Outlook: Norman conquest
Thursday 04 November 1999
These days, of course, we wouldn't dream of it, would we? Everyone is far too grown up, mature and worldly wise to fall for such nonsense. Or are we? The extraordinary rise yesterday in the share price of a little known Manchester leather company called Knutsford suggests strongly that even now at the turn of the millennium we don't seem to have learned much from the history of financial bubbles.
Just to recap, a heavy weight band of property and retail entrepreneurs, including Archie Norman, chairman of Asda, have announced a management buy in with the purpose of using the company as a vehicle "for identifying, acquiring and developing undervalued businesses operating in areas within which the team have amassed a great deal of experience". If you think this sounds suspiciously like an undertaking of great advantage, but nobody to know what it is, you'd be right. To be fair on Mr Norman and his fellow travellers, they are not at this stage asking asking investors to stump up any money for their asset stripping endeavour, but that hasn't stopped a frenzy of speculative anticipation.
Mr Norman and colleagues are buying their shares at 2p each. In the stock market, speculators chased the price up to an astonishing 252.5p yesterday, and although it later fell back sharply, the shares were still 150p by the close. If this price holds, Mr Norman ends up with a stake valued at more than pounds 37m, this for an outlay of just pounds 495,000. For the others, with larger stakes, the bonanza is greater.
Rarely has there been a more extreme example of the stock market's penchant for backing the man, or in this case, the four of them, rather than the underlying business. That the talent alone of these four characters could be worth this sort of money - at the peak yesterday, the stock market was putting a post transaction value on Knutsford of pounds 700m, this for a company with net assets of just pounds 5.43m - seems unlikely in the extreme, despite the outstanding record of all four in value creation. But even if it was, the valuation is based on a false premise. Think about it. Mr Norman wants to use Knutsford to buy undervalued assets. But unless the world has begun to lose all reason, nobody is going to want to sell such assets for overvalued paper.
Things may be bad at Marks & Spencer, Somerfield, Sainsbury's and Storehouse, but shareholders in these companies will not be prepared to give away pounds 700m of value to Mr Norman and his merry band of financial engineers, however desperate their need for fresh executive talent.
The Mirror yesterday epitomised the frenzy by recklessly urging its readers to "beg or steal" the money to buy shares in Knutsford, so impressed was it with this line up of talent. It had better hope that not many of them did. This is a spivvy little endeavour worthy of the worst the high rolling 1980s could offer. Mr Norman risks ruining an outstanding reputation as a business leader with his involvement.
- 1 Nigel Farage: Me vs Russell Brand on Question Time – he's got the chest hair but where are his ideas?
- 2 Harry Potter fans can apply to the Hogwarts-inspired College of Wizardry
- 3 Jessica Chambers: 19-year-old woman 'doused with lighter fluid and burned alive' in the US
- 4 Russell Brand calls Nigel Farage 'poundshop Enoch Powell' in BBC Question Time debate
- 5 Orange Wednesdays are no more
Weather bomb in pictures: Storms cuts power for tens of thousands – and snow is on the way
Jessica Chambers: 19-year-old woman 'doused with lighter fluid and burned alive' in the US
Russell Brand calls Nigel Farage 'poundshop Enoch Powell' in BBC Question Time debate
Russell Brand was rendered speechless on Question Time by this man
Fury at Airbus after it hints the super-jumbo may be mothballed
Disgruntled RBS worker writes hilarious open letter to Russell Brand after anti-capitalist publicity stunt leaves him hungry
Nigel Farage defends Kerry Smith 'ch***y' comment: 'If you are going for a Chinese, what do you say you’re going for?'
Nigel Farage's approval rating hits 'record low' as popularity suffers in wake of Ukip sex scandal
Pakistan school attack live: Taliban kill at least 132 children in 'horrifying' massacre
Sony hack: Angelina Jolie branded 'seriously out of her mind' in further embarrassing leaked email saga
Panic Saturday: 13 million Britons spend £1.2bn – while 13 million others across the country live in poverty unable to afford food
iJobs Money & Business
$200 - $350 per annum: Carlton Senior Appointments: Managing Producer Office...
$125 - $225 per annum: Carlton Senior Appointments: San Fran - Investment Advi...
Up to £70,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...
Up to £65,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...