Monday 1 June 2015

The Alarm Bells Ringing Loudly Back in 2012

A letter from Bruce Mauleverer and Michael McInerney, both clients of Rivington Street Holdings and Tom Winnifrith

Mr Mark Robertson, CEO
Rivington Street Holdings Plc
Third Floor
3 London Wall Buildings
London EC2 1Y

26 July 2012

Dear Mr Robertson,                                                                                        By Email
Request for Information
Introduction
This letter is written as a formal request for the disclosure of information about the many events leading up to the sale by Rivington Street Holdings Plc (RSH) of 50.1% of the share capital in Rivington Street Corporate Finance Plc (RSCF) – in a recent  management buy-out. This letter is written on behalf of Michael McInerney and myself, both of us writing in our capacity as shareholders in RSH.

At all relevant times we understand that Jim Mellon was Chairman of RSH and Tom Winnifrith (TW) was CEO. We have each had a longstanding relationship with TW. My first purchase of units in the SF T1ps Smaller Companies Growth Fund was in November 2007. For all relevant purposes TW was our point of contact in the investments that follow. There is a clear audit trail of emails, comments and suggestions that illustrate the enthusiasm with which he recommended these holdings. We always regarded TW as a man of high principles and integrity, who would carry out excellent research and would not recommend any stock or fund unless he was satisfied that it was a sensible asset to acquire.

We are dismayed about what has become of RSH and RSCF – and to the value of our holdings; and we are almost completely in the dark as to what has happened in recent months.

We discount of course the fact that the markets have fallen dramatically and that small company stocks in particular have been hit hard.  That is not our concern.  Our concern is about transparency and about the equitable treatment of shareholders. It also relates to issues such as Due Diligence and compliance with FSA regulations and guidelines.

Because we are so much in the dark, we have decided to set out a chronological list of my purchases, simply to set the scene (Mr McInerney made similar investments which can be listed if necessary); and then to ask a series of questions with a view to elucidating what has happened and why our holdings have become so severely depressed in value.

The RSH website at present says:
We're having a bit of a spring-clean at the moment and we'll be launching a new website shortly.
That is not very informative.

Chronology of Share and Fund Purchases

Worship Street Investments Limited/Athol Gold and Value Limited
With the active encouragement of TW, in May 2009 I subscribed for 1,500,000 shares in Worship Street Investments Limited (WSI).  The shares were 2p each. I invested £30,000. My wife Sara subscribed for 500,000 shares costing £10,000.

In June 2010 I invested in a further 2,272,727 shares in WSI (at a cost of £50,000). These shares were placed in my SIPP.

Our understanding was that WSI invested in a wide range of private and listed companies. However, whenever we asked TW for information about the fund we were not given meaningful information. It seemed that TW was not running the fund.

In February 2012, we were told, without prior notice or consultation, that WSI had sold its portfolio to Athol Gold and Value Limited (AGV); and my wife and I were each issued with ‘Consideration Shares’ in AGV (3.81 Consideration Shares for every share held).

Following this communication, in February 2012 I was sent a share certificate that showed me as holding 7,460,408 shares in AGV. My wife’s share certificate, sent at the same time, shows a figure of 1,908,477 shares.

On 6 July 2012, AGV made an announcement that referred to the continuing decline in the value of its investments and gave an indicated NAV of 0.16p for its shares as at close of play on 29 June 2012.

For reasons that I do not understand, my Suffolk Life SIPP statement (through Stocktrade brokers) shows that I have a holding of 8,674,894 shares in AGV, for which it is said that I paid £24,289.70 (rather than £50,000) and which are now said to be worth £9,889 (at 11p per share). I have not yet contacted Stocktrade to request information about this anomaly; but on any view the shares are now worth a fraction of what I paid for them.

Elite T1ps Smaller Companies Income & Growth Fund
My Stocktrade account describes these shares as Way Fund Managers Elite T1ps Smaller Companies Fund. I appear to hold 49,751 shares, for which I paid £50,000. They have declined in value by 33%.

