12/10/2008 2:43:00 PM
The future of Ross’ shares is crucial
David Ross’ staggering ‘misunderstanding or oversight’, as the City were informed this week, has been fantastic fodder for The Daily Mail and the rest of the mainstream media. It has all the ingredients of a great popular news story: rich man, dodgy dealings, links to the political establishment and a plentiful gallery of photo-friendly girlfriends.
There is greater significance for the media given the story’s ability to tap into the current public mood. In times of economic pain for everyone, he can be held up as the embodiment of the absurdly rich, and a modern fable for getting into debt to fuel an aspirational lifestyle and believing in the hype of the property market.
I think the long-term significance for Carphone rests on what happens to his shares. Will Ross have to hand them over? If so, who will take them on? The share price will undoubtedly take a hammering if Ross is forced to surrender his 20%, and the fallout is an unwelcome distraction for the business.
My understanding is that there has been a buoyant mood at all levels of the organisation, and the events of the last few days have not really had an impact. And although it reflects badly on Carphone’s financial governance that it either allowed Ross to use his shares as collateral for massive loans or simply did not know, there does not appear to be any effect on the Carphone business for the foreseeable future.
What it will do is provoke some serious explaining with Carphone’s new American partners, Best Buy. After paying the £1.1bn for 50% of the retail business, it could hasten the purchase of the remaining half.