The Elephant in the Room

Given The Takeover Panel’s success in procuring a Court of Session Order to compel Dave King to make an offer for all Rangers International Football Club Plc shares not owned by the Concert Party it would be practically impossible for King to remain a director unless he complies with that Order.

The co-option of Barry Scott to the Board and the elevation of Alistair Johnston as a person with significant control could be construed as repositioning, however it will be whether or not King makes the offer of 20 pence per share to all the shareholders not included in the Concert Party that will determine what happens next and we shall know whether he does later this month.

Irrespective of whether or not King complies with the Court Order this story is far from over and will continue to hamper Rangers’ prospects until it is conclusively resolved.

A King resignation as a director of RIFC would reduce the prospect of contaminating the club, it’s directors and advisors from the full effect of cold shouldering should he decline to make a offer.

That would mean that King, as distinct from RIFC, had financial pariah status and not the club. That is the correct thing to do and should have already occurred but, instead, Rangers’ financial reputation has been dragged through the mud by association.

What should not be underestimated is the reality of cold-shouldering, not for just the offending party, but for those involved in business with the offending party. The consequences are dire for the individual or organisation who falls foul of the rules, making it impossible to carry out normal business activities within the sphere of influence of The Panel and the same consequences face those who shelter the cold shouldered. It should be appreciated that there are members of the RIFC board that are members of regulated financial professions who would be further prejudiced through association with a cold shouldered non resident King.

Perhaps unfortunately for a large slug of the mainstream media and football authorities, financial pariah status pursuant to cold shouldering in the UK coming on top of criminal convictions in SA would be impossible to spin in any positive way or to maintain continued fit and proper status. I mean, we could have the SFA cold shouldered, couldn’t we? All said though, the cognitively dissonant will carry on regardless.

If King does the right thing by resigning from the board, it is still important to appreciate that the ‘4 Bear’ Concert Party as determined by The Panel will continue to exist irrespective of how King deals with the instruction to make an offer for the shares. That is the elephant in the room that remains; the Concert Party via their shares and loans will retain the same level of control they currently have and remain compelled to abide by The Panel’s rules. King’s resignation would not remove that impediment.

It doesn’t end there. By challenging the authority and insulting the intelligence of The Panel and the Court, King has ensured all large share transactions in RIFC will be scrutinised and questioned and could additionally determine, for example, that the Concert Party is increased to include Club 1872 and Barry Scott on the basis they are working in concert with King and/or other concert party members.

There are some who think that The Panel has been slow to respond and impose sanctions and that they are all bark and no bite. It would be wrong to think so. The reality is that King has moved the whole dispute into uncharted territory. There has been no precedent for such continued brazen and naïve flouting of Panel rules. Accordingly, The Panel has chosen to move at its own pace, dotting the ‘i’s and crossing the ‘t’s and I suggest they’re being methodical rather than indecisive in dealing with the estimable Mr King.

The true value of RIFC shares was a key point in the recent court case with all kinds of claims being made. Some think that the lack of significant arm’s-length trades makes it impossible to arrive at a correct price, and others say that the price paid to Mike Ashley in recent trades is the benchmark. In my opinion, neither is correct. Current and prospective shareholders have the financial figures in the accounts to work with, and can determine the real worth from there. On that basis it is clear to me the shares are not worth anything like the last alleged trading price on Jenkins. Rather it seems that the shares only have nominal value given the business has never declared a profit, continues to lose money and is reliant upon ongoing shareholder loans to stay in business.

Any subsequent share issue – even with King gone – could muddy the waters further; The Concert Party members may expose themselves to another Panel instruction to make another offer should any of its members acquire more shares without coming to an arrangement with The Panel beforehand. To illustrate such an arrangement, Dermot Desmond procured Panel permission to increase his shareholding above 29.9% the last time Celtic had a share issue. This is preferable to trying to hoodwink the financial authorities with tall tales.

It should be clear to all followers of RIFC’s financial travails that the status quo is unsustainable. So, the question is ‘what’s next’? The chairman’s statement that accompanied the annual accounts once more talked about loan to equity conversion without reference to the impact of the existence of a Concert Party amongst the RIFC Board of directors and providers of loans. This is remarkable as any such conversion cannot take place without the permission of The Panel and/or without dragging the other directors and lenders into the quagmire with another possible offer for the shares not owned by the Concert Party.

