Another investor in R&Q has come out swinging at embattled executive chair and director William Spiegel.
An open letter published on Phoenix Asset Management’s website by Gary Channon, cofounder and CIO at the firm, has dealt further blows to Spiegel’s tenure, which is due to be voted upon in a special board meeting on 13 September. A section of shareholders of R&Q have called upon Spiegel to stand down from his roles with former founder and executive chairman Ken Randall stepping back in.
In his letter, Channon says Spiegel is ‘wanting’ in three categories of shortcomings: competence, alignment, and integrity.
Channon said that the company is ‘not competently led’, writing: “From our first dealings with him we realised that he struggled with intelligent capital allocation at a company level. He couldn’t work out the impact of the dilutive capital raise he had just foisted on us. He couldn’t grasp that he needed to understand the value of what he was giving up, not just the return on the capital he was raising. We have other examples and have picked up as part of our research monitoring process other anecdotal evidence of a person who does not have a good grasp of the details.”
He added: “The underlying point though is that R&Q is not competently led, this is known internally and by key stakeholders and this is damaging the business which will ultimately have detrimental consequences.”
He went on: “An example of a misalignment is the management’s action during this latest saga. We had become aware that Brickell’s initial bid for the company was £2.20. The bid was accepted and the very next day, William disclosed to the bidder that the company would be posting a 160m pre-tax loss and needed over 100m of emergency funding in order to prevent breaches of financial covenants and rating downgrades. We can only assume that Brickell did not take this lightly and from what we have observed began to take a far more defensive posture to help the company prevent further damage. Shockingly, the moment the Brickell deal was signed, we believe the executives awarded themselves over $6m of bonuses which were not explicitly disclosed to Brickell.”
Channon went on to question Spiegel’s integrity, writing: “The final factor is integrity, the quality of being honest. Essential in any business we invest in, but incredibly important in a business-like R&Q which is very opaque and where we must rely upon the communication from directors to make our judgements. The weakest form of integrity in our assessment is someone who will not lie to you but will be willing to let you form the wrong view without correcting you. We don’t find that William achieves even that level.”
This latest letter follows news this week that R&Q is to hold a special general meeting for its Board to vote on the proposals by Phoenix to have William Spiegel removed as executive chair and director of the company.
That move came after weeks when separate camps have either affirmed Spiegel’s performance or taken against him. Phoenix has led the charge against Spiegel, with R&Q confirming in a statement that this resolution is shared by Brickell, 777 Partners, 777 Asset Management, plus others.
The tumult began in the middle of the month when Phoenix Asset Management Partners, which has around 12% of the firm’s share capital, said in an open letter that it wished for Spiegel to be removed with Randall to take his role.
In his latter, Channon wrote that there was no ‘formal or informal agreement’ between Phoenix and Brickell or Randall in regards to any matter regarding R&Q.
He added: “William and the board have attempted to portray this as William Spiegel vs Ken Randall saga. That could not be further from the truth. The exigency is in removing an executive that is impairing the business and not acting faithfully and in shareholders’ best interests. Ken Randall was simply engaged as he is a trusted and highly knowledgeable former custodian of the business and in our view the perfect interim steward.”
However, other firms holding shares in R&Q have come to Spiegel’s defence.
Thomas Moore, senior investment director for UK and European equities at abrdn, said: “abrdn PLC manages funds owning approximately 6.2% of the outstanding shares of R&Q Insurance Holdings Ltd. We support the current Executive Chairman, William Spiegel, and believe that the strategy outlined is appropriate to realise the full shareholder value inherent in the Legacy and Program Management divisions.”
He added: “We have not seen a valid argument to justify the distraction which would arise from a change in management, and believe the stability of Spiegel’s leadership is especially important after a year of change.”
The Scottish firm was not the only one coming out in support of Spiegel. Investment firm Vida Capital, which manages 9.07% of the firm’s outstanding shares, expressed its support for the current leadership and strategy of the company.
In a statement, the company, which is a vertically integrated, uncorrelated investment firm specialising in insurance, longevity, structured credit, and private lending, said that it supported Spiegel, the management team, and the Board in their efforts to maximise shareholder value.
It added: “We believe a dramatic change to the strategy or to the executive leadership at this time would be counterproductive and would create a major distraction for the company.”
Spiegel was named as executive chairman in April 2021 on the retirement of Randall. The non-life legacy and run-off acquisition and management, programme services and investments specialist had been planning for succession, with this move previously announced in July 2020.