First Artist Corporation Plc/Pivot Entertainment Group Plc/Reach4Entertainment Enterprises Group Plc
In February 2011, I bought 190,000 shares in this company for £38,000. At the same time my wife bought 60,000 shares for £12,000. TW phoned me and strongly recommended that I subscribe to the issue as the stock was likely to go to 40p within a reasonable period of time.

In May 2011 I bought two further tranches of shares in this company: the first for 35,000 shares at a cost of £10,430; and the second for 126,495 shares at a cost of £39,485.

On 2 June 2011 we received a letter from the Share Centre to say that the company’s name had been changed to Pivot Entertainment Group Plc. On 14 May 2012 we received a further letter to say that the company’s name had been changed again to Reach4Entertainment Enterprises Group Plc.

My shareholding in Reach4Entertainment Enterprises Group Plc (noted as comprising 161,495 shares) is now showing a loss of 83% (always assuming that I could sell at the Bid price in the market).

High Road Capital Plc/Agneash Soft Commodities
In March 2011 I subscribed for 4,000,000 shares in the above company at 0.5p per share – an investment of £20,000.

In June 2011 I was informed that the company had changed its name to Agneash Soft Commodities (‘ASC’).

My shareholding in ASC is now showing a loss of 44% (always assuming that I could sell at the Bid price in the market).

Port Erin Biopharma Investments Limited
In August 2011 I bought £50,000 worth of shares in this company. Later that month I bought a further £10,000 worth of shares. The total number of shares that I bought was 600,000. The value of the shares has declined in value and we do not feel that we have been kept properly informed.

Elite T1ps India Fund
In October 2011, I invested £50,000 in this fund.

In June 2012, when it was clear that nothing was going to happen to this company, I sold my shares for £49,240, representing a loss of £760.

Rivington Street Holdings Plc
In May 2011 I invested £50,000 in RSH and placed it in my SIPP. RSH was one of TW’s hot tips for the  year.

In December 2011, as the direct result of a telephone invitation from TW, I bought a further 120,000 shares in RSH at a price of 25p – costing £30,000. These shares now appear to be valueless (or perhaps worth 1.5p at best).

SF T1ps Smaller CompaniesGrowth Fund
My wife and I have each bought substantial quantities of units in this Fund. I note that on my Share Centre account this Fund is now called SF Webb Cap Smaller CompaniesGrowth Fund.  I have received no notice of this change of name.

SF T1ps Smaller CompaniesGold Fund
My wife and I have each bought substantial quantities of units in this Fund. I note that on my Share Centre account this Fund is now called SF Webb Cap Smaller CompaniesGold Fund. I have received no notice of this change of name.

Michael McInerney: Investments
Michael McInerney invested in all the same funds and stocks; and a chronology of his purchases can be provided if necessary. The only addition in his case is his investment in the EIS Fund, details of which are provided below.

EIS Fund
In 2009/10/11 Michael McInerney invested £50,000 in EIS Funds 1,2 and 3, which have recently been valued at £36,725.

On 18 July 2012, Suzanne Collins of RSH wrote to Mr McInerney:
Since the departure of Tom Winnifrith we have been without a dedicated investment manager for these schemes, although they are still beingmonitored and we do have a resource we can call upon should it beconsidered necessary.  Both the FSA and FSC are aware of the currentsituation.

This is clearly unacceptable.

Generally
On 11 July 2012, Lucy Williams of Peterhouse Corporate Finance (formerly of RSH) wrote to us;
Please see attached the rivington street holdings announcement from this morning which states MBO of Rivington Street Corporate Finance (the department I work in) was concluded this morning and Peter Greensmith (CEO of RSCF) and the team now own the majority of the company. We have now moved offices to 31 Lombard Street and changed our name to Peterhouse Corporate Finance. Please note my new email address.

If you have any queries on any of the investments made through Rivington/T1ps please do feel free to ask me and either I or one of my colleagues should be able to provide you with an update.  

As you can imagine, we have many questions about the foregoing.

