£6m flutter pays off for The Plumber

AN ENTREPRENEUR known in the City as The Plumber has turned a £100,000 private company into a £27m public group following a controversial £6m spread bet. But investors have questioned the deal and are calling for an investigation by the watchdog Financial Services Authority.

Paul Davidson, a former pipe-fitter turned multi-millionaire, bet that the price of his biotechnology company, Cyprotex, would rise after floating on Aim, London's small companies stock market. Mr Davidson told the Financial Times that his bet on Cyprotex was 'irregular' but not, he thought, illegal.

Davidson said he was a regular spread better but did not 'usually bet on his own companies'. He described his bet on Cyprotex as 'pioneering stuff', adding: 'It just goes to show that you can do any deal you want in the City.' He described spread betting as 'a way of getting the upside while remaining anonymous and without paying tax'.

According to the FT, investors believe City Index, where Davidson placed his bet, asked investment bank Dresdner Kleinwort Wasserstein to cover its possible exposure by buying some shares in the biotech company.

They believed that if the share was to soar they would at least recoup some of the money they would have to pay Davidson. The investment bank bought 20% of the company. The effect of the huge amount of money pouring into Cyprotex was to force up its launch share price. In the flotation, more than 22m shares were placed, of which DKW holds 17.8m.

The shares DKW bought represented almost 80% of the total amount placed with investors at the flotation. Investors say Davidson failed to reveal his bet to them when the company was floated. One said: 'We want this looked at.'

The FSA declined to comment on whether, and under what circumstances, company principals can bet on their own company's share price. Davidson said he checked his scheme with his legal advisers.

A separate spread betting coup - in which a group of young City workers netted at least £2m - is being investigated by the fraud squad. The five men are alleged to have used privileged inside information to place a number of spread bets.