Market Report: Innovation Group tumbles on talk of placing

The Innovation Group (TIG) was the focus of stock market gossip yesterday and the attention proved to do only harm to its stock price. Shares in the software group dropped 12 per cent, or 3.5p, to 26p, on talk that a major share placing is likely at the company. Gossips were not quite sure whether it is a placing of new stock, say for the purposes of an acquisition, or whether an existing shareholder is looking to offload their holding.

The Innovation Group (TIG) was the focus of stock market gossip yesterday and the attention proved to do only harm to its stock price. Shares in the software group dropped 12 per cent, or 3.5p, to 26p, on talk that a major share placing is likely at the company. Gossips were not quite sure whether it is a placing of new stock, say for the purposes of an acquisition, or whether an existing shareholder is looking to offload their holding.

If there was one thing that was for certain yesterday, it was that TIG was in no mood to respond to the speculation. "It is the company's policy never to comment on market talk," said a spokesperson. But that did not stop the rumours spreading through the dealing rooms of the Square Mile.

We know the software group does not need new money to fund its existing business. TIG's last set of results showed that it was cash generative. However, a fund raising for an acquisition is a possibility, according to analysts. Innovation was once a highly acquisitive company and it may be about to return to this footing. And rumours that it may be considering a deal did the rounds of the City earlier this year. At the time it was suggested that the company had come under pressure from Robert Bonnier, its largest shareholder, to do a deal.

Mr Bonnier was also cited by some yesterday as possibly looking to sell down his stake. Should this prove to be the case, it has the potential to create a massive stock overhang, as the former Scoot.com chief executive controls 18 per cent of the company. But why would he want to sell down his holding? After all, Mr Bonnier has always maintained that he is a long-term investor. Well, gossips reckon he needs to raise cash to fund losses he has racket up via his share dealings in Eidos. Shares in the computer games developer have had a torrid time after a series of profit warnings.

Elsewhere in the sector, Sage put on 2.75p to 170.25p as Credit Suisse First Boston returned from a meeting with the group's management team in a bullish mood. The Swiss broker was told that Sage is well on course to meet its forecasts for 2004. One worry which has surrounded the group's shares in recent months is the possibility that it may be losing market share to Microsoft, which has recently moved into some of Sage's markets. But CSFB dismissed this suggestion.

LogicaCMG fell 3p to 166p after Morgan Stanley slashed its price target to 185p from 267p before the company's trading statement later this week. The US broker believes that Logica's update could trigger further downgrades in earnings estimates despite the fact that the company had a profit warning as recently as May.

Smith & Nephew, the orthopaedics specialist, was among the worst performers in the FTSE 100 index for the second session in row. It dropped 15p to 553p as investors fretted about the impact on the company from Friday's disappointing news from its US peer Stryker. Analysts on the whole poured cold water on such talk. Among them were those at Dresdner Kleinwort Wasserstein, which said that Stryker's poor figures last week were the result of company specific problems and not a slowdown in the orthopaedics market. It urged investors to use S&N's share price weakness as an opportunity to add to their holdings.

Big Food Group soared 7p to 93p on talk that Baugur, its biggest shareholder, is pushing for the company to break itself up. The Icelandic retailer controls 22 per cent of BFG's shares and was said to have vetoed its plans to buy Londis earlier this year. There were also vague suggestions that the value food retailer may attract a bid approach following the recent weakness in its share price.

Acambis retreated 7.5p to 321.5p after Bavarian Nordic was granted a US patent for its smallpox vaccine. Investors fear the Scandinavian group is looking increasingly likely to win a $900m contract from the US government for the next generation of smallpox vaccination at the expense of Acambis. But Goldman Sachs was not so sure. "The patent award does not put Acambis at a disadvantage in competing for US smallpox vaccine contracts," it was heard telling its clients.

Among small caps, word has it that business is booming at Pipex, up 0.25p to 8.37p. Market professionals reckon the telecoms group is on course to break into to black well ahead of expectations and that this is likely to be confirmed by a trading statement from the company some time next month.

Business is also said to be booming at Sportingbet. Shares in the online betting group rose 1.75p to 100p on talk that it has enjoyed record trading over the past three months thanks to the large number of sporting occasions over this period, which had left punters spoiled for choice with events to bet on. Next month's Athens Olympics is tipped to give Sportingbet a further boost.

MARKET MOVERS

Dixons 157.5p (up 2p, 1.3 per cent). Ongoing share buyback supports the stock.

InterContinental Hotels 576p (up 4p, 0.7 per cent). Deutsche Bank reiterates its "buy" rating and sets a 635p price target on the stock, telling investors that the company continues to go in the right direction.

Pearson 630p (up 5p, 0.8 per cent). JP Morgan moves its clients into the stock ahead of upcoming results from the media giant.

Northern Rock 693p (up 6p, 0.9 per cent). In demand ahead of results today.

Egg 155.75p (up 4.5p, 2.8 per cent). Analysts suggest that the disposal of Prudential's 79 per cent stake is nearing completion.

Scottish Radio Holdings 932p (up 20.5p, 2.3 per cent). Reports that major shareholder EMAP is considering a bid for the whole group excite.

Oasis Healthcare 16.5p (up 1.75p, 11.9 per cent). The company says it hopes to benefit from the dentistry reforms announced by the Government last week.

Montpellier 19.5p (up 1.75p, 9.8 per cent). Abandons project to build new biomedical facility for the University of Oxford after pressure from animal rights protestors.

Entertainment Rights 11.75p (up 1p, 9.3 per cent). Secures a new deal with the BBC for Postman Pat, one of the many characters to which it has the intellectual rights.

NETeller 171.5p (up 4.5p, 2.4 per cent). Issues a bullish trading update.

Hot Group 18.25p (up 0.75p, 4.2 per cent). Donald Hanson, a non-executive director, discloses the purchase of 1 million shares at 17p.

ARM Holdings 104p (down 8.75p, 7.7 per cent). Investors worry about the stock's high rating after unimpressive interim results.

Austin Reed 127.5p (down 6p, 4.5 per cent). Poor trading at its Country Casuals chains hits the overall performance of the group.

Symphony Plastics 12.75p (down 0.25p, 2 per cent).Raises £500,000 via a share placing.