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At Cash Store, small steps in the right direction

Cash Store wearing out welcome with investors

Peter Power/The Globe and Mail

Short-term lender Cash Store Financial Services Inc. is taking some small steps to mollify upset shareholders, but still has a long way to go.

About two weeks ago, mutual fund company Montrusco Bolton started a public campaign for changes at Cash Store, saying "enough is enough" after the stock fell by more than half in the past year and dividends vanished. Montrusco put three proposals forward that will be voted on at the company's annual meeting on Feb. 7. It called for the company to look at selling stores outside Canada to focus on its home market, demanded that Cash Store cancel a New York listing to save cash, and finally to separate the roles of chairman and chief executive officer, both of which are currently held by founder Gordon Reykdal.

Cash Store has been a major disappointment for investors. The stock has been sliding, as have its bonds, and credit rating agency Standard & Poor's recently downgraded the company. The last straw for Montrusco Bolton was when the company suspended its dividend and announced it only on a conference call, rather than with the press release that most companies would use to disseminate such information widely.

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Late on Friday night Cash Store offered to separate the roles of chairman and CEO before early 2014. Cash Store also recently put out a press release confirming what it told investors weeks ago on a conference call, that it had cancelled its dividend for the time being.

Both are signs of progress, said Behrak Shahriari of Montrusco Bolton. But there is still more work to be done. He noted that the timing of the plan to separate the roles of chairman and CEO gives management a lot of wiggle room.

"I don't know if that's a concession," he said.

"Any move in our direction of the proposals is surely welcome and positive. However, what I'd point out is, just the release itself is very cryptic." He also noted that the "timing is very nicely flexible for management."

He said that proposing any related party to management as chairman would be "totally unacceptable."

As for the other proposals that are up for a vote at the coming Cash Store annual meeting, "we are committed to all the proposals. We didn't put three [there] because we expected to negotiate them down."

(Boyd Erman is a Globe and Mail Capital Markets Reporter & Streetwise Columnist.)

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