FCA regulated online brokerage firm London Capital Group Holdings plc (LON:LCG) has announced changes it is making to its management and employee compensation programs.
Essentially, many of the shares and warrants granted to existing staff only become ‘in-the-money’ and of value if LCG’s share price rises above 46 pence per share. Given that LCG’s current share price sits in the 3-4 pence range, 46p is more than 10 times the current share price and is therefore not much of a reasonable carrot.
The repricing, however, still requires a significant (but more attainable) increase in LCG’s share price in order for management and employees to benefit, thereby aligning their interests with those of LCG shareholders, who also would like to see a move up in the stock price. The new target prices will be between 4.7-5.3p per share.
The company also announced new share grants to several senior managers in the company. The new share grants have an even higher in-the-money price of 7.4p – requiring a more than doubling of LCG’s current share price before they become of value.
The full text of LCG’s press release on the matter follows:
22 November 2016
LONDON CAPITAL GROUP HOLDINGS PLC
(“London Capital Group”, “LCG”, the “Company” or the “Group”)
Joint Share Ownership Plan (“JSOP”) and issue of Warrants
The JSOP was set up in June 2010 to provide long-term performance-related incentives to employees and to assist with the retention of key employees. There are currently awards under the JSOP over 5,885,000 ordinary shares (“Ordinary Shares”) in the Company (“Existing JSOP Shares”), which are held jointly by the Company’s existing employee benefit trust (the “Existing EBT”) and the relevant employee under the terms of the awards. 5,035,000 of the Existing JSOP Shares were allocated in January 2015 (the “January Existing JSOP Shares”) and the other 850,000 Existing JSOP Shares were allocated in June 2015 (the “June Existing JSOP Shares”).
The holders of the Existing JSOP Shares would currently benefit from the growth in value of an Ordinary Share above a price of 46 pence per share. The Existing EBT currently holds a further 6,595,000 unallocated Ordinary Shares (“New JSOP Shares”).
The Ordinary Shares held in the Existing EBT (including the Existing JSOP Shares and the New JSOP Shares) equate to 3.4 per cent of the Company’s issued share capital and are worth around £390,000 at the current share price. Given that the Ordinary Shares’ current mid-price is approximately 3.125 pence, the existing JSOP awards, as currently constituted, clearly do not provide appropriate incentives for management and employees.
The Board, having taken legal and financial advice, has therefore decided to revise the terms of the JSOP awards in respect of the Existing JSOP Shares so that employees holding such awards will now benefit from the growth in value of an Ordinary Share above, in the case of the January Existing JSOP Shares, 4.7 pence per share or, in the case of the June Existing JSOP Shares, 5.3 pence per share. This compares to 46 pence per share as was previously the case for all of the Existing JSOP Shares. This revised share price represents, in the case of the January Existing JSOP Shares, an approximate 50 per cent. premium to the current share price, or, in the case of the June Existing JSOP Shares, an approximate 70 per cent. premium to the current share price.
The Company also announces that the New JSOP Shares have now been offered to employees as JSOP awards. Those employees awarded New JSOP Shares will benefit from the growth in value of an Ordinary Share above 7.4 pence per share. This revised share price represents an approximate 137 per cent. premium to the current share price. The New JSOP Shares will only vest in full after 21 November 2019.
The following Existing JSOP Shares are held by directors and persons discharging managerial responsibilities:
|
Name |
Position |
Number of Existing JSOP Shares |
|
Charles-Henri Sabet |
Group CEO |
5,000,000 |
|
Charles Poncet |
Non-Executive Chairman |
200,000 |
In addition, the following New JSOP Shares will be offered to persons discharging managerial responsibilities:
|
Name |
Position |
Number of New JSOP Shares |
|
Andreas Kontos |
Cyprus CEO |
1,500,000 |
|
Mukid Chowdhury |
UK CEO |
1,500,000 |
|
Antonis Antoniades |
Cyprus CFO |
1,000,000 |
|
Georgios Stylianou |
Cyprus Chief Sales Officer |
1,000,000 |
|
Simon Henry |
Head of Compliance |
200,000 |
|
Laurence Crosby |
Head of Markets and Risk |
150,000 |
The amendment of the existing JSOP awards and the grant of the new JSOP awards will not alter the total number of Ordinary Shares in issue.
Given the limited quantum of the current incentivisation plan, it has been decided to augment this plan by establishing a new employee benefit trust (the “New EBT”), the beneficiaries of which include the management and employees of the Company. The Company and the New EBT have therefore entered into a warrant instrument pursuant to which the Company will grant warrants (“Warrants”) to the New EBT to subscribe for 100,000,000 Ordinary Shares at an exercise price of 7.4 pence per share, equivalent to an approximate 137 per cent. premium to the Ordinary Shares’ current mid-price. The Warrants may be exercised at any time in the period expiring on 21 November 2019. The use of the Warrants in this arrangement will effectively provide the New EBT with access to Ordinary Shares without creating an increased financial burden on the Company, as would be the case if LCG had to lend funds to the New EBT to acquire Ordinary Shares in the market.
If the Warrants are exercised, it is intended that the Ordinary Shares will be issued to certain employees of the Company in due course, potentially under the JSOP or another incentive plan. The issue of the Warrants does not alter the total number of Ordinary Shares in issue. However, if the Warrants were exercised in full by the New EBT, the total number of Ordinary Shares in issue would increase by 100,000,000. The Ordinary Shares held by the Existing EBT (including the Existing JSOP Shares and the New JSOP Shares) and the New EBT would then, in aggregate, be equivalent to 23.5 per cent. of the Company’s enlarged issued share capital, however, these Warrants would only start to represent any value to potential beneficiaries once the Company’s share price had increased by 137 per cent. from its current level.
The amendment to the existing JSOP awards held by directors, constitute related party transactions under the AIM Rules. The directors (excluding Charles-Henri Sabet and Charles Poncet), having consulted with Allenby Capital, the nominated adviser to the Company, consider that the terms of the transactions are fair and reasonable insofar as the Company’s shareholders are concerned.
The notifications below, which apply in respect of the amendments to the terms of the JSOP awards in respect of the Existing JSOP Shares, are made in accordance with the requirements of the EU Market Abuse Regulation:
Notification and public disclosure of transactions by persons discharging managerial responsibilities and persons closely associated with them.
The LCG press release including the aforementioned individual management disclosures can be seen here.