New dispute engulfs Gore Street as vote reveals mounting dissent
Gore Street Energy Storage (GSF ) may have seen off rebel shareholders but is now facing scrutiny over £5m of ‘undisclosed’ fees paid to manager Gore Street Capital (GSC).
The board of the £513m battery investor may have survived attempts by shareholder RM Funds to oust chair Patrick Cox and non-executive director Caroline Banzsky in both August’s requisitioned meeting and at last week’s annual general meeting (AGM), but it appears the activist’s complaints over the fund’s lack of transparency are gaining support.
Investec analyst Ben Newell has highlighted ‘serious concerns’ around the payments made to GSC which provides both investment management services and commercial management services to the fund.
Newell conducted a deep dive into both the accounts of GSF and GSC and found they did not tally up.
He said investment management fees of 1% a year are paid on a blend of 50-50 market cap and net asset value (NAV), while commercial management services – including construction oversight, administrative, and accounting work – are charged at 15%, subject to a cap of 1% of NAV.
The most recent GSF accounts to March 2025 confirmed payments of £5.1m to GSC for investment management and £600,000 of commercial payments.
GSC’s accounts list revenues from investment management of £5.6m, which Newell said ‘aligns’ with GSF’s accounts. However, revenues from corporate services fees totalled £5.6m, or £5m more than disclosed by the fund.
‘To our knowledge, GSC did not earn any meaningful commercial management fees from any other funds,’ he said.
To look for answers, Newell turned to GSF’s subsidiary companies – of which there are four and which in turn own a further 30 subsidiaries spanning the UK, Ireland, and Germany.
‘We have looked at the accounts of the UK entities,’ he said. ‘These entities alone disclose payments totalling £2.9m to GSC over the financial year ending 21 March 2024.’
Cox, chair of GSF, confirmed to Investec that the payments from GSF’s subsidiaries are not disclosed.
‘As such, fees being earned by the manager appear to be £5m more than in the accounts,’ said Newell.
Despite any legal or technical justification GSF can offer, Newell said ‘it is unconscionable that the board would not disclose all payments through all its subsidiaries to any entity within the investment manager’s group’.
No hidden agenda
GSF chair Cox told Citywire that ‘all fees have been disclosed’ and ‘all obligations have been complied with and the accounts have been signed off by EY each year without qualification’.
‘There is nothing by way of hidden agenda and nothing that does not bear scrutiny,’ he added.
The payments by GSF subsidiaries to GSC cover the services it provides for constructing, managing and operating the ‘complex’ portfolio of assets, including permitting, contracts to build, EPC certificates, commercial contracts, and route to market.
Cox said the fund would have to pay a third-party to deliver these costs if GSC did not do it but it happened that GSC has ‘build up significant inhouse capabilities to manage these types of things’.
He added that the manager’s fees for these services is benchmarked and capped, so it is ‘not plucking a number out of thin air and saying ‘pay up’’.
Cox confirmed all the subsidiaries publish accounts but to make it clearer to shareholders, the fund will now update the way it discloses fees to provide the ‘aggregate information of what [these services] costs’ on a quarterly basis.
‘There is no hidden agenda, these fees have always been disclosed and independent subsidiary accounts published,’ he said.
Dissenting voices
While Investec sided with RM Funds in calling for new board members to be appointed, shareholders voted in favour of the current line up at last week’s AGM – although there was significant dissent.
A total of 27% of shareholders voted against the re-election of Cox as chair, while 22% voted against Banszky. Board members Malcolm King, Thomas Murley, and Lisa Scenna saw votes against their re-election of between 18% and 20%.
The numbers were similar to the voting at the general meeting in August, called following a requisition by RM Funds, which had around 30% of votes in favour of replacing Cox and Banszky, with turnout of 62%, versus last week’s 53% turnout.
Investors also opposed two resolutions at the most recent vote, which fell just short of the 75% of votes needed to pass at 74.8%.
Stifel analyst Iain Scouller said the resolutions related to new share issuance and were ‘fairly irrelevant as things stand’.
‘The main takeaway from the meeting is the significant dissent displayed once again,’ he said.
The board has agreed to undertake a round of investor engagement in around six months, but Scouller said given the results, this is a ‘pretty poor’ response.
‘Despite a clear shareholder revolt, and to the frustration of RM Funds in particular, it does not look like much change is going to happen at this point, and the fund will continue with its capital allocation plan announced late July,’ he said.
Scouller retained a ‘negative’ rating and warned the shares, which currently trade at 55p, could slide further towards 50p. The shares have already lost 47% of their value since the fund was listed in May 2018.
