This blog gives you the latest topical news plus some informal comments on them from ShareSoc’s directors and other contributors. These are the personal comments of the authors and not necessarily the considered views of ShareSoc. The writers may hold shares in the companies mentioned. You can add your own comments on the blog posts, but note that ShareSoc reserves the right to remove or edit comments where they are inappropriate or defamatory.

Two more AIM Exits – Ludorum and Armour Group

Two more departures from AIM were recently announced – Ludorum (LUD) and Armour Group (AMR).

Ludorum have been developing a market for their animated children’s TV series based on Chuggington trains and associated consumer products. But revenue has never really taken off as investors hoped. Along with the interim results announced on the 15th December (again somewhat disappointing), the company announced a proposed delisting from AIM.  These are the reasons given in the announcement:

The factors taken into consideration by the Directors in reaching the conclusion above include:

– there has been a significant fall in the Company’s share price which, in the opinion of the Board, is not justified by the Company’s performance or prospects;

– like many other small listed companies, Ludorum suffers from a lack of demand for its shares and, in practical terms, a small free float. As a result, the Board believes that there is currently no reasonable prospect of the Company being able to use the listing to raise money from other investors;

– the low liquidity in the Company’s shares tends to lead to a volatility in the share price which the Board believes may distort any objective assessment of the Company’s value;

–  the Board believes that, in the light of the above, the costs associated with the listing are not justified as being in the best interests of the Company or its shareholders.

These arguments are surely sound (and match the comments made in the last ShareSoc Informer newsletter on other AIM delistings). The trading in the company’s shares was minimal. The revenue and profits of the company surely do not support the cost of an AIM listing. The company hopes to provide an alternative trading system after it de-lists.

Another company that may leave AIM is Armour Group which is the subject of a mandatory takeover bid by major shareholder Bob Morton and an associated concert party, although the bidder has subsequently said that they intend to maintain the AIM listing. The cash offer looks likely to be accepted as the concert party already holds 47% of the shares. This company actually presented at a ShareSoc seminar back in October 2013 when some investors attending developed a somewhat jaundiced view of the business after asking a few questions – well at least this writer did (ShareSoc members can read the review written at the time in a previous ShareSoc newsletter). Subsequently the company disposed of its operating divisions and became a cash shell. Surely not a company that would be missed.

What’s the moral of that story? That you can learn a great deal about a business and its prospects by listening to what the management has to say and asking a few questions. Looking at the financial forecasts alone can be very dangerous.

Roger Lawson

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