Investor Event

Graphite Enterprise Trust PLC

The latest news is at the foot of this page.

This campaign was launched in  August 2012. The following information was issued in a press release:

ShareSoc Launches Campaign on Excessive Share Price Discount at Graphite Enterprise

ShareSoc (the “UK Individual Shareholders Society”), has launched a Shareholder Action Group in relation to Graphite Enterprise Trust Plc. We have major concerns about the persistent discount to Net Asset Value (NAV) at which the shares of this company trade and some aspects of the corporate governance of the company. 

In the view of ShareSoc, and the shareholders in Graphite Enterprise whom we represent, the discount at which the company’s shares trade (about 34% at the time of writing) is excessive. This issue was raised at the recent AGM, and at the previous one, but the directors have made it clear that they do not plan to tackle this issue.

Narrowing the discount to a more reasonable level would give an immediate and substantial uplift to the market price of the shares.

Although the company has more than doubled the dividend recently, that will still only mean a yield of about 1.3% and it has had no obvious impact on the share price. Also the dividend cost is only £3.6m when profits were £29.4m last year, and investment trusts are no longer inhibited from returning all profits to shareholders via dividends due to the recent change in regulations.

The company has suggested that the discount needs to be compared to their peer group, but others such as HG Capital are on much less discount, and some other private equity investment trusts which are on wide discounts have been taking very vigorous steps to tackle the problem. 

To suggest as the company does in the Annual Report that “the key to reducing the discount is to generate demand for the company’s share through strong performance over the long term and communication of the company’s strategy” is really only saying the same as was said at the previous AGM. So far this approach has had very little impact on narrowing the discount.

Our other main concern about this company is that the Chairman and two other directors have been on the board for more than ten years. Are these directors truly independent of the fund manager is a question you should ask after that length of time, bearing in mind that in investment trusts the board is often heavily reliant on the fund manager for advice and administrative support? 

Unfortunately the fund manager often has a vested interest in maintaining the status quo because a discount control policy usually involves share buy-backs or tender offers which reduce the size of the fund.

We would like to see this company introduce a specific discount control policy with more vigorous steps taken to tackle the wide discount.

Interim Results: Some comments on the Interim Results were issued in this note on the 5th October: Graphite_Update_1. We still think the discount is way too high at 32%!

Third Quarter ResultsSome brief comments on the results to the end of October were given in this note: Graphite_Update_2.

Annual Report and AGM Voting Recommendations: This note was issued reviewing the contents of the Annual Report to shareholders, the recent performance of the company, and giving some voting recommendations for the Annual General Meeting on the 13th June 2013: Graphite_Update_3. The discount to NAV has now narrowed to 22% – more reasonable if not perfect – and therefore we consider this campaign has been successful. The likely reasons for the improvement are given in the note. On that basis we consider the campaign concluded unless matters subsequently worsen again.

AGM Report: Note that there is a full report on the Graphite Enterprise Annual General Meeting on the 13th June here

Latest NewsFurther news on this campaign will be posted here as it arises. 

Note that this campaign is now closed. Use the Contact page if you have any questions on it.