So, what should happen and what is required for RIFC to rid itself of this terrible yolk? The answers are pretty obvious; King should make an offer of 20 pence per share to all those shareholders not included in the Concert Party. He has said the shares are worth more than that and that no one would accept. If he’s correct he has nothing to worry about and he would create a clear path forward for Rangers; he would resolve the dispute with The Panel and create the conditions for a debt to equity conversion.

So, why might that not happen? Because if the shares are worth 27 pence as the directors have suggested that means the loan to equity conversion should be at the same price and, of course, if the shares are not worth anything like that there would be a rush to accept 20 pence and the ball would be on the slates, so to speak.

It appears to me the board is stuck between a rock and a hard place and that King will resign and there will be no offer. If this happens the position would be precarious. The current board doesn’t have the credibility, money or experience to take Rangers forward. Being a true blue should not be the defining characteristic of what’s required to make Rangers competitive but it appears to be the preferred qualification of most of their customers. I believe Rangers need a new owner with a controlling shareholding and deep pockets to sort out this mess and I have reason to believe this view is shared by some of those with influence. That is not to say that a solution is imminent, but the reality check is at least a start.

NO MORE OLD FIRM

New York City, November 8, 2017

When Celtic fans and supporters of other football clubs rebuke the Scottish mainstream media for continuing to refer to the Celtic and Rangers coupling as the ‘Old Firm’ it is invariably to do with the fact that the Rangers club currently competing in the SPFL is only five years old and that the Old Firm moniker died when the old Rangers club entered liquidation in 2012. The purpose of this epistle is not to gloat over the demise of one half of what was the Old Firm but rather to focus on why the moniker was used and why it really is no longer appropriate.

The term Old Firm arose because of the economic benefit and superior financial status derived from the religious dimension associated with their respective supporter bases; Ibrox Park’s proximity to Harland and Wolff fuelled religious bigotry in the Govan shipyards inspired similar at Ibrox Park whilst Celtic’s genesis lay with poor Irish immigrants, the majority being of the Catholic faith. Essentially, this meant both clubs were able to attract supporters from out with their respective immediate environs and gave them an economic advantage over all of the other clubs in the then SFL. This manifested in better players and, de facto, more trophies than any of the other clubs.

In these bygone days of old Rangers was the Protestant establishment club, always financially bigger than Celtic, and won more trophies whereas Celtic was very much the outsider and often the victim of anti Irish and anti Catholic racism. This was most evident in season 1951/52 over the flying of the Irish flag at Celtic Park; the SFA had determined that the flag had to be removed but, interestingly, it was Rangers’ casting vote that helped ensure the flag remained. Rangers rationale was clear; there was money to be made out of the relationship and had the SFA carried out their threat to expel Celtic from the SFA, then Rangers would have been financially worse off for it. In short, the Rangers Celtic dynamic was good for business and the Old Firm an appropriate description for their relationship.

However, the Rangers’ alpha male status in the relationship started to fragment in the 1960s as Celtic’s everyman appeal grew accompanied by greater success on the field of play. Indeed, since the appointment of Jock Stein in 1965 Celtic has been the more successful club. Rangers’ final demise and, for most, the end of the Old Firm came in 2012 with the club’s liquidation following decades of financial losses and unsustainable levels of debt.

The successor Rangers and their various boards of directors since 2012 appear to have learned few lessons from the previous club’s demise; three directors of the old club are now directors of the new club and are pursuing the same business model that bankrupted the old club. That business model involves a superior and ‘no one likes us we don’t care’ attitude to all and sundry when, of course, one should care coupled with continuously spending more than one earns financed by unsustainable amounts of debt. I’m afraid to say this adventure only has one likely ending and it’s not a happy one if you’re of a blue hue.

The new Rangers may wear the clothes of the old club but it is not on an economic par. It cannot legitimately be part of any ‘Old Firm’ as it is neither old nor on a financial par with either its predecessor or Celtic. The old Rangers had revenues of £56.3 million whereas the new club has revenues of £29.2 million. This compares with Celtic’s revenues of £90.6 million. So, Celtic’s revenues are 3x those of new Rangers. Celtic also has a stock market value of £175 million which is more than 10x that of the current Rangers’ value. Even when Celtic was at it’s lowest ebb in the immediate pre Fergus McCann days the divide between the Old Firm clubs was not as big as the current one between Celtic and Rangers. In the absence of a trophy investor with only a passing interest in financial solvency it is difficult to see how the latter can financially compete with Celtic. Indeed, the more realistic challenge for Rangers is to do better than Aberdeen, Hibernian and Hearts where the financial gap between the four is less than the one with Celtic.

