Jarvis Securities (LON: JIM) shares are down 19%. JIM shares fell on the dividend declaration and trading update - that update revealing the occasional problem within the business. This is not good news, obviously. But a little consideration needs to be applied here. If the one company in a sector - let us say the smaller end of London’s broking and investment banking sector - finds itself having problems is that the result of the sector having problems of the one and specific company?
We ask because of course WH Ireland recently reported problems so bad they required an emergency rights issue: “WH Ireland (LON: WHI) is that interesting thing, the stockbroker that can't make money in the stock market. Even more interesting, the wealth manager that manages to destroy wealth. We think that both of those observations are going to be really very helpful to the business in the future. However, putting sarcasm aside it is true that they're a capital markets firm and one that isn't making money at present. They're also, or they were at least, days away from having to go into orderly wind down and liquidation. So there was a certain imperative at getting these new shares out the door.” Is this the specific company or something more general?
Back to the announcement from Jarvis: “As previously announced, a Skilled Person was appointed pursuant to s166 Financial Services and Markets Act 2000 ("FSMA") ("Skilled Person") to review the systems and controls of the Company's subsidiary, Jarvis Investment Management Limited (see announcements dated 16 September 2022 and 4 July 2023). The associated restrictions on Model B clients, has led to the loss of certain Model B clients and the corresponding revenue. In addition the costs associated with the Skilled Person review are higher than anticipated. These factors, combined with reduced trading volumes caused by market conditions, mean that the Company is now trading below current market expectations.” Note that they do not say how far below expectations.
Jarvis Securities share price from Google Finance
It’s possible to think of this as running either way. This level of the broking market is fiercely competitive and perhaps the two of them are just not doing quite so well as the others. But it’s also possible to think that the entire sector is in trouble. We’re just coming out of 15 years of zero interest rates. That’s going to roil markets, money’s much more expensive these days. If it’s that second answer then we might want to look very carefully at all other participants in the marketplace.
After all, if it’s a sectoral problem then we want to be out of, or even short, the sector, not just those already obviously having problems like Jarvis Securities.