Peter Hicks, research analyst at Chelsea Financial Services, has made an extraordinary attack on the board of the former Amati AIM venture capital trust.
In a video posted on Youtube, the VCT broker makes his strongest comments yet on behalf of shareholders dismayed by the board’s decision last year to sack Amati, the UK smaller companies specialist that was its long-standing fund manager.
The appointment of Maven Capital Partners as its replacement has been controversial. Although a leading VCT provider, Maven invests in unquoted private companies which Hicks said was a big change to a “totally different asset class and approach” from the quoted AIM stocks in which Amati manager Dr Paul Jourdan invested.
Shareholders in the renamed Maven Renovar VCT (MRV) expressed their unhappiness earlier this year by voting nearly two to one against the investment policy and, in a first for the VCT sector, sacking the entire board.
“The message couldn’t have been clearer. Shareholders don’t approve of these changes, nor do they approve of the board,” said Hicks.
Since the showdown at the annual general meeting last month the board has limped on, prompting Jourdan to requisition a general meeting of shareholders to oust the board and appoint new directors, including himself.
Robert Legget, the director currently leading the board, has defended the decision to appoint Maven saying under Amati the company’s assets had fallen by £134.5m since February 2021. The portfolio now has assets of £111m.
The corporate governance crisis has cast doubt on the future of the company. Legget has said a wind-down of the portfolio in current market conditions would harm shareholders.
He also believes that a “balanced” approach to returning capital to investors and making “measured” investments in unquoted companies would enhance returns.
Hicks rejected this argument saying the VCT should return to Amati and AIM stocks and that investors could redeploy their dividends from the company into Maven, or other generalist VCTs, if they wished to.
He accused the board of adopting a “bunker mentality”. Instead of stepping down, the broker said they had hit back with assertions that the vote for the policy change would have passed if it hadn’t been for Amati employees, their family and friends.
Hicks said this was “sour grapes from a board in denial and unwilling to accept that their proposals and leadership have been rejected”. Turnout at the AGM was high and reflected genuine investor discontent, he said.
The broker also took aim at the board’s use of performance figures, selecting the worst period in living memory for UK smaller companies to justify its decision. This ignored the excellent long-term of both Jourdan and Amati before the lengthy small-cap sell-off began four years ago.
Hicks accused the board of “capitulation” when AIM was at a low, saying it had abandoned the important investment principles of patience and courage, and set a “toxic precedent” for the sector by ignoring shareholders’ wishes.
“Doing away with one of the most experienced managers in the sector for the sake of some poor mid-term performance is myopic and a bad outcome for the VCT market. And more importantly who gets to decide? Shareholders or a board refusing to listen?”
