It’s Important to Read the Prospectus!

I am never very keen to invest in new IPOs of which there are plenty launching into the market of late. They tend to be launched on a wave of enthusiastic promotion while the company’s management gets distracted by their new wealth and responsibilities. But I do look at some of them. One I have just reviewed is Victorian Plumbing (VIC) which joined AIM last week.

The company sells plumbing accessories through to complete bathroom and toilet suites (see https://www.victorianplumbing.co.uk/ ). The company has been growing rapidly by focussing on internet ordering and deliveries direct to consumers or to fitters. It only has one showroom in the country.

The valuation looks quite high but not ridiculous bearing in mind that it is profitable and growing rapidly. But the information provided on page 48 of the prospectus is enough to put me off.

This is what it says: “While the Directors are not aware of any current third party claims, the Group’s competitors, or other entities and individuals, may claim to own or have exclusive rights to intellectual property or other proprietary rights used in the Group’s business. From time to time, third parties may claim that the Group is infringing their intellectual property rights, and the Group may be found to in fact be infringing such rights. Conversely, the Group may be sued by third parties for alleged infringement of their proprietary rights. In a case brought by one of the Group’s competitors, Victoria Plum, the High Court in England and Wales ruled in November 2016 that both the Group and Victoria Plum’s activity of bidding on certain Google keywords amounted to passing off and the Group was found to have been infringing certain of Victoria Plum’s trade marks in bidding on certain Google keywords including its name. The Group is subject to an undertaking not to bid on such terms. Under the same court order, Victoria Plum is subject to an undertaking not to bid on the term “Victorian Plumbing”, which amounted to passing off of Victorian Plumbing”.

So far as I can see the business named Victoria Plum is very similar if somewhat smaller in size. They are also focussed on internet sales and sell very similar products, possibly even from the same suppliers.

If you type in “Victoria Plumbing” into Google you get Victorian Plumbing listed first followed by Victoria Plum – I guess Victorian Plumbing are paying more for Google adwords.

“Victorian Plumbing” is a registered trade mark of Victorian Plumbing Ltd but it’s still very messy that there is a similar business with a very similar name. This potential confusion should have been sorted out before the company chose to do an IPO in my opinion.

The failure to have clear ownership of associated intellectual property such as brand names is enough to me off investing in the shares.

Roger Lawson (Twitter: https://twitter.com/RogerWLawson  )

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