x Abu Dhabi, UAEWednesday 26 July 2017

It pays to know the aliens behind your investment

The men behind a company may help determine the value of a company for investing.

Unless you are a successful businessman or an individual of independent means, a surefire way to induce an existential crisis about the direction your life has taken is to browse the notifications of share dealings of executives in publicly quoted companies.

Such as those of BG, now my sole (and, it would seem, steadily diminishing) holding.

Having thrown my entire fictional wealth into this stock, gambling - on nothing more substantial than a threadbare understanding and dubious application of the theory of Fibonacci retracement patterns - that the current dip in the until recently rocket-like rise of this share was nothing more than a drawing of breath before a resumption of stratospheric growth, I now find myself in a difficult position.

If I lose my nerve and sell now, with my portfolio worth a near all-time low of £15,530 (Dh90,960), I will suffer a grievous loss. Of course, if the price continues to fall away it will become only more grievous; less than two weeks ago, I was £2,000 better off but at the current catastrophic rate of decline I could soon have less than the £15,000 I started with back in June.

Nevertheless, I'm going to give it one more week, at the end of which either my faith in Fibonacci will have been vindicated or the current momentary downturn will have taken on the calamitous characteristics of something altogether more sustained.

This week, I was going to tell you about my sideshow adventures in Forex training, but that will have to wait. I know, you must be horribly disappointed, but if you are even faintly considering getting into online day trading that is a state you had better start getting used to.

Instead, I found myself breaking cardinal rule number one by abandoning rigid reliance on System A (in which "A" stands for "Any") and scouting around for intelligence - sifting through the bins, as it were, for any clue as to why the behaviour of BG's share price might be defying my turkey-ham-fisted predictions.

And that's when I stumbled on The Fabulous Life of Martin Houston. And friends.

It all started in 1948, when today's BG began life as British Gas, a nationalised British public utility operated on behalf of the government and the good people of the UK. All was fine and dandy until 1986, when the Gas Board, as it was fondly known, was privatised as part of Margaret Thatcher's ideology-inspired fire sale of formerly national assets.

This privatisation, worth £9 billion (Dh52.73bn) and at the time the biggest share offering of its kind, was the subject of the notorious "If you see Sid ... tell him!" advertising campaign. This was a gift to all stand-up comedians but especially those on the left of the spectrum, for whom it was the personification of the Conservative Party's attempt to boost its voter base for generations to come by the cynical creation of a new share-owning class.

But let's not trot out all that old-school Trotskyist resentment. Instead, let's take an envious peek at the career of Martin Houston, currently BG's executive vice president and managing director for the Americas and global LNG.

Houston - based, somewhat confusingly, in Houston - is a geologist who, whether by luck or design, joined British Gas in 1983, just three years before privatisation. Now 52, he became vice president of the BG Group in 2000 and was appointed to the board in 2009.

On November 4, the company posted a notice that Houston's wife, Jane, had ... well, I'm such a financial ignoramus that I have no idea what she had done, but it seemed to involve some kind of transfer of 100,000 shares. But whatever it was, my eye was drawn to the PS: "There is no change in Mr Houston's interests in the issued share capital of BG Group plc," it said. "Mr Houston continues to have an interest in 786,351 shares."

Incredulous, I reached for my calculator. Unless I am mistaken (and I am prepared to admit the possibility), with BG's shares currently worth just over £12 each, that would mean that Houston - in addition to his salary, fringe benefits and pension - is sitting on a nest egg worth about £9.5 million.

Crikey. This Houston most definitely does not have a problem. I do hope he votes Conservative.

Not that anyone had to tell Frank Chapman, who, as BG's chief executive, is Houston's boss. Chapman joined British Gas plc as managing director, exploration and production, in 1996, a decade after privatisation, and came to the post via private-sector experience with BP and Shell. Appointed to the board in 1997, he was made chief executive in 2000.

In April this year, there was great public indignation in the UK when it was revealed that, in the wake of a 17 per cent rise in the company's share price in one year, Chapman's remuneration package for 2009 had amounted to £28m, including salary, shares and pension contributions.

Even the head of the CBI, the employers' organisation, warned that with such gigantic payments executives risked being viewed by their employees as "aliens" - aliens, he added, whose pay had risen since 2000 from 47 to 81 times as much as the average pay of their workers.

Fair play to Chapman and colleagues, I say. But what is one to make of the fact that on November 11, five days after his company's share price hit a two-year high of £12.96, Chapman cashed in 85,000 of his shares in the company, for a price of £12.80 per share, realising a cool £1m-plus?

Daughter's wedding? Splashed out on a yacht? A couple of nights at Emirates Palace? Whatever the cause, it's loose change for Chapman, who is still sitting on 1.9m shares (and I can't even bring myself to work out what they are worth), but I couldn't help noticing.

 

jgornall@thenational.ae