deVere's Green acquires 24% of STM Group, in gamble on Maltese QROPs growth

Last month Nigel Green, the founder and CEO of IFA group deVere, acquired a 24% stake in STM Group, the Manx incorporated AIM-listed fiduciary services business, in an audacious gamble on what action HMRC would take in relation to QROPs. 

STM Fidecs is perhaps best known as a provider of QROPS, having been one of the first companies to develop the schemes in Malta, which was approved by HM Revenue & Customs as a jurisdiction to which UK pensions could be transferred in 2009.  STM has also developed other pension-related solutions, including one which is designed to enable the transfer of UK pensions of individuals retiring to or returning to the US, and another which enables expatriate UK pensioners to move their pensions between a number of different countries, without incurring additional fees.

In acquiring a stake in STM (via an issue of new Ordinary Shares in the company issued at 17.5p per share), Green appears to have been gambling on the fact that QROPs changes to be announced by HMRC would lead to an increase in the QROPs market in general, and in particular an upturn in clients moving their pensions to Malta, where STM is a leading player, at the expense of other competing jurisdictions such as Guernsey and the Isle of Man.  His belief that Malta was likely to win where other might suffer was based largely on the fact that Malta is within the EU and has an extensive double-tax treaty network. 

Green was presumably confident that the QROPs market in Malta was indeed set to boom, as by most other measures STM was going through a very difficult period.  The company reported pre-tax profits having fallen by more than half and revenue falling to below £10 million.  Only £600,000 of the total revenue related to QROPs business, and there would therefore need to be a very significant spike in this area of the business for it to be material enough to turn around the fortunes of the company, which has felt a significant negative impact from the Eurozone crisis.

Whether or not the investment, (which cost Green £1.59m) was good value for money remains to be seen, but it seems that at least some of his investment assumptions were correct.   As previously reported, earlier this month HMRC removed the vast majority of Guernsey’s QROPs from its approved list and Malta may well be a beneficiary in the future of some of the business which might otherwise have gone to Guernsey.  However, HMRC seems to have left other territories such as the Isle of Man unscathed, at least for now, so Malta still faces some stiff competition from other jurisdictions which are well established in the market.

However, it is believed that Green was also looking to exploit some synergies between STM and deVere.  STM is looking to develop and build upon its distribution network and deVere is well placed to be a very important sales channel for STM, particularly given deVere’s current push into the US market.  According to a deVere press release last month, it has used QROPS for “almost half” of all the £1.3bn worth of pensions which it has transferred to offshore jurisdictions.

STM’s shares are currently trading at 25p which is almost double the recent low of 13p, but still a very long way off the hey-day back in 2007, when they were worth 73.5p.