Market Report: Monstermob buyout talk gets phones ringing

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The Independent Online

Hopes that a management buyout could soon be on the way at the mobile ringtones specialist Monstermob sent its shares soaring yesterday. But, although investors were excited by the rumours, the stock ending the day up 35 per cent, or 14.5p, at 56p, analysts were sceptical that the company would be bought in the near future.

From a distance, now looks to be an opportune time for someone to table a bid. Monstermob's valuation stands near an all-time low after a series of profit warnings. The latest came a month ago and saw the company complain that new Chinese mobile phone regulations would hit its revenues hard. It said that local operators are going to introduce measures to address consumer complaints about mobile subscription services which would make it harder for the group to retain subscribers.

However, the extent to which this will affect Monstermob earnings is far from clear, making the company a risky investment proposition. Some dealers suggested the takeover story may have been spread by investors keen to revive interest in the stock so they can reduce their own exposure to it.

Meanwhile, the FTSE 100 lost more than 1 per cent of its value, falling 60.6 points to 5,828.8, amid worries about the effect the soaring price of oil is having on the global economy. In London, crude hit a record high of $78.20 (£41) per barrel on news that oil giant BP was to shut down a key oilfield in Alaska to repair a damaged pipeline. Comments from Standard & Poor's chief economist, David Wyss, only made matters worse. He suggested that if the conflict between Israel and Hizbollah worsens to the point that Iran becomes involved and closes the Strait of Hormuz to oil tankers, the price of crude could spike to $250. In the opinion of Mr Wyss, the resulting increase in energy costs would lead to a global recession comparable to the downturn of the early 1980s.

Given such talk, only seven stocks in the blue-chip index managed to finish the day in positive territory. Among them, Reckitt Benckiser gained 25p to 2,156p, British Energy added 4.5p to 738p and National Grid rose 0.5p to 610.5p.

For the third successive session, Spirent registered strong gains in heavy trading of its shares. The telecoms equipment group closed 2.25p higher at 40p amid continuing hopes that it will soon be taken over. Agilent, a US rival, is the name most often mentioned by dealers as a likely bidder for Spirent.

When an economically cyclical stock such as Spirent makes strong gains in brisk trade against the background of a weak wider market, it often means that corporate action is on the way.

It certainly did in the case of Morgan Crucible yesterday. While the FTSE 100 nursed a deficit of more than 50 points for most of the day, the specialist engineer featured as a strong riser in above average volume. Then (surprise, surprise), at 4.22pm, came a statement from Morgan Crucible that it had "received a preliminary approach that may or may not lead to a cash offer being made for the company". In what were the dying minutes of the session, investors piled into its shares, pushing them 20 per cent higher on the day, or up 48.5p, at 282p.

Elsewhere, Radstone Technology ticked 2.5p higher to 274p after unveiling an order worth £3.2m from the US defence group Astronautics Corporation.

Among smaller companies, CML Microsystems, unchanged at 208p, saw its finance director Graham Clark pick up 2,800 shares at 210p. Director share buying had more of an effect on shares of the environmental services group Fountains. They rose 7p to 89p after Richard Haddon, the chief executive, snapped up 20,000 shares at 84.5p.

Leyshon Resources rose 1.5p to 16.5p on the back of a bullish drilling report from its prospect in north-eastern China.

Finally, PlusNet dropped 14p to 110p after Investec Securities downgraded its forecasts for the broadband provider. Although shares in the group have dropped from 400p since the start of the year, the broker believes the stock is likely to continue to underperform.

Investec pointed out that in recent months Carphone Warehouse, BSkyB and Orange have all started to offer free broadband packages, prompting a "bloodbath" in the industry. It expects the likes of Vodafone and O2 to launch similar services in the coming months, making matters worse for PlusNet.