Let's hope Cineworld's shameless bonus scheme proposal flops

Figcaption Lets Hope Cineworlds Shameless Bonus Scheme Proposal Flops
Posted at: Author: Rain TV UK

Y ou would assume a 20% family shareholding in the company you run would serve as a strong incentive to get out of bed in the morning. Not so, apparently. Mooky and Israel Greidinger, the headline acts at Cineworld, would also like a super-charged bonus scheme to restore the quoted cinema chain’s share price to its pre-pandemic status.

The blurb from the boardroom says “it is imperative we retain and motivate our highly regarded leadership team through the next phase of the company’s recovery and beyond”. Are other shareholders meant to believe the brothers, chief executive and deputy, are contemplating a change of career?

Cineworld faces revolt by shareholders over £208m share scheme Read more

Come on, the family’s stake in a business founded 90 years ago is still worth £193m. If the share price, currently 69p, gets back to its February 2020 level of 190p, the value of that holding will increase to £530m. That’s a decent prize.

The proposed scheme would see each brother collect shares worth £33m if 190p is achieved within three years. And, in the event of a rocketing overshoot, a cap would be set at £65m. The sums are ridiculous in themselves. The fact that the speed of Cineworld’s recovery depends on national vaccination programmes, and is thus beyond management’s control, merely adds to the silliness.

Fund managers must vote down the proposal. If they don’t, every public-company executive in the land will demand a Covid recovery bonus.

Covid sparks spread-betting boom

The warning on IG Group’s website says 75% of its customers lose money trading its financial spread-betting products. That doesn’t stop anybody having a go, of course, and a pandemic has been beautiful for business – from the provider’s point of view, that is.

The number of active clients at IG increased by 55% in the June to November period, an astonishing figure that helped to generate a 129% increase in pre-tax profits to £231m. To think: a few years ago the question was whether the financial spread-betting boom was over.

Volatility in share prices, which Covid has provided in spades, usually brings out the punters but there are probably two extra ingredients at work: spare time and spare cash.

If you’re in a secure job – and IG says its average client is male, aged between 30 and 50 and earns £65,000 a year – you may have more disposable income than a year ago since you’ve been deprived of foreign holidays and restaurants and so on. Having a leveraged flutter in stock markets fills the space between Zoom meetings, and possibly even during them.

The phenomenon seems to be global. IG is predominately a UK business but its update signalled strong growth in its overseas markets, from Australia to Japan. The US is now in view and IG is buying, for $1bn, a retail-focused futures and options operation called Tastytrade.

The name is a clue that the online brokerage’s style is more excitable than UK regulators might allow when financial derivatives, which aren’t plain vanilla fare, are offered to the general public. But they do things differently in the US. Tastytrade has gathered 105,000 active accounts from launch in 2017, which definitely demonstrates appetite for trading.

What does it all mean? No doubt IG’s clientele are a sophisticated bunch who understand risks. And, if they’ve been on the right side of the volatility in Tesla, Rolls-Royce and Lloyds Banking Group – the three most traded stocks in the last six months – they may even have improved the 75% losing batting average. But remember: a surge in retail investor interest often comes just before markets turn ugly.

Non-executive directors are in vogue

There’s a mini-trend among FTSE 100 companies, when faced with a sudden or hard-to-fill chief executive vacancy, to haul a non-executive director into frontline service.

Jette Nygaard-Andersen at Entain, the Ladbrokes and Coral owner, is the latest appointment. Andy Bird at Pearson, the educational publisher, was another. So, too, Warren East at Rolls-Royce and, in Entain’s sector, Peter Jackson at Flutter, the Paddy Power and Betfair owner.

One can see the appeal. A director already on the board knows the company and the strategy, but should also bring experience from elsewhere. In Nygaard-Andersen’s case, her executive years were spent at a Swedish media group specialising in video gaming and esports, territory that the gambling industry now also has its eye on.

We’ll have to wait to see if non-executive converts outperform others, but less money spent on headhunters is something.

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