In all of this there is a temptation for Celtic supporters to crow over the Rangers predicament. That would be a mistake. Celtic is demonstrably in a financial league of its own and the Old Firm axis is clearly no longer extant. That is a problem for Celtic; if Celtic’s domestic competition is poor, over time Celtic will regress to the mean and the step up into Europe will become greater. Also, Rangers now has more in common with the other clubs than it has with Celtic and if these clubs determine they cannot move towards Celtic the alternative is to pull Celtic towards the rest. With that in mind, beware of any efforts to tinker with the SPFL’s revenue distribution models!

Pax Vobiscum et Serva Fidem.

Blog from Tallin

A very interesting three days comes to an end.

This little country has only really existed in most of our lifetimes since 1991. As most will probably know prior to then it was part of the USSR until that imploded. Consequently, you have an adult population that is familiar with authoritarian or centralist government and less questioning of government dictats than is the case in the U.K. This is relevant because it has enabled the government to embrace technology and roll out a raft of sweeping reforms to every day life. Two of the most relevant are the introduction of biometric ID cards and online voting. It is the ID cards that have enabled the rollout; these cards hold all your personal information and are compulsory for all nationals. These cards double up as passports in the Schengen territories, as driving licenses and for online medical prescriptions. There are draconian sanctions imposed on anyone who attempts to access an ID account without authority or good cause, however, that will not be good enough for libertarians and big brother devotees even though it’s right up the Scottish government’s street.

That said, the Scottish government could learn a lot from the Estonian experience and, indeed, there is a representative in our party. Every country needs a USP and Estonia’s is technology. Scotland hasn’t really had one since slavery ended and shipbuilding died. It does, however, have advantages that it hasn’t maxed out. These are prowesses in education, engineering and speaking English as a native language. These are fantastic characteristics to apply to the global fintech market. I have fintech business to hand out. I hope I can keep in Scotland but I suspect some of it will go to Estonia.

Estonia time…🛫

And so the week begins with a wee jaunt to Estonia after a dam good weekend……a record victory for Glasgow Rocks against Manchester Giants. What more could one ask for 😀!

Why Estonia? Well, it’s a fintech trade mission consisting of a Scottish government representative and a few technophiles and investor types. Estonia happens to be a pretty dynamic country at the cutting edge of financial technology. In 2000, the Estonian government introduced a law that made wifi access a basic human right and was the first country to include online voting in government elections.

Estonia was in the USSR until 1991. It’s a pretty small country with a population of circa 1.3m and it’s capital is Tallin. It is in Northern Europe and borders the Baltic Sea and Gulf of Finland and includes more than 1,500 islands.

It joined the EU in 2004 and adopted the Euro as its official currrncy in 2011. It has become one of the EU’s most economically successful members.

It was never won the Eurovision Song Contest.

SCOTLAND’S FIRST HOUSE PURCHASE WITH SCOTCOIN

A residential apartment in Glasgow has been sold for 10 million Scotcoin. It is believed to be the first time a property in Scotland has changed ownership using a crypto currency to settle the transaction. At the current exchange rate for Scotcoin it is the equivalent price of 60,000 GBP which will be the price used to calculate LBTT liability to the purchaser and is the GBP Home Report Valuation. The seller is well known Scottish businessman, David Low and the purchaser Is Peter McGowan, a businessman based in Corby, Northamptonshire. David Low said, ‘I am a great believer in crypto currencies and I think Scotcoin, in particular, has a very bright future as Scotland’s very own crypto currency. Peter wanted the flat and I wanted more Scotcoin so we’re both happy’ Peter McGowan said ‘I needed a flat in Glasgow for a family member and David wanted more Scotcoin, so the deal was done’. Willie Fleming of The Scotcoin Project said “I’m very proud that the property market has now entered the Scotcoin ecosystem. The very fast, low fee transactions offered by Scotcoin will make the market more efficient for both buyers and sellers alike”.

