I will give you the details as I see it.Michael Glennon had been...

I will give you the details as I see it.

Michael Glennon had been on my radar for about a year as I was directed to his old website by a friend who actually became a non executive director in GC1. At that stage you had to be a wholesale investor and MG had had a good track record for a number of years.  We did not get our act together and in fact when MG launched the company I met with him as part of his IPO pitch. It was an instant meeting of values and investment style.

We took up a position in the IPO and got a 1 for 1 option @1.00 with it. The first year it did alright on NTA but the Option was always an overhang and the fund was very small around $22million I think the NTA was up around 13.8 c at one point but you always knew that the options would exercise and the NTA would halve back to around $1.07. That was the old way of floating LIC's you attached an option that hopefully would cover the 3% you paid brokers to get the punters into it. Now that that has blown up the LIC's use other tricks like an IPO price of $1.10 hoping you forget you paid that or the very latest the manager pays the 3% fees to the brokers and recovers it over time as the manager.The other factor was that MG was promoting this in June and July of 2015 when the ASX (XAO) was around 5575. From the moment they got the money the market was dropping and at February 2016 the index was around 5000. So they had struggled against their IPO price and I think many advisors were struggling to make a case for holding in a small fund. 2016 to 2017 I think that most punters really were following and the options exercised pushed down the NTA growth but doubled the size of the fund to around $44 million. I don't think that advisors gave it a real chance as there were fees and commissions to be earned within the churn that occurs each year. Also ( my opinion) I think MG was balancing the portfolio and the people around him and as such didn't really do enough marketing. 

I also don't think that 2016/17 performance was a good as it should have been and a few more shares can to market each month. I think that really that is what I am investing in MG stuck to his plan and the building blocks he had put in place stayed in the portfolio. The team (my opinion) stuck to and honed their strategy where many others would have done the classic - share buyback to improve NTA without actually having to perform. That did not happen - what did was that MG kept buying in the market and backing the company. 

I have often asked investment managers how they manage adversity and very few have said that it takes a lot of conviction to hold the line. My concern about buybacks is that often the shares you can easily sell are in fact the ones that the market wants and what you have left is the underperforming stocks because in clearing to cash those are harder to exit.

Michael got his team honed they knew that the building blocks were there and performance required patience - especially in small caps.

So what happened the stocks started performing and the share price lagged until it didn't and now a lot of investors are talking about GC1.

The next big challenge is how he increases the company size. I am opposed to bring in wads of cash as SOPH's are very happy to churn your stock. So I hope he looks at ways to get shareholders committed to more. I personally would welcome a plan to raise 10% each year by way of a non renounceable rights issue and let those who want to take up excess. That way the company can grow at an orderly pace each year but we can have a company around $100 million in say 5 years with the growth in value as well. 

As regards showing cumulative distributions - Some LIC's have overcome the IPO price by way of paying little or no dividends in the early years. PGF /PAF come to mind but there are a lot more. MG told us that he wanted to provide a fair return for those that wanted part income but that there would be a DRP. I think they started providing the total distributions to show that they had also paid out to shareholders and not just retained income.