Questions
  1. Please confirm that TW was CEO and COO of RSH at all relevant times.
  2. Was TW also COO or some other officer of Athol?
  3. Please confirm that Jim Mellon was Chairman of RSH at all relevant times. What role has the Chairman played in this debacle?
  4. How were investment decisions made? Was TW answerable to the board of RSH or was he a free agent? Did the Board approve the transfer to the Isle of Man? Who made the final decisions?
  5. What was the reason for the precipitate departure of TW?  He has told us that he is bound by a confidentiality agreement.  However, where there has been such a longstanding relationship of trust, we as shareholders are clearly entitled to know what happened. There was much online rumour and gossip; and the whole situation, from our perspective, was and is far from satisfactory.  Please explain.
  6. There has been considerable ambiguity as to TW's current and future role, if any, with RSH. Please let us know the true position.
  7. WSI/Athol: We based our investments on the trust we had in TW; but this may have been misplaced. The fund does not appear to have been properly run and decisions seem to have been taken in panic or on the hoof. The only common denominator with other investments was RSH via TW. Please explain the basis for investment decisions.
  8. Upon what factual basis was I encouraged to invest such a large amount of money in WSI?
  9. Why did Athol take over WSI’s investment portfolio? We had thought that Athol was a gold company?
  10. On 13 June 2012, Suzanne Collins of RSH wrote to MrMcInerney:Agneash Soft Commodities was bought out by another company called Athol Gold.  Athol Gold was investment advised by TIM (IoM) but is now advised by Tom Winnifrith directly so I will ask him to get in touch with you about this, and any questions you have should go to him.At the moment I am not sure who is providing the investment advice to the Elite Fund, it was Way Fund Managers themselves, but they may have passed it on to another adviser.  I have asked them for specific contact details but they have not yet come back to me – if you would like to contact them yourself on the number I provided I am sure they will be able to help – or when I have a response I will let you know.
           
            Later that day Suzanne Collins wrote again:
            The portfolio within Agneash was taken over and effectively became a holding within Athol Gold – therefore as Athol gold was investment advised by Tom effectively Agneash was too.  Agneash became a shareholder in Athol Gold and as that is an investment company the portfolio became part of the underlying assets of Agneash.

            Were those statements true and correct? If not, why not?[1]

  1. Following our investments we regularly had to chase for valuations and updates. These were regularly promised but insufficient detail was provided. Please explain why that was the case.
  2. We were not advised of the restructuring plans and the difficulties RSH had in running the fund that had apparently invested in unquoted or Plus Market quoted shares. Please explain why that was the case.
  3. We were advised indirectly that WSI had been taken over by Athol; but we received no explanation or rationale. TW was apparently COO. Why were we not informed?
  4. Were investment decisions in WSI/Athol taken after appropriate due diligence or only after personal contact and gut feeling? This question applies to decisions made in other funds as well.
  5. Athol appears subsequently to have been integrated with Agneash, although weare not at all clear as to what occurred.  Please enlighten us. The common factor was TW; but was this a RSH board decision or TW acting independently?What happenedwas very unclear and far from transparent.
  6. We have similar questions for each of the other funds and stocks. For example, who is running the Elite Fund? Why has there been such a lack of transparency and communication?
  7. Why was the India fund wound up?
  8. Why was JPJ Share discontinued?
  9. Who are Way Fund Managers and what is their role?
  10. What has happened to or is to happen to T1ps.com?
  11. If RSCF was and is a company that has ‘strong performance’ of its business (see the announcement of 11 July 2012), how was it thought to be in the interests of the shareholders of RSH to sell 50.1% of RSCF in the buy-out (for £300,000 in cash) noted above?
  12. Please advise how RSH and/or the relevant Investment Managers carried out their Due Diligence duties.  This is a matter of critical importance to us; and we need to be informed how investment decisions were made and generally about the issue of process.

Conclusion
As you will see from the above chronology and list of questions, there is much to cause us grave disquiet as to what has happened to our respective portfolios; and we both feel aggrieved by the lack of communication and apparent disregard for our interests as shareholders.

We would appreciate carefully detailed, candid and transparent answers to our questions.

We reserve the right to ask further questions and to refer this correspondence to the FSA.

We look forward to hearing from you.

Yours faithfully,





P Bruce Mauleverer                                                    Michael McInerney





[1] Also on 13 June 2012, TW wrote that Agneash had not been taken over by Athol; that it remained listed on Plus; and that he did not run it.

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