Good news on the Bernard Whimp front – the “investor” who first came to notoriety making his cash by managing wholly controlled entities offering people well below what the market price is for a listed security and relying on a few to take the cash whether they realise or not.
The offers nowadays, which seem to come from limited partnerships (not from Whimp personally), come in two sorts:
- a simple low offer; or
- an offer above market price, but with the small print advising that only some of the money will be paid now (as little as 10%) with the rest being owed by the limited partnership and paid over the course of up to ten years.
A copy of the decision is here. Essentially, the offers above market with the deferred payment small print were ruled misleading and reversed. As little as ten percent would be paid up front to the seller – but the shares would still be transferred in full, with the unsecured up to 90% balance owed by the limited partnership purchaser and many years to come before seeing the full colour of the purchaser’s money, if ever. A worse deal is hard to imagine.
His Honour Justice Gendall concluded:
The offer is likely to be misleading and deceptive, as objectively determined by the Court. None of the defendants actively contested that proposition. They simply did not concede any misleading or deceptive behaviour. Even if the test was “beyond reasonable doubt” (which it is not) I am well satisfied to that standard. The impression is clearly given that full payment would be made immediately or promptly, and that the offer price, presented on the face of the document as a comparison with the current market price represented a value exceeding the current share trading price when that was not accurate.
Likewise, the document does not convey clearly that the consideration for the acquisition of the shares was, to the extent of 9/10ths an unsecured loan to Limited Partnerships about which no information was given.
Mr Whimp operated on the basis of the maxim of “let the buyer beware” but did so through a misleading and deceptive mechanism.
Sean Hughes of the Financial Markets Authority commented that they were:
very pleased the Court has today confirmed our view that the ‘deferred payment’ offers made by Mr Bernard Whimp and associated entities were misleading. We accept the Court’s decision. This decision means that investors should no longer be deceived by these kinds of offers. This will not only help to restore investor confidence in our financial markets, but also send a clear message about inappropriate conduct which otherwise damages the market’s reputation.
The Court has ordered that, with the exception of a small number, any agreements made to sell shares to Mr Whimp are cancelled and any shares that have already been transferred are to be returned.
….except for a few shareholders who responded to a communication from Mr Whimp and confirmed they wished to continue with the sale. And, of course, those that simply accepted low offers well below market, with no conditions attached.
You can’t help them all.