A shares scam? No – it’s just a VERY bad deal
Ms M.J. writes: I have been scammed by Obatan. I filled in a form and sent off my Sun Life Financial share certificate as Obatan said they were willing to buy my shares, but I have since received nothing and have been told it is a scam.
LET me say one thing immediately. You contacted me at a time when the Financial Conduct Authority had issued a public warning that Obatan might be providing financial services without its approval. It told everyone to ‘be wary of dealing with this unauthorised firm’ and advised on ‘steps you should take to protect yourself from scams’.
About four weeks later, the FCA withdrew every word of this. It announced: ‘The FCA does not, on the information presently available to it, believe that Obatan LLC is carrying out activities in the UK for which it requires to be authorised.’
So, what are those activities exactly? Well, Obatan – which is based in Glendale in California – has contacted shareholders in a number of companies, offering what are called ‘mini-tenders’. In a nutshell, it offers to buy their shares. This is completely legal, but rotten value for anyone who accepts. And because Obatan says it will only buy a modest stake in the target company, it is not caught by the normal rules involving takeover bids.
Sun Life Financial emphatically said that it did not recommend or endorse the offer, which was for £26 per share. This was about 39 per cent below the price you could have received on the stock market.
I imagine you missed this warning because you accepted the offer and sent your share certificate to Share Registrars, a company in Surrey that acted for Obatan. I asked Share Registrars for a comment and was immediately contacted by Obatan’s London-based lawyers, Edwin Coe.
Firing an unnecessary shot across my bows, the firm’s Russel Shear told me: ‘Please note that our client’s rights are reserved in respect of any information you choose to publish which is defamatory.’ He described the FCA’s warning as ‘wholly incorrect’, and added that the mini-tender offer had in fact been approved by someone authorised by the FCA.
Shear explained that Obatan was simply ‘providing a solution to accepting shareholders to dispose of their shares which might not otherwise be available to shareholders resident in the UK’.
I asked what was the problem that required a solution, and Shear told me it was the fact that Sun Life Financial shares are not listed in the UK. This is true, but they have a proper listing on the Toronto Stock Exchange, so they can easily be sold through a UK broker.
Neither Shear nor Share Registrars would tell me who is the FCAauthorised person who approved the offer, and Shear told me to stop asking questions as Obatan did not want what he described as an ‘ongoing debate’.
While all this was going on, you received a cheque for £3,354 as payment for your shares. If you had sold them through a broker instead of to Obatan, you would have received about £2,000 more.
Obatan has made similar minitender offers for shares in other companies, including Great-West Lifeco – which owns Canada Life – and Manulife. In each case, the offers are 30 to 40 per cent below the stock market price.
This is like me going to my next door neighbour and offering to buy his £20,000 car for £12,000. It is perfectly legal, and if my neighbour somehow assumes that I am being helpful and accepts the offer, then I get his car at knockdown price. But for him, just like Obatan’s offer to you and other investors, it is really, really rotten value.