Thursday, 27 August 2009


How to avoid the shark infested waters 
of the City and win

Date 27/08/2009

Penny Sleuth - The Penny Shares Expert | By Tom Bulford

In the debate about City bonuses the question that never seems to be asked is this. Where does all the money come from? From the little guy, of course – the outsider like you and me.

But it’s one of my great aims in life to contribute as little as possible into the City bonus pot. That’s why I refuse to pay money to fund managers to manage my money. Why would I when I can make my money grow much faster than they can, without all the extortionate costs?

But for an example of how this great money transfer process works I recommend that you read Anyone Can Do It, the autobiography of Duncan Bannatyne.

The fight between the dragon and the shark

These days Bannatyne is best known as one of the dragons in ‘Dragon’s Den’. But his life story is a great deal more interesting than that of a mere TV celeb. Brought up in a poor part of Glasgow, Bannatyne graduated from doing the paper round as a kid, to driving an ice-cream van. Then he started running care homes and then moved into health clubs, making millions along the way. The chapter of his book that I especially enjoyed was entitled ‘Shark Infested Waters.’

In 1991 Bannatyne’s Quality Care Homes had opened nine nursing homes. He wanted to open more, but the banks would not lend him the money. ‘At this stage,’ he said,’ I didn’t know the first thing about stocks and shares… I’d never even heard people talk about the City.’ He was in for a rude awakening.

Bannatyne decided to raise some money by selling some of his shares on the Stock Exchange. He needed a broker and began to ring up some likely candidates. Some seemed interested. But then Bannatyne clicked that they were only trying to pump him for information to pass on to their other care home clients. Eventually a greasy specimen called Bob Lederman stepped up. He said that ‘he was looking to add a nursing home company to his portfolio and agreed to take me on’ – note the condescension.

Soon Lederman started to tell Bannatyne what was required. He started by recommending some of his friends as non-executive directors. These were headed by Chairman Hamish Grossart who demanded £20,000 per annum for two days work per month plus a very large share option. Next Bannatyne had to appoint a PR firm, from whom he soon received his first bill, 22% more than he had agreed.

‘What is the 22% for?’ he queried. ‘Oh, don’t worry,’ was the reply, ‘that is usual practise.’

The process went on through endless meetings with countless advisers and other hangers-on. All the time, Bannatyne felt bewildered, patronised, and uncomfortably aware that he was paying for it all.

On one occasion an adviser visited the nursing homes in the north-east of England, allowing Bannatyne to pay for a lavish lunch. Later, when Bannatyne got his expenses claim, he found that the adviser had claimed for ‘sustenance’ on the train. Bannatyne got him to admit that he had not in fact eaten on the train and asked why he had claimed. ‘Well, it’s usual practice, Duncan. Everyone does it.’

Bannatyne was unhappy that the broker was deliberately undervaluing the shares so that those of his friends who were lucky enough to receive an allocation would make an easy profit. And he also knew that the broker would make a handsome commission as these favoured few traded out of the shares and others bought in. His mood was not improved by having to host a huge dinner for all the advisers and investors the night before the shares made their stock market debut.

How the little guy called the City’s bluff... and won

Here Lederman presented his bill. A fee of £80,000 had been agreed but, guess what, a further £12,500 had been added for expenses. Bannatyne asked to see the list of expenses. Lederman was unable to produce it. ‘It’s usual practice,’ he said. But Bannatyne refused to pay, Lederman threatened to abort the deal and both stormed out of the room.

‘You know what really p***es me off?’ yelled the broker, ‘It’s that lots of people in this building worked really hard on this and now they are not going to get anything out of it because you’re pulling the flotation.’

‘You’re the one pulling it,’ Bannatyne shouted back. He stood firm, called Lederman’s bluff and eventually won the day.

Suffice to say that Bannatyne does not have a high impression of the City. And neither do I. I would rather that you did not contribute to those City bonuses. You can make good money in the stock market without going near these sharks.

To view the original of this article CLICK HERE
Hamish McLeod GROSSART52 born 07-Apr-1957

SPECulative Society of Edinburgh Member

Non-Executive Chairman joined the board as chairman in 1996.
Cairn Energy PLC
currently also non-executive deputy chairman
Cairn India Limited
a non-executive director Member and Chairman of the Audit, Remuneration, Nomination & Corporate Governance Committees
British Polythene Industries PLC
Deputy Chairman
Artemis Investment Management Limited
a non-executive director

Scottish Radio Holdings
Digital Bridges
Barker & Dobson - (Drayton Consolidated Trust) - Alma Holdings
Royal Doulton

He has over 20 years' experience on public company boards, in a wide range of industries,
both in an executive and non-executive capacity, frequently with catastrophic consequences.

He has left:
a long trail of broken lives, betrayed staff, colleagues and women,
who have suffered from his emotional inadequacies and lack of maturity.

A weak and bullying individual, who brings shame and unhappiness to his children,
and those who misguidedly cared for him, as he sets out to prove his worth to himself.

Always acting egocentrically at the expense of those he can bully, exploit and control.
An emotional Narcissist & a manipulative sociopath.
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