The demise of Goals Soccer Centres (LSE: GOAL), whose shares were delisted from AIM at the end of September, provides a good lesson on the dangers of investing in AIM-listed stocks and the weaker regulatory environment that entails.
Goals, the “leading operator of outdoor small-sided soccer centres,” had been incorrectly declaring VAT going back several years and was set to be hit badly by the error. That’s the kind of thing I’d hope wouldn’t go unnoticed on the main London market.
Goals ended up embarking on what is known as an AMA Process, inviting offers for its business and assets, and one of the early sniffers was Mike Ashley’s Sports Direct International (LSE: SPD).
We finally had confirmation of possible cash offer a week before Goals’ shares were delisted. The deal would have been worth 5p per share, though the business itself described it as “preliminary and highly caveated.”
It all came crashing down this week, amid an unseemly display of recrimination and accusation. Following on from Monday’s notification from Sports Direct that it doesn’t, in fact, intend to make an offer for Goals, on Wednesday the sportswear retailer launched an astonishing tirade. It alleged that “Goals and its board did not truly engage with an offer process; access and co-operation was limited and fitful.”
The attack continued, saying: “It would be convenient for those concerned if Goals, and its corporate history, disappeared as a result of the AMA process,” and cranked up the rhetoric with: “This leads Sports Direct to conclude that the behaviour of the Goals board, and its apparent failure to spot and deal with the issues, amounts to incredible incompetence and ignorance, wilful or otherwise, at the very least and potentially far worse.”
The assault ended, after urging regulatory investigation, by alleging that “independent shareholders of a UK listed company get wiped out through the skulduggery of others.”
As far as investors go, well, there’s nothing anyone who holds any shares can do at the moment but hang on and see what the AMA process might generate. If there’s any investigation into the VAT accounting errors at Goals, I hope it will shine some light on what I consider to be appalling bad oversight by the AIM regulatory regime. I don’t hold out much hope, though, as we’ve seen a continuing string of oversight failures from AIM companies for as long as I’ve been investing in shares.
Erm, buy SPD shares?
What about Sports Direct? Well, that company has managed to wipe out 60% of its shareholders’ value since a share price peak in August 2015 without needing to resort to any skulduggery, and there have been no dividends to compensate. And while Sports Direct’s earnings have been tumbling, Ashley has been spending his time and money in various attempts to spread his high street presence, like the disastrous acquisition of House of Fraser.
Though the price has picked up in the past couple of months, I’m still steering clear of Sports Direct shares. One of my reasons is that I want to see top quality management in my companies, and Wednesday’s shocking display further convinces me I’m not seeing it in Sports Direct.
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Alan Oscroft has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
Motley Fool UK 2019