12/10/2008 10:45:00 AM
Carphone shares slide as David Ross quits
Carphone Warehouse CEO and chairman Charles Dunstone sought to reassure staff this week as the furore surrounding the resignation of co-founder David Ross grew, as did subsequent calls for an investigation.
At the centre of concern for shareholders is growing speculation around the future of Ross’ 19.4% shareholding in the company, which he is currently keeping.
Dunstone was informed last Friday night (5 December) that Ross had used his shareholding as security for personal loans – a major breach of rules that govern listed companies.
The admission was immediately followed by Ross’ resignation.
Other Carphone shareholders include management, head office and store staff who collectively hold 3.3% of the company. Meanwhile, Dunstone, holds 32.6% of company shares.
At the heart of the matter is Ross’ ability to pay back loans for his other businesses, specifically a retail property venture called Kandahar Retail Estate with investment bank Morgan Stanley.
Ross is reported to have taken out loans of over £200m against his 143 million shares prior to 2006.
Carphone sources have backed up newspaper reports that finance chief Roger Taylor is furious with Ross’ actions, which threaten to destabilise the company.
Carphone issued a statement on Monday (8 December) that said: ‘David Ross has also notified the company that none of these loans are currently in default and that he has no current intention to sell any of his shares in the company.’
The statement added: ‘In addition, he has given an undertaking to the board to facilitate an orderly market, where possible, for any potential future disposal of shares in the company.’
Uncertainty around Ross’ ability to pay back the loans has led to speculation regarding the options facing Carphone if Ross’ financial situation changes from that described in the retailer’s statement.
One City source close to Carphone said: ‘It will all depend on whether Ross is forced to sell the assets to pay back any lenders or if an investigation and media pressure is particularly heavy and drawn-out.’
Dunstone was praised by many close to Carphone for supporting his childhood friend, with many expecting him to ride out the furore and try and build back the share price.
Other options faced by Carphone’s board are looking for a buyer for Ross’ stake in the business, or finding the money themselves, selling off the telecoms business and taking the retail and distribution business private. The final option will require large amounts of cash nd clearance from the financial authorities.
Carphone’s share price has fallen from £3.40 in January 2008 to £1.40 at the start of November 2008 – and had fallen to 85p as Mobile went to press on Tuesday (9 December).
Friday 5 December
David Ross’ representatives tell Dunstone late in the day that he has not declared 136.4 million shares he has used as backing for personal loans to the Carphone board.
Share price: 96p
Saturday 6 December
Dunstone tells key individuals of Ross’ admission. Ross resigns from Carphone.
Monday 8 December (AM)
Carphone chief executive Charles Dunstone informs the London Stock Exchange and a statement is made to the City.
Share price: 87p
Monday 8 December (PM)
Dunstone talks to Sky News reporter Jeff Randall. He claims he did not know about the situation until the board found out.
Share price: 89p
Tuesday 9 December
Dunstone rallies Carphone employees. Meanwhile, Ross resigns from all his roles in the organisation of the London 2012 Olympics and National Express.
Share price: 85p