THE FURY OF SMALL INVESTORS

After years of mismanagement, and millions in pay, Thomas Cook’s blundering bosses face...

THOUSANDS of small investors in Thomas Cook are furious after being wiped out by its demise.

One group which represents individual investors is considering whether there are grounds to sue the auditors after their shares were left worthless, branding the collapse of one of the UK’s oldest tour operators ‘disgraceful’.

While small investors are nursing their losses, the collapse of the 178 year-old Peterborough-based travel company is another crushing blow for the High Street, with more than 550 stores expected to close, hitting up to 9,000 UK jobs.

A total of 21,000 jobs around the world are at risk after the company’s collapse in the early hours of yesterday morning when a complex rescue deal between its banks and largest shareholder, Chinese investor Fosun, broke down.

Some 20pc of its shares are held by private investors, some of whom may have piled in hoping the company secured the rescue package, which was unveiled two months ago.

Russ Mould, investment director at stockbroker AJ Bell, said: ‘Hundreds of Thomas Cook stores will now be shut, adding to the woes depressing the High Street, and investors owning shares have lost almost everything.’

The shares have had a rollercoaster ride since the company took on its current guise in 2007 when it merged with My Travel during a takeover and acquisition spree in the travel sector that also resulted in close rival Tui merging with First Choice.

Thomas Cook’s shares – which traded at about 300p around the time of that deal – collapsed in 2011 when it was seeking fresh loans from banks. Just two years later the travel operator tapped investors for cash. The shares then rallied to around 180p before the latest restructuring effort failed.

Even last summer the shares were trading at 150p, before falling to 3.5p where they closed on Friday.

Cliff Weight, director of investors group Sharesoc, said it was ‘early days’ but that the body which represents small investors was looking at the role of auditors EY. He raised concerns in July about assurances the company gave earlier in the year that its cash position was improving and it was in talks with its banks simply as a ‘proactive’ measure.

Speaking after the company collapsed with £1.7bn of debt, Weight said: ‘We are concerned at the disconnect between management rhetoric and reality, and we question the role of auditors in reviewing trading updates.

‘Gleefully optimistic messaging in the face of corporate failures is not what these announcements are intended for.’

Analysts blamed a number of factors for Thomas Cook’s downfall, including its debt and its slow reaction to online bookings, which have dramatically changed the way customers buy holidays.

It follows the collapse of Monarch Airlines two years ago, when around 1,800 staff were made redundant and an estimated 110,000 customers left stranded.

Mould said even though Thomas Cook had 22m customers, it made just £250m of underlying earnings – about £11 a customer.

EY said it was not its policy to comment on firms it audited.

When Sharesoc raised its concerns in July, Thomas Cook told the Mail the half-year results statement in May had ‘ highlighted a number of risks and uncertainties in relation to the challenging trading environment, including competitive pressure and higher fuel and hotel costs’.

It added: ‘We were also clear in relation to the risks and uncertainties associated with the outcome of the airline review.’

Helal Miah, an analyst at The Share Centre, said: ‘The collapse of Thomas Cook shows that investors need to be very wary of highly leveraged businesses and the dangers of trying to catch a falling knife.’