Outline the reasons for the shareholder rebellion in 2003/4 - Essay Example

The British arm of the Anglo-French company is the EuroTunnel P.L.C. and the Eurotunnel S.A. makes up the French arm. (Euro Tunnel P.L.C - Euro Tunnel S.A. 1988 - aka Chunnel - Financial Fiasco). The private financing of the tunnel became a necessity when the government of the United Kingdom undertook a policy decision that there would be no public money made available for the construction of the Euro-Tunnel. (Flanagan, M. (2004). Eurotunnel rebels may come to rue their putsch of board). From 1986 onwards till November 1999, shareholder funding was resorted to on several occasions towards finances for the Euro-Tunnel.

In a similar vein bank loans were also taken on four occasions from November 1987 to July 2002 towards the financial requirements of the Euro-Tunnel. (Financing). These large financial commitments from two contrasting groups were received in the belief that the Euro-Tunnel would be a fine investment. This did not prove to be the case and against this background the shareholders rose in rebellion. The first and foremost reason for the shareholder rebellion was the drastic fall in share value, due to the poor performance of the Eurotunnel Group, which was much below the forecasted traffic and revenue figures.

Shares that had been purchased for 350p and had risen to 800p in 1989, as a result of the healthy traffic and revenue forecasts, but had dropped sharply in value to less than 40p by March 2004. As was to be expected, shareholders would become restless. The second reason for the shareholder rebellion was the lack of the presence of any large institutional investor among the shareholders. The share holding was widely distributed as can be seen from the fact that there were no shareholdings above 3% at the time of the AGM.

This deficiency in the profile of the shareholders meant that the supportive influence of institutional shareholders was not available for consultations on ways and means