Derek Pain: Now shareholders in small-caps are joining revolution

Shareholders are, at long last, banding together to give managements a much harder time. It seemed that the recent round of revolts was largely confined to the bigger elements of the stock market, such as insurance giant Aviva. But little-noticed events have shown that small-cap directors are not immune from shareholder anger with two former constituents of the no-pain, no-gain portfolio among those coming under fire.

Perhaps readers should not be too surprised at the difficulties that entrapped Goals Soccer Centres over the £73.1m takeover bid from the Ontario Teachers' Pension Fund. A few weeks ago I expressed surprise at the price the directors of the five-a-side football group had approved and recommended shareholders to accept. The Canadians offered 144p a share, a figure that looked absurdly inadequate when measured against previous levels.

Five years ago Goals shares topped 400p. In the intervening years the company prospered, although, perhaps, not quite so much as some anticipated. Even so, the shares were clearly worth more than the downbeat offer.

Indeed, the portfolio enjoys happy memories of the shares, selling at 300p, more than doubling its money. I dare say many existing shareholders were not prepared to consign history to their bank statements. Some could have paid more than 400p; many others considerably above 144p. Why, they asked, should they be expected to accept a stunning loss that is largely due to the disastrous lethargy that has embraced so many small-caps.

After all, Goals still played a rewarding game and had grown from around a dozen centres five years ago to 43 and also ventured overseas. The takeover, conducted through a scheme of arrangement, required a 75 per cent majority. In the event the bid collected support from 61 shareholders, amounting to 71.4 per cent of the voting capital. The 19 who voted against commanded the remaining votes and, therefore, blocked the deal.

With the Canadian pension fund, more or less, out of the takeover arena for six months, Goals shares have taken a kicking and, as I write, are 118.5p. Perhaps I should re-recruit them. After all the board is clearly receptive to bid action. Lighthouse, the accountancy and wealth management group, is the other ex-constituent to feel the weight of shareholder anger. The group's proposal to delist its shares from AIM was comfortably defeated. A meeting was requisitioned seeking the removal of David Hickey, chairman for 10 years. It seems rejection of the AIM withdrawal had already prompted Mr Hickey to depart at the time interim figures are announced, probably later this month. However, the call for his removal prompted him to bring forward his resignation. New chairman is Richard Last, a man who has featured in other past portfolio constituents.

Another example of shareholder pressure is Mouchel, the support services group that in happier days I considered for the portfolio. Shareholders were so disgusted by a rescue package, and, I suspect, the performance of management, that they turned down a scheme that would have given them a miserly one pence for each share they held. Although there is an element of self harm, their message was loud and clear; because of the circumstances surrounding Mouchel's plight they were prepared to ignore such a pittance. Mouchel subsequently opted for administration.

The so-called shareholders' spring has, as indicated, mainly focused on leading companies with voting against often excessive pay and perks gathering momentum. I would suggest some under-performing small caps should also be the subjects of such revolts. For too long shareholders have been prepared to meekly go along with controversial board proposals.

Now the rebellion has gathered such support that I suspect many a board is now prepared to scale back what could be regarded as unpopular proposals. Pay and perks have been the driving force for most complaints but shareholders, even among the small-caps, are prepared to resist what they consider moves that go against their interests. Perhaps, at last, the real owners of companies and not the employees are in the ascendancy.