Back in business
Article Date: Jul 01 2004
Serial investor Mark Horrocks has been busy of late with the painful liquidation of his investment trust, Intrinsic Value. But the experience has left him undaunted by the small company world and he’s got plenty of new projects in the pipeline.
Clutter is defined as a disordered heap. That’s an entirely apt description of Mark Horrocks’ office. Teetering piles of reports and documents cover every surface and even find their way to the floor – the state of his office is far more akin to that of some Fleet Street journalists than the typical investment manager. And Horrocks has something of the air of a cerebral features writer about him.
Inclined to ruminate while resting his fingertips together, Horrocks talks in a measured way about small quoted companies and his interest in helping to improve the liquidity of the shares. His manner is intellectual rather than Action Man – the sort of man who reads a newspaper while cycling (slowly) in the gym.
His name has been in the newspapers quite a lot in recent years, sometimes because of his associates, sometimes because there has been a suspected verbal dust-up on the business front. For the past few years Horrocks has been running an investment management business, Intrinsic Value, and its eponymous investment trust. The business Intrinsic Value (now merged with corporate financier Ghaliston) was jointly founded by himself and Luke Johnson, another investment man with an even more decided bent towards journalism.
Boardroom struggles
Perhaps it was that air of the journalist that encouraged them to think that they could be partners, even though they had never previously met. The inevitable split came in 2001, when Johnson wanted to compete against his previous business partner, Hugh Osmond, in buying into a stock market-quoted venture. Evidently the two current partners also decided that they couldn’t work together and went their separate ways. Asked if he and Johnson still talk, Horrocks’ riposte is, ‘On specific topics, no.’
More recently, the battle has been over the future of the investment trust itself. Like many trusts, the share price is at a discount to its asset value. It has been targeted by an Isle of Man group, Laxey, trying to gain control of the board on the back of its near 20 per cent shareholding (and the support of another seven shareholders holding some 24 per cent of the equity).
Horrocks shrugs philosophically. ‘This is what happens when you lose control of the shareholder list and become quoted. My money is also in Intrinsic and if I get it out I can turn it to something else. How can a 20 per cent shareholder have such an influence? The rest of the list is very close to people who have been involved with Laxey in the past,’ he comments stoically.
Back to a clean sheet
Horrocks and the board defeated Laxey’s attempt to gain control and instead devised their own plans for the liquidation of the trust. This has gathered pace in the last few months, and Horrocks adds that, ‘It’s just been one of those enlightening experiences!’
‘[Liquidation] will allow us to start with a clean sheet. I need a bit of time out to make sure I am going in the right direction. Out with the old and start afresh.’
Friends in high places
Where does Horrocks go from here? One of his advantages is that he is both well connected and well respected. Associates include John Gunn, Chris Akers (he shares offices with Akers’ Sports Resource Group) and Mike Edelson, the Manchester-based king of the cash shells. With Gunn, he is discussing an idea for a mini merchant bank for SMEs, involving property specialists as well as potentially becoming a nominated adviser (for the AIM stock market).
Intrinsic Value was regarded as too small and going around talking to people has opened up some new ideas for Horrocks who is looking for a better financial product. Dissatisfaction with an investment trust vehicle, where the share price can become divorced from the asset value, is leading to him setting up an offshore OEIC (open-ended investment company) to invest in small quoted companies and targeting high net worth individuals as potential investors.
Hedge fund managers are also being targeted. They are being given large sums of money to run different categories of assets. In the case of small caps, they need to allow for funds to be allocated to this type of asset without causing themselves liquidity problems. Continues Horrocks, ‘Institutions should outsource the small end of the market to independents to manage.’
Flotation specialist
But he is also looking to be more actively involved in the unquoted sector and in particular pre-IPO funding. ‘Just at the bottom of the stock market you need to create a conveyor belt for small brokers. I think there is a niche down there if we believe in the quoted market and AIM. I will try to help get rid of companies that come to the market for the wrong reasons. I’m interested now in getting involved in companies that want to float – trade sales are not a skill of mine.’
Despite his obvious attraction to small companies, Horrocks started out in that venerable institution, Guardian Royal Exchange, first as investment analyst and then as investment manager. His initial role was in the staff pension fund, but he ended up with responsibility for the UK equity content of the main life fund, with a value of £2 billion throughout the 90s.
When he left GRE in 1997, he ‘sat at home for a year and day-traded.’ He also had about 20 small companies that he invested in. There was a range of activities from owning a couple of golf courses/driving ranges in Bolton (his original neck of the woods) to setting up Madisons Coffee (now renamed Gourmet Holdings).
Adds Horrocks, ‘I’m very happy with the progress at Madisons. There’s been a share placing with the Kaye family and Robin Ray [well-known investors in restaurants] and the business is buying Bell and Dragon, a range of gastro-pubs. I think at long last it will come to something.’
In search of a cash shell
His long-term commitment to businesses has also led him to fund e-media-c, a company which delisted from OFEX a year ago to save money, but now, on the back of a contract with the BBC, Horrocks is looking for a cash shell to bring it to AIM later this year.
He has also supported the buy-out of financial website Interactive Investor from Ample, thinking there might be a consolidation play with online businesses Hemscott and ADVFN. Like many small-company devotees, Horrocks just likes dabbling at the bottom end of the pool.
