PowerVR news seems to defy the logic of disclosure

MARKET REPORT

This may sound a bit naive, but aren't shareholders entitled to equal access to price-sensitive information?

If a quoted company has an announcement to make about material things like current trading, changes in senior management, or a significant deal it must notify the Stock Exchange. Otherwise a false market could be created in the shares.

But yesterday investors would have scoured their screens in vain to find out why shares in VideoLogic, the computer chip designer, had suddenly flickered into life. They closed 10p higher at 60.5p on hefty volume of 2.7 million shares, valuing the company at pounds 90m. By the close of play, though, there was no still news, no nothing.

Thankfully the Internet - that indispensable information source - came to the rescue, carrying a press release, dated Thursday, 27 February, bearing the headline "NEC invests $25m in PowerVR Games Program".

In a joint statement Japan's leading producer of microchips revealed it would spend $25m (pounds 15m) this year developing VideoLogic's PowerVR chip which enables personal computers to run 3D graphics.

There was also a broad hint that several other big computer companies would take orders for the chips this year.

All interesting stuff, but why weren't shareholders told? VideoLogic argues some of the information about the NEC deal was already known and that it decided against making an announcement to the Stock Exchange after talking to SBC Warburg, its broker and financial adviser. For its part, the Stock Exchange is understood to be investigating an apparent breach of disclosure rules.

VideoLogic's shares could hit 75p on the latest news and Keith Woolcock, electronics analyst at Merrill Lynch, thinks the shares remain a steal on forecast profits of pounds 5.4m for the year to March 1998, implying a p/e ratio of 16.

Those electronics companies that actually bothered to tell the Stock Exchange what was going on also fared well. Shares in Eidos, the computer games group, soared 75p to a record high of 1045p on news of a third-quarter pre-tax profit of pounds 7.8m versus a pounds 1m loss in the corresponding period last year.

Also breaking new ground was accountancy software firm Sage, whose shares jumped 31p to 617.5p after securing a foothold in the German software market, the largest in Europe, with a pounds 40.1m acquisition.

Wall Street influences dominated sentiment for most of the session after traders shrugged off Labour's easy win in the Wirral South by-election.

The FTSE 100 managed to stay above the psychologically significant 4,300 mark, but closed just off the day's low at 4308.9, down 30.9.

The main talking point was NatWest, whose shares are set to open sharply lower on Monday after announcing shortly after the market closed that it would take a pounds 50m charge against first-half results after discovering errors in its interest rate options book. A senior trader has been suspended pending the conclusion of an internal inquiry. Earlier, NatWest's shares had closed 0.5p lower at 758.5p.

Shares in drugs group Zeneca tumbled following news that the US Food and Drugs Administration had issued a warning to the company following an inspection at one of Zeneca's plants in Macclesfield, Cheshire.

The FDA said it would not recommend approval of any new applications which list Zeneca as the manufacturer of sterile pharmaceuticals until the problems identified at the plant had been resolved. The sterile manufacturing area subject to the FDA inspection is a sophisticated plant responsible exclusively for a cancer treatment called Zoladex.

Zeneca's shares crashed by as much as 50.5p before recovering to close at 1805p, down 33.5p on the day.

Banks with interests in the Far East stood out. Standard Chartered hit another all-time high, up 26p at 841.5p, while HSBC firmed 19p to 1582p ahead of Monday's results.

Television stocks were again an active sector. Speculation that a bid was about to be launched for Yorkshire Tyne-Tees sent its shares 30p higher at 1272.5p with Granada, the obvious candidate, 21.25p weaker at 908.75p as a result.

HTV's good run continued on reports that it was forging a closer production alliance with Warner brothers of the US. The shares ended 11p to the good at 361.5p ahead of next week's results.

Shares in Henlys motored ahead, jostling for top slot in the list of FTSE 250 advancers with a 32.5p gain to 559p, after the car dealership and transport group unveiled 1996 profits of pounds 33.3m versus pounds 25.3m last time.

Taking Stock

Broker Granville Davies likes the look of Low & Bonar, the Dundee- based packaging group. Relief that respectable results were accompanied by an encouraging trading statement has seen the shares bounce recently off their year-low of 388.5p to last night's close of 449.5p, up 1p.

Management is keen to accelerate the internal growth rate while a robust balance sheet provides ample scope to make bolt-on acquisitions. Granville says the forward p/e ratio of 11 is too conservative and the shares should outperform as investors regain confidence.

Aim-listed Concurrent Technologies, the computer design and production company, pleased the market by increasing 1996 profits by 129 per cent to pounds 1.3m and paying a maiden dividend of 0.1p. The shares leapt 7p to 25p.

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