The Financial Conduct Authority is investigating a £3.6m sale of shares to small investors in a company claiming to revive the Our Price records brand.
Our Price was Britain’s second-biggest chain of music stores in the mid-1980s, but after a series of owners, its last shop closed in 2004. The brand was acquired by Lee Skinner, who has attached it to short-lived businesses such as Our Price Furniture and Our Price TV.
Investors have not lost money in the transaction, although the cash is being held in a third-party escrow account. The FCA is allowing Our Price to use limited funds, but large-scale spending is barred to protect shareholders.
Early last year, Skinner sought to raise £1.5m by offering shares to private investors in a new company, Our Price Records Ltd, at 60p a share, valuing the company at £10.5m. After a second round of share sales, Our Price raised £3.6m.
Despite using the Our Price name and logo, the company was not seeking to tap into the vinyl revival. Instead, Skinner said he would use the well-known brand to become a force in online retailing, as a shop window for discounted goods from leading brands.
The share prospectus said the company would use the funds to launch its website and pay for advertising. It said the “exit plan” was to list on the stock market or sell to a trade buyer for £100m within three years.
In late 2015, the FCA started examining the share sale and in January 2016, the regulator wrote to shareholders to say it was investigating.
Skinner wrote to shareholders on 27 April saying Our Price’s problems stemmed from its accountants, Leigh Carr, not being authorised to approve the prospectus.
The FCA wrote to shareholders on 3 May saying Leigh Carr’s lack of authority was “only one facet of our investigation” and that it was examining whether unauthorised sales agents breached company law, whether Our Price knew about any breaches, and the accuracy of promotional material sent to consumers.
Skinner told the Guardian that he was ready to launch the business in January and the FCA investigation had prevented him from doing so.
“Everything as far as I’m concerned has been done totally legitimately with the objective of a flotation or a trade sale within three years, once Our Price had rebuilt itself. That was always and still is the objective,” he said.
Leigh Carr did not respond to requests for comment. The FCA declined to comment.
Our Price’s prospectus said it would receive commission on discounted products offered through its website. It said there were “arrangements in place” with more than 250 big brands, including John Lewis, Marks & Spencer and easyJet holidays.
The prospectus projected sales of £1.9m in the first year of business, rising to £18.8m two years later, and for pre-tax profit to soar from £424,404 to £17.4m in the same period.
Our Price’s annual return, filed in June, showed 260 investors had bought 4.9m shares at 60p or £1 a share. In addition, Skinner owns 12m shares and his fellow director Karen Ferreira owns 3m.
The 2000 Financial Services and Markets Act says anyone inviting consumers to make investments should be authorised unless the content of the communication is approved by an authorised person. Breaches of the act are a criminal offence.
Our Price shares were marketed by firms claiming to be stockbrokers or wealth advisers. The FCA has warned that at least three of these – Global Capital Wealth, Goodman & Banks and Gemini Asset Management – are unauthorised and has included them on a list of possible scam outfits.
The regulator has been trying, through its ScamSmart campaign, to clamp down on unauthorised agents selling shares.
Frank Booy, a retired scientist, spent £21,000 on Our Price shares when he was cold-called by selling agents including Gemini. “It’s a lot of money. As a scientist, you wander round the world working in different countries for a short time and you effectively don’t get a pension. I was hoping to get some money from this,” he said.
