Outlook: Norman conquest

THERE WERE many promises of instant wealth during the South Sea bubble of the eighteenth century. Investors bought rising stocks no matter how outrageous their design, anticipating lines of idiotic speculators to form behind them eager to gobble up the stock at an even higher price. Financiers, legit and bogus alike, were able to raise money with ease for such preposterous business propositions as "for the trading in hair" and "for a wheel of perpetual motion". Then there was the all time classic of an enterprise "for carrying on an undertaking of great advantage, but nobody to know what it is". It defies belief that anyone could have thought of investing in such a thing, but they did.

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.

Start your day with The Independent, sign up for daily news emails
Voices
There will be a chance to bid for a rare example of the SAS Diary, collated by a former member of the regiment in the aftermath of World War II but only published – in a limited run of just 5,000 – in 2011
charity appealTime is running out to secure your favourite lot as our auction closes at 2pm tomorrow
News
Claudia Winkleman and co-host Tess Daly at the Strictly Come Dancing final
people
Arts and Entertainment
Caroline Flack became the tenth winner of Strictly Come Dancing
tvReview: 'Absolutely phenomenal' Xtra Factor presenter wins Strictly Come Dancing final
News
Elton John and David Furnish will marry on 21 December 2014
people
PROMOTED VIDEO
News
people
Life and Style
A still from the 1939 film version of Margaret Mitchell's 'Gone with the Wind'
life
Arts and Entertainment
J Jefferson Farjeon at home in 1953
booksBooksellers say readers are turning away from modern thrillers and back to golden age of crime writing
Sport
Amir Khan is engaged in a broader battle than attempting to win a fight with Floyd Mayweather
boxing Exclusive: Amir Khan reveals plans to travel to Pakistan
News
Stacey Dooley was the only woman to be nominated in last month’s Grierson awards
mediaClare Balding and Davina McCall among those overlooked for Grierson awards
Voices
Joseph Kynaston Reeves arguing with Russell Brand outside the RBS’s London offices on Friday
voicesDJ Taylor: The great tradition of St Paul and Zola reached its nadir with a worker's rant to Russell Brand
News
Twitchers see things differently, depending on their gender
scienceNew study shows that birdwatching men have a lot in common with their feathered friends...
News
i100
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Carlton Senior Appointments: Private Banking Manager - Intl Bank - Los Angeles

$200 - $350 per annum: Carlton Senior Appointments: Managing Producer – Office...

Carlton Senior Appointments: San Fran - Investment Advisor – Ind Advisory Firm

$125 - $225 per annum: Carlton Senior Appointments: San Fran - Investment Advi...

Sheridan Maine: Commercial Finance Manager

Up to £70,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...

Sheridan Maine: Regulatory Reporting Accountant

Up to £65,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...

Day In a Page

The week Hollywood got scared and had to grow up a bit

The week Hollywood got scared and had to grow up a bit

Sony suffered a chorus of disapproval after it withdrew 'The Interview', but it's not too late for it to take a stand, says Joan Smith
From Widow Twankey to Mother Goose, how do the men who play panto dames get themselves ready for the performance of a lifetime?

Panto dames: before and after

From Widow Twankey to Mother Goose, how do the men who play panto dames get themselves ready for the performance of a lifetime?
Thirties murder mystery novel is surprise runaway Christmas hit

Thirties murder mystery novel is surprise runaway Christmas hit

Booksellers say readers are turning away from dark modern thrillers and back to the golden age of crime writing
Anne-Marie Huby: 'Charities deserve the best,' says founder of JustGiving

Anne-Marie Huby: 'Charities deserve the best'

Ten million of us have used the JustGiving website to donate to good causes. Its co-founder says that being dynamic is as important as being kind
The botanist who hunts for giant trees at Kew Gardens

The man who hunts giants

A Kew Gardens botanist has found 25 new large tree species - and he's sure there are more out there
The 12 ways of Christmas: Spare a thought for those who will be working to keep others safe during the festive season

The 12 ways of Christmas

We speak to a dozen people who will be working to keep others safe, happy and healthy over the holidays
Birdwatching men have a lot in common with their feathered friends, new study shows

The male exhibits strange behaviour

A new study shows that birdwatching men have a lot in common with their feathered friends...
Diaries of Evelyn Waugh, Virginia Woolf and Noël Coward reveal how they coped with the December blues

Famous diaries: Christmas week in history

Noël Coward parties into the night, Alan Clark bemoans the cost of servants, Evelyn Waugh ponders his drinking…
From noble to narky, the fall of the open letter

From noble to narky, the fall of the open letter

The great tradition of St Paul and Zola reached its nadir with a hungry worker's rant to Russell Brand, says DJ Taylor
A Christmas ghost story by Alison Moore: A prodigal daughter has a breakthrough

A Christmas ghost story by Alison Moore

The story was published earlier this month in 'Poor Souls' Light: Seven Curious Tales'
Marian Keyes: The author on her pre-approved Christmas, true love's parking implications and living in the moment

Marian Keyes

The author on her pre-approved Christmas, true love's parking implications and living in the moment
Bill Granger recipes: Our chef creates an Italian-inspired fish feast for Christmas Eve

Bill Granger's Christmas Eve fish feast

Bill's Italian friends introduced him to the Roman Catholic custom of a lavish fish supper on Christmas Eve. Here, he gives the tradition his own spin…
Liverpool vs Arsenal: Brendan Rodgers is fighting for his reputation

Rodgers fights for his reputation

Liverpool manager tries to stay on his feet despite waves of criticism
Amir Khan: 'The Taliban can threaten me but I must speak out... innocent kids, killed over nothing. It’s sick in the mind'

Amir Khan attacks the Taliban

'They can threaten me but I must speak out... innocent kids, killed over nothing. It’s sick in the mind'
Michael Calvin: Sepp Blatter is my man of the year in sport. Bring on 2015, quick

Michael Calvin's Last Word

Sepp Blatter is my man of the year in sport. Bring on 2015, quick