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Here’s Oliver!

I was working on my next set (non-ISEQ listed Irish stocks) of valuations for The Great Irish Share Valuation Project, and realized there were two very obvious revisions I needed to make… Yup, in my next TGISVP post, I’ll be adjusting the valuations for Siteserv (SSV:ID) and Worldspreads (WSPR:LN), after two scandals in a single bloody day! How do I express my sheer disgust here..?!

Let’s start with Siteserv:

I predicted here that EUR 44 mio would be a pretty good sale price in the circumstances – fairly spot on, as Denis O’Brien‘s now snapped it up for EUR 45.4 mio. Keep an eye on O’Brien, he’s been mostly focused on the Caribbean for the past few years, but I think we’ll now see an increasing change in focus. He’s one of the few Irish on the Rich List who has the firepower, AND the liquidity, to go on a domestic shopping spree. Great fortunes are built from bombed out sectors and economies… Now he’s acquired Siteserv on a debt free basis, their hell-bent growth strategy will finally start to make sense again.

I highlighted the company was cashflow negative, and completely insolvent. This has been recognized in the transaction, with IBRC writing off well over a EUR 100 million in debt. I’m not sure of IBRC’s latest carrying value on this debt, but with the scale of the write-down I’m sure there’s an additional loss implied for the Irish taxpayer. Then again, this was just a recognition of Siteserv’s dire situation – you just can’t conjure up extra value out of thin air. This isn’t the scandal – unless you want to describe prior banker fuckwittedness as a scandal (yawn, old news…). The real scandal for taxpayers is IBRC’s decision to allow EUR 5.0 mio of the sale proceeds to be paid out to Siteserv shareholders..?!

Can you please tell me of a single previous situation where a company’s shareholders received a penny, let alone a 96% premium on the last share price, when the company’s lender(s) were simultaneously writing off over 70 cents on the EUR?

Maybe I’ve missed something somewhere? – but I can’t believe a single politician, journalist, blogger or action group hasn’t picked up on this wretched payoff? Wake up! Sure, maybe the amount’s ‘small‘, but there’s a bloody principle here that surely somebody would like to defend? For once, I’d look forward to someone translating this amount into some inane social welfare/poverty statistic…

And is there any possible justification the IBRC can offer up for handing over this EUR 5.0 mio (that should rightfully have gone to the taxpayer)? Are they worried about citizens…sorry, I mean shareholders voting ‘NO‘ to this transaction? That’s fucking absurd! – if you’ll excuse my fucking swearing… If absolutely necessary, in advance of any vote or after, the company could have been put into administration and then immediately sold to O’Brien with 100% of the proceeds going to the IBRC.

OK, time to get the blood pressure down – hmm, we’ll see – let’s switch to Worldspreads:

I’ve already had some fun detailing/speculating about Worldspread’s previous behind the scenes drama, and highlighting how royally shareholders were screwed on the sale of its Irish business. Little did I foresee they’d pop up a few weeks later to completely re-fuck their shareholders…oh, and their clients and employees into the bargain.

This announcement – of ‘possible financial irregularities‘ – rather predictably mutated over the w/e into the announcement of a shortfall of GBP 13 million in client funds (sigh, can you say MF Global, can you say segregated accounts..?). This is actually rather worse than it seems at first glance – it implies a net EUR 11 mio of Worldspread’s own cash seems to have been pissed away, or otherwise diverted, in the past 6 months too. The scale of these amounts in relation to WSPR’s revenues and balance sheet is colossal – another fine show also from the company’s  advisers…

I considered Worldspreads was always going to be an also-ran (IG Index highighted today they’d an estimated 41% market share, vs. 3% for WSPR). I also speculated the only route to shareholder value was to arrest the company’s expansion mode, and sell it to a larger competitor. Little did I expect this appalling turn of events. The CEO, Conor Foley (who showed poor judgement on the poor sale of the Irish division), and the CFO are now both out the door – even I won’t speculate further about that..!

KMPG’s now been appointed as administrators, and have already concluded there’s no chance of a sale of the company. The company will unfortunately be wound up, and net proceeds paid as a partial reimbursement to clients. Depending on the amounts involved, I expect customers can hopefully look to the Financial Services Compensation Scheme for compensation, but of course this could prove to be a protracted affair.

Hopefully the legal eagles won’t be able to keep all the juicy details under wraps here – this could turn out to be a great Phoenix magazine special some time soon! btw Charlie McCreevy‘s a Worldspreads director, so another right old financial fuck-up for an (ex) Irish Finance Minister…