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I’ve sold all my shares in Arden Partners. The reasons for my change of heart are first, Luke Johnson resigned as Chairman. He is a veteran of many company boards, and an entrepreneur, and I put a lot of weight on his ability and his attention to Arden to justify investing in this company in the first place. I take his departure after his shares have fallen so much as a bad sign. I may be wrong, but I take it as an indication that he has done what he can with this business and he would rather concentrate his time improving other businesses in his portfolio.
The second reason for selling is that I’m struggling to understand whether this corporate broker and market maker has a good future. The loss of the ability to bundle the cost of research on small companies with brokerage charges when it buys/sells shares on behalf of institutional clients has led to a great deal of uncertainty regarding its income from trading.
On the corporate finance side (helping companies raise money), we have a few years of no growth in client numbers: 39 in 2013 and 38 in 2017. Companies simply do not want to join AIM or the Main Market of the LSE and so do not need Arden to help with the process, nor do they need on-going Nomad and broker services. It still has the other bread and butter financing activities to keep it going – but where is the growth?
I sold at 36.4p (market capitalisation of £11.3m with 31m shares), having bought at 42.2p in Sept 2015 and received 1p in dividends, resulting in an 11% loss.
(Previous Newsletters: 1st – 7th Sept 2015, 25th Feb – 8th Mar 2016, 9th – 11th Feb 2017, 13th Mar 2017, 19th – 20th July 2017)
Why I bought
In September 2015 what I saw in this Midlands stockbroking firm was a market capitalisation of a mere £8.1m, but with £5.9m in cash, easily marketable securities holdings of £1.66m and a net current asset value of £8.86m.
Also, in the previous four years it had increased the number of corporate clients from 32 to 44.
Furthermore Luke Johnson (Pizza Express, Channel Four. Patisserie Holdings, etc.) had recently spent £1m (10.76%) buying shares in this company.
Another good sign: Arden had bought-in £1.44m of its own shares, following £2.6m of buy-backs 2010-13.
Also, the directors held over one-third of the shares and there were a lot of ex-directors with large holdings looking over the current directors’ shoulders, so there should be alignment of shareholder and director interests.
But there were problems:
First, it had produced a
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