Market Report: Autonomy shares slump on bond issue

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The Independent Online

One thing investors are rarely keen on is a company taking on debt – it leads to rivals paying to call the piper's tune. Autonomy Corporation, the hugely successful FTSE 100-listed IT group yesterday announced plans to issue a £500m convertible bond, sending its shares crashing to the bottom of the FTSE 100. The bond's proceeds will be used to pay down debt accrued thanks to last year's buyout of Interwoven, but the deal also puts funds in place "before we start any serious conversations" on acquisitions, it said.

In either event, it was all too much for some investors, who sent the stock down 88p to 1522p, partly reversing the gains of 30-odd per cent over the last six months. In many cases the falls were due to some investors shorting the stock, claimed sources close to the company.

Volumes on the FTSE 100 were thin in early trading following the Bank of England's projections on growth and inflation. However, Mervyn King's stark assessment that the economy was still "bumping along the bottom" had limited impact on the index of leading shares, which finished the day up.

Financial stocks made the strongest progress. The biggest winners were the insurance companies, with Aviva, Prudential and Old Mutual all vying for the medal positions. The insurance companies have been walloped over the past few days as concerns about the financial sector have returned.

Yesterday's biggest winner was Aviva, which put on 17.1p to 361.6p, reversing a trend that has seen the shares fall 13.4 per cent in the last week. Old Mutual also deserves an honourable mention after its shares jumped 4p to 101.3p. This comes after a 7.6 per cent slide in the last seven days.

While the insurance sector might have breathed a collective sigh of relief, yesterday's gold medallist in the market's premier league was interdealer broker ICAP. Like the insurance stocks, ICAP has endured miserable recent form. Yesterday's 32.2p rise to 337p comes after a 20 per cent drop in the past week.

ICAP was clearly aided and abetted by investors thinking the recent sell-off may have been overdone, but was also helped up the ladder by upbeat notes from both Goldman Sachs and Morgan Stanley.

There was also a Churchillian feel to the top of the list as FTSE 100 new boys Aggreko, the emergency power supply group run by Sir Winston's grandson Rupert Soames, rose by 35p to 930p. The company will be hoping yesterday's gains are not the beginning of the end of the good news.

Pharma giant GlaxoSmithKline joined Autonomy at the bottom of the pile. Despite some upbeat numbers last week, and success in seeing off most of its generic competition, Europe's biggest drugs company has failed to interest investors in recent months, underperforming the index. The stock fell a further 22.5p to 1196p yesterday, confirming its place in negative territory for the last 12 months.

GSK's failure to inject punters with any excitement was almost matched by Imperial Tobacco, which dropped 19p to 2019p.

The group has made steady gains in the last month, with the shares putting on nearly 4.5 per cent. Yesterday the company announced it planned to challenge the Government's decision to ban cigarette vending machines. The removal of the self-service machines would see some of Imperial's sales go up in smoke.

It was a similar story away from the FTSE 100, with financial services groups heading towards the top of the FTSE 250.

BlueBay Asset Management has faced the problem of former trader Simon Treacher being fined and banned by the FSA for deceiving investors in recent weeks. The company's shares have lost more than 7 per cent of their value in the last week, but rebounded strongly yesterday, gaining 15.5p to 334.1p.

Mike Ashley's Sports Direct International was also among the winners, with a 3.5p jump to 97p. The move reversed a poor start to the year, which has seen the stock fall by close to 5 per cent.

It was not all joy on the FTSE 250, however. Directories business Yell Group was chief among the laggards as investors got dizzy with the gains the shares have made in the last week. The stock dropped 1.81p to 39.19p yesterday after climbing by more than 10 per cent in the week before. The increases came after the company announced decent results at the start of the month.

In small-cap land, mobile technology outfit Emblaze, which describes itself as "a group of technology companies addressing both growth and innovation activities, thus combining the stability of 'bread and butter' mature technology enterprises with 'high-risk /high-reward' investments in innovation" was up.

A spokeswoman said that "there may be some news" at next week's Mobile World Congress in Barcelona. Investors may also have been encouraged by the company's bold move to challenge Microsoft, which it says has infringed a number of its patents.

Emblaze's share closed up 6.75p at 46.25p, a 17.09 per cent increase.