfit GLIF has dropped precipitously in the last few weeks. Its currently trading at around 12.5p, well off recent trading levels between 20 and 25p. Now I must declare at this point some interest or ‘form’ when it comes to GLIF. First off, I’ve known GLIF very well for many years, largely because my alternative finance website www.altfi.com often features them within their superb coverage of this fast expanding universe. I’m also a non-exec director of a fund that used to be closely connected to GLIF – the SQN Secured Income Fund which used to be known as the GLI Alternative Finance fund.
For the record, I have no involvement in GLIF nor any inside knowledge about what’s going on. But what does strike me as odd is the plummeting share price – down a whopping 53% over the last six months. The core businesses within the now slimmed down group – which includes offshore HNW lending platform Sancus, growth funder BMS and what was once Platform Black – appear to be trading well. The business also has plenty of cash. My guess is that many of the small private investors who used to invest in GLIF for the high dividend yield have been progressively selling down. But given the sheer quantum of the share price decline, that must be a very large number of people selling down their shares all at once! Another potential concern could be wider developments within the alternative finance space – maybe another crisis at a leading alternative lender rather in the style of last year’s blow up at LendingClub? But again, I can’t see any evidence of impending stormy weather – in fact, the share price of some leading P2P funds (such as P2PGI) has actually gone up in the last few weeks. And although I can see some weakness in the UK domestic economy, I can’t see that being a huge driver of the GLIF share price in the short term. The mystery deepens.