Patisserie Valerie. When is the selective briefing of an institutional investor legitimate?
When Luke Johnson made his company saving loan to PV, that was the “moment of crisis” that was successfully averted by his action. Even though Mr Johnson clearly wanted to do the right thing and everything he could do to help, it appears that he extended that crisis environment to justify the subsequent selective briefing and rapid dilutive sale to institutional investors in order to repay him as soon as possible.
No doubt a bank would not have made the loan at all…
Whilst shareholders should be grateful for the event that actually saved the company– many chairmen of AIM listed firms would not have had the resources, the fact that he did meant that his loan became a PV corporate event in itself, once made and as chairman acting in the best interests of shareholders, was he right to demand these consequent actions by the firm for his benefit?
Should all shareholders have had the opportunity to buy into a more equitable dilution of stock, no matter that doing so would have been much more difficult and perhaps even unrealistic for the company to execute. It’s certainly true that delay could have meant a growing threat to the liquidity of his bailout cash.
The bad tempered shareholder’s meeting involving Mr Johnson’s dismissiveness to a shareholder who wanted to highlight this matter as reported in the press are unhelpful as well and suggest that there are lessons to be learned even for Mr Johnson who has been commentating on management behaviour for years.
I think on balance, he did the right thing under very difficult circumstances that probably resulted in the least damage to all concerned before investigation findings that may make accusations of fraud at PV and weak management controls and which may be a long time coming.