Digital 9 Infrastructure – Catastrophic Performance Harms Shareholders

ShareSoc has considered the DGI9 case carefully and has approached the FCA. 

ShareSoc member Paul de Gruchy has written previously about disturbing revelations at DGI9. Further research by Paul has revealed apparent failures by TriplePoint, the fund’s former Alternative Investment Fund Manager (AIFM) to comply with the investment policies set out in the fund’s prospectus, contributing to a collapse in DGI9’s NAV and in its share price. 

The case has been considered by ShareSoc’s policy committee which decided to approach the FCA with our concerns about the conduct of TriplePoint, to try to determine the FCA’s stance before considering whether to launch a formal campaign. 

Policy committee member Mark Bentley and Paul de Gruchy (who is legally qualified, a former director of another infrastructure fund, and a former employee of the Jersey regulator) duly met the FCA.  

Whilst the FCA representatives listened to our case, they were not willing to disclose whether the regulator is contemplating any action in this case, citing confidentiality restrictions under the Financial Services and Markets Act.  

They did explain, however, that if they concluded that there is a case for enforcement action, the case would be passed to the FCA’s enforcement department. 

We underlined that action against the company, as opposed to TriplePoint, could further harm shareholders by drawing on the company’s funds. 

We also queried whether companies like DGI9, which own and operate productive assets, should be classified as investment companies (as opposed to trading businesses). We suggested that the accounts of such companies would be much more informative if the subsidiaries they own were consolidated into group accounts, rather than the corporate accounts reflecting a subjective valuation of those subsidiaries. Judging by the discrepancy between market capitalisation and published NAVs, the market is clearly sceptical of the ascribed valuations.ShareSoc will consider what steps to take next and whether to launch a formal campaign. A number of factors will feed into this decision: 

  • What the objective of such a campaign would be and whether the objective is likely to be achievable. 
  • Whether any action risks further harm to the interests of shareholders (see the issues raised here). 
  • Whether there might be sufficient interest from affected shareholders to justify a campaign. ShareSoc’s resources are limited and we must be highly selective in where we focus them. 

 

You can help us on the third point by commenting on this article.  


DISCLOSURE: Mark Bentley and Paul de Gruchy hold shares in DGI9 

5 Comments
  1. Dinesh Sanghvi says:

    As a shareholder, I feel the Directors and the fund managers were negligent in their fiduciary duty and should be held accountable. Thus, as a Shades of member, I support taking actikn.

  2. ML says:

    Is there a US angle which might interest the SEC in some way? Their track record of successful prosecution is in a different league to our FCA.

  3. David Major says:

    What would be the point in reading a prospectus if the key assurances within it can then be ignored?

    Makes a total mockery of the whole LSE rulebook

  4. RM says:

    I’m in full agreement with Dinesh Shangvi’s comment here and support action in this case.

    There should be accountability and shareholder redress in this case, which appears particularly egregious.

  5. Stephen Day says:

    As a shareholder, I have an interest in this.

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