Weekly stock market round-up
This is traditionally one of the quietest weeks of the year for company announcements, and this year is no exception. However, there are one or two snippets worth picking up on.
Shares in National Grid Transco were under pressure this week after the blackouts in the US. Grid owns Niagara Mohawk, the transmission unit at the centre of the outage, but says that it did everything it was supposed to and is not in any case liable for interruptions, even on that scale. The investigation will take months and any resulting legal action will drag on for years, so it’s unlikely the shares will be seriously de-rated in the medium term.
Marks & Spencer has given up trying to sell Kings, its US supermarket chain and the last vestige of a failed overseas expansion strategy. It said it couldn’t get a good enough price. The flop doesn’t really change the group’s longer-term strategy, broadly summarised as food, financial services, home furnishings and clothes, although the cash would have come in useful.
GlaxoSmithKline said US regulatory authorities approved Levitra, a rival to Viagra, and the product should start hitting pharmacies’ shelves soon. The drug is already approved in 50 countries worldwide, but the US is the key market and GSK was keen to steal a march on other Viagra wannabes. It’s another piece of good news for GSK, whose shares have shown great resilience this year and are worth buying.
MyTravel, the tour operator once far more sensibly named Airtours, said it finally reached agreement on revised terms for a bond issue. The debt in question was a bond due to convert into shares next year. The conversion price was way above the group’s current share price, meaning MyTravel would have had to redeem the bonds for cash – and there’s no way it could have afforded that following a catastrophic fall from grace over the past 18 months. It has bought itself more time by extending the maturity of the bond out until 2007. The price is that it must pay more interest and give the bondholders more of the company when the bond matures.
Shares in technology companies have staged a remarkable recovery in recent weeks as investors turn more upbeat about the economic outlook. Some stocks have more than tripled in a relatively short time-frame. But there was a rude reminder of the risks this week when Vocalis announced it had gone into administration. The company makes speech recognition software and has flirted with bankruptcy for much of the past two years. A rescue rights issue at the start of the year was good money after bad. The receivers are talkingabout a small cash distribution to shareholders, but don’t hold your breath.