Note:- Scotcoin is a crypto currency established in 2014 by Derek Nisbet, a Scottish fintech entrepreneur. It operates on the Bitcoin blockchain using the Counterparty protocol and has a market value of 10 million USD placing it in the top 200 of global crypto currencies as measured by the USD value. In 2016 all intellectual property associated with Scotcoin was acquired for an undisclosed sum from Nisbet by Scottish fintech investors, David Low and Temple Melville The investors’ desire is for the Scottish Government to adopt Scotcoin as the country’s unofficial crypto currency. It is acknowledged that currency is not a devolved responsibility whilst Scotland remains part of the UK. Scotcoin could only become an official currency if Scotland was independent of the UK or current legislation was changed.

BUY SCOTCOIN @ Exchange.ScotcoinProject.com© 2017 The Scotcoin Project CIC | Company No. SC437322 | VAT registration No. 254267596

Scotcoin – Whit’s it all aboot?

Scotcoin is a crypto currency established in 2014 by Derek Nisbet, a Scottish fintech entrepreneur. It operates on the Bitcoin blockchain using the Counterparty protocol and has a US dollar value of circa US $10m placing it in the top 200 of global crypto currencies as measured by US dollar value.

In Q1 2016 all intellectual property associated with Scotcoin was acquired for an undisclosed sum from Nisbet by Scottish fintech investors, David Low and Temple Melville (“the investors”).

The investors also have an interest in The Scotcoin Project CIC (“TSP”), which has been set up to educate and inform the general public about blockchains, crypto currencies and Scotcoin, in particular. TSP also holds a trademark license number RC000070800 to use the Scotcoin name, logos and associated intellectual property. The investors have funded TSP to date and the current intention is to make further donations as required.

The investors have believed for some time that distributive ledger/blockchain technology is systemically disruptive, at a very early stage of adoption and development and will manifest in the mainstream of business and social life over the next decade or so. They are also of the view that crypto currencies will gain widespread acceptance over a similar timescale. There are currently circa 200 active country specific fiat currencies in the world and it is expected that crypto currencies will operate alongside a significant number of them and, of which, Scotcoin would be one.

It is apparent there are still only a relatively small number of professionals and advisors with a working knowledge of blockchains and crypto currencies. This is also true of governments and central bankers as well as the general public. However, these numbers are increasing and it is only a matter of time before the technology becomes more widely understood and accepted and enters mainstream society. This has been the evolutionary path taken in recent years by personal computers, mobile phones, the internet and online shopping.

It is also sensible to assume that when governments and central bankers and their advisors have a full understanding of the power and effectiveness of blockchain technology that they will seek to regulate all asset classes of value that are capable of anonymous transfer to third parties. In fact, it is an effective given that this will happen. This would mean that all participants in a market would require to be financially regulated. This is expected to be achieved by registering assets on private blockchains; current and prospective holders of crypto currencies, brokers, bankers and market makers will all have to be identified and KYC and AML approved prior to participation in the market. Parties that do not comply with these requirements will be operating illegally.

The investors’ preference is for the Scottish Government to adopt Scotcoin as the country’s unofficial crypto currency. In saying this it is acknowledged that currency is not a devolved responsibility whilst Scotland remains part of the UK. Scotcoin could only become an official currency if Scotland was independent of the UK or current legislation was changed.

The investors are also of the view that Scotcoin will have to migrate from the Counterparty blockchain to its own private blockchain in order to comply with the anticipated direction of the market.

The principle objectives for Scotcoin are to:-

1. migrate to its own private blockchain where all participants are identified and regulated,
2. achieve conversion directly from fiat to Scotcoin without involvement of any intermediate currencies,
3. establish an efficient secondary market for trading in Scotcoin,
4. formulate and implement a business plan to increase circulation of Scotcoin to everyone on the electoral role in Scotland and
5. formulate and implement a business plan to increase the number of outlets willing to accept Scotcoin in exchange for goods and services provided.

The investors are engaged with professional advisors on a formal and commercial basis to:-

1. complete a whitepaper for migration of the current Scotcoin ecosystem to a private blockchain,
2. engage with prospective investors to assist in delivering the migration,
3. highlight the benefits of Scotcoin to the Scottish Government and
4. present the roadmap to the Scottish government in 2018.

Adoption or approval of the roadmap by the Scottish government will involve the investors donating the intellectual property associated with Scotcoin to the Scottish people via an appropriate legal entity, most likely to be TSP.