By Magnus Huntly-Grant
David Ross, the co-founder and second highest share holder of Carphone Warehouse has resigned over questions of impropriety after he used company shares as collateral against personal loans and failed to declare it to the company.
In addition to resigning as deputy chairman questions have been raised with regard to Mr. Ross’ role as Olympic Costs Monitor for London 2012. His appointment to the organising committee was made by Boris Johnson.
Maybe hardest hit by the news was Charles Dunstone, school friend and majority share holder for Carphone Warehouse. He gave a statement saying that the news was received by the board with “great sadness” and attributed the negligence in disclosure as “an oversight or misunderstanding of what needed to be done.”
Carphone have said that Mr. Ross made guarantees against 136.4 million shares at various points between 2006 and 2008. in total he guaranteed 136.4million shares – worth £120 million at todays share prices – as a levy against personal loans. Under stock market rules this behaviour is not illegitimate in itself, however, under these circumstances the company must issue a public statement, a protocol made impossible by Mr. Ross negligence in declaring his actions until too late.
A statement by the company explains that Mr. Ross used the shares as part of a security package which also comprised other assets of “substantial value” and Mr. Ross had “given an undertaking to the board to facilitate an orderly market, where possible, for any potential future disposal of shares
According to Bloomberg data, Mr. Ross owned 19.4 % of Carphone and Mr. Dunstone owned 32.6% on September 26.
Mr. Ross has also done the exact same thing with the 11 million shares he owns in the company Big Yellow Group Plc, a UK based storage company. They have also suffered recent share value losses.
To appease the fears of shareholders, company executives have announced that none of the other board members have used their shares in this way and none of Mr. Ross’ shares have gone into default. Further to this he has no plans to sell his stake in the company. this act, calculated to assuage worries has had little effect as Carphone shares fell more than 6% down to 87p in early trading.