Market Report: JD Wetherspoon flattened by stake sell-off

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The Independent Online

JD Wetherspoon shares came under heavy selling pressure throughout yesterday's session after Citigroup was reported to have struggled to sell a £21m stake in the company on behalf of a client.

JD Wetherspoon shares came under heavy selling pressure throughout yesterday's session after Citigroup was reported to have struggled to sell a £21m stake in the company on behalf of a client.

Citigroup is believed to have succeeded in placing the 7.8 million shares in the pubs group at 269p, having hoped to offload them at up to 273p each. Hence, it was no surprise to see JD Wetherspoon finish the day as one of the worst performers in the FTSE 100, down 12.5p at 266p.

Originally, it was rumoured that Citigroup was selling the stock on behalf of Tim Martin, the group's founder and 17 per cent shareholder. However, as the session wore on, it emerged that the seller was in fact an institutional investor.

Over the past six months JD Wetherspoon's stock has performed strongly on hopes the company might receive a management buyout offer. But Charles Wilson, an analyst at Bridgewell Securities, believes such a scenario is unlikely to come to pass, arguing that investors should exit the shares. He said a buyout was not on the cards because of the pub group's high level of debt and pricey stock-market rating. According to the Bridgewell Securities analyst, even after yesterday's share price drop, JD Wetherspoon trades at a near-40 per cent premium to the rest of the pubs sector.

In the FTSE 100, Smith & Nephew dropped 7p to 543.5p as traders were unsettled by a profits warning from Biomet, S&N's US peer. However, Dresdner Kleinwort Wasserstein took advantage of the weakness to move its client into S&N. It said the setback at Biomet was the result of company-specific problems and not a slowdown in the medical devices market.

Merrill Lynch was responsible for the two best performers in the FTSE 100. AB Foods gained 18p to 806p after the US broker upgraded the stock to "buy" from "neutral" and predicted the company will have no problem diluting the negative impact on its business of the EU's new sugar regime. The details of the reform will be unveiled in their entirety today, though the broad outline of the regime is largely known. Merrill believes AB Foods will make further value-enhancing acquisitions, which will offset the impact of sugar on its overall earnings.

Merrill Lynch also got behind GlaxoSmithKline, 23p higher to 1,360p, after a meeting with Paolo Paoletti, the head of the drug giant's cancer division. "Overall, the meeting demonstrated that GSK's pipeline of products continues to progress well," the broker said.

Corus dropped 1.75p to 42p after a profits warning from its US peer Nucor. America's largest steel maker lowered its second-quarter earnings forecasts, citing weakening demand for sheet steel. Meanwhile, industry data from China also did Corus no favours. It showed China experienced a 37 per cent year-on-year rise in steel production during May, making the fast-growing economy the world's largest crude steel producer. The news prompted a dire warning from Credit Suisse First Boston: "If China carries on with current growth rates the country will see itself with a steel market crisis on its hands, which is likely to spillover abroad".

Misys ticked 1p lower to 222p in advance of today's results from the financial software specialist. The fact that Morgan Stanley downgraded the stock in the run-up to the figures has undermined the group's share price, as have worries that tough trading at its banking division may cause Misys to struggle to meet City forecasts.

British Energy held steady at 380p despite news that the US fund management firm Duquesne Capital now controls 6.2 per cent of the electricity generator. The firm is run by the star Wall Street operator Stanley Druckenmiller, who is reported to be one of the key people behind George Soros' Quantum Fund.

Since January's debt-for-equity swap, the investment community has become increasingly upbeat about British Energy's prospects. One reason for this is the sharp rise in wholesale electricity prices, which have increased by one third so far this year.

The company is very much a play on the future direction of electricity prices however analysts warn that they are volatile and notoriously difficult to forecast accurately.

Lower down the pecking order, Erinaceous put on 5p to 278.5p on word the group's commercial property division is trading strongly. Stream ticked 1p higher to 61.25p as gossips suggested the mobile phone content specialist is being stalked by a predator. They reckon Monstermob, 13.5p higher to 306.5p, is a prime contender to make a move on the Stream after the failure of its planned tie-up with iTouch.

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