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.
- 3 Russian girl takes her own life after parents find pornography on her computer
- 4 Ball pool for adults opens in London
- 5 Amal Clooney gives excellent response to fashion question at European Court of Human Rights
Michelle Obama highlights harsh restrictions faced by Saudi women after meeting King Salman without wearing a headscarf
Saudi preacher who 'raped and tortured' his five -year-old daughter to death is released after paying 'blood money'
Kim Kardashian on Bruce Jenner's 'story': 'We support him no matter what, and I think when the time is right, he'll talk'
Russian girl takes her own life after parents find pornography on her computer
Ball pool for adults opens in London
9 reasons Greece's experiment with the radical left is doomed to failure
'We would evict Queen from Buckingham Palace and allocate her council house,' say Greens
Have we reached 'peak food'? Shortages loom as global production rates slow
Greece elections: Syriza and EU on collision course after election win for left-wing party
British grandmother Lindsay Sandiford faces execution by firing squad in Indonesia
Liberal Democrat minister defends comments suggesting immigration causes pub closures
iJobs Money & Business
£13000 per annum: Recruitment Genius: This Pension Specialist was established ...
£23000 - £26000 per annum + Benefits: Ashdown Group: Market Research Executive...
£25000 - £35000 per annum: Recruitment Genius: A Technical Report Writer is re...
Competitive salary & benefits!: MBDA UK Ltd: MBDA UK LTD Indirect Procurement...