Sunday, 10 July 2011

The story of a shareholding

Back in the summer of 2001, I was relatively flush. I was single, with a decent income and a manageable mortgage. For the first – and probably last – time in my life, I was spending less than I earned each month, and thus building up some savings.

So when Watford announced that they were going to float on the Alternative Investment Market, the idea of owning shares in my beloved club was both attractive and achievable. I dutifully read the glossy prospectus - newly installed manager Gianluca Vialli with Elton John on the front, Tommy Smith and a kid with his face painted yellow and red on the back – but all the detail about cash in- and outflow and fixed assets didn’t make a lot of difference to me. I just liked the idea of having a stake in the club I’d been following since 1970. So on July 24th, 2001, I wrote a cheque for £1,000, and in return I received a certificate showing that I was now the owner of 100,000 shares in Watford Leisure plc.

By December 2002, Vialli (and Elton) had gone, as had ITV Digital, and new chairman Graham Simpson launched a further share offer to try to make up some of the shortfall caused by the combination of the two. By this time I was engaged and planning a wedding, and had to be a little more conservative with my cash. This time they were offered at just 0.1p a share, so for £350 I received a further 350,000 shares, taking my total holding up to 450,000 shares.

After this it gets a bit hazy, because I’m not a financial expert. I know that in late 2003, Simpson went back to the well again, but this time I didn’t participate. Like many fans, I was beginning to feel that I’d poured enough money into the club over the years, and that maybe the board should do their job and work out a way of making the club pay its way.

Because I didn’t buy any more shares, my existing holding was subsequently diluted (by a mechanism I still don’t really understand) by a factor of a thousand, to just 450 shares. Which seemed a bit harsh, somehow.

Fast-forward to 2006 and there was yet another financial crisis. This is the most confusing of all, because as far as I can see, even though I’m pretty sure I didn’t invest any more money, I received an additional 1,080 shares. The prospectus talks about a ‘12 for 5 Rights Issue’, and simple maths shows that 450 times 12 divided by 5 is indeed 1,080.

So, until recently, I was the owner of 1,530 shares in Watford Leisure plc. What I never factored in was the possibility that I could be forced to sell them, but of course, that’s just what has happened. Now I’m sitting here with a cheque for £15.30, which is all I have to show for my 10 years as a shareholder in Watford Leisure plc.

I suppose I ought to cash it. I could spend it on a takeaway pizza and some garlic bread, perhaps, or a couple of paperback books. It might even pay for my admission to a Watford cup tie, now that they’re no longer included in the price of my season ticket.

Looking back over the annual reports from this last decade, I notice that in both 2003 and 2004, one of Mr Simpson’s stated targets for the club was to ‘return value to shareholders’. That aim was quietly dropped in later reports, and in retrospect it’s easy to see why. It was a promise they were never going to be able to keep.

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