Spreadex Market Update
Friday, October 11, 2013 - Morning Market Update
Royal Mail opens up 36% on it's IPO
Royal Mail started conditionally trading this morning and opened up 36% on the IPO. The hugely oversubscribed stock saw anyone who tendered for shares up to £10,000 received just shy of £750 worth of stock however those who tendered over £10,000 received nothing. Official trading begins on Tuesday with the conditional trading meaning should for some reason the privatisation not go through the shares can be recalled. With demand so high for this stock expect a volatile day.
It appears President Obama and the Republicans are nearing a deal to re-open the government and temporarily push back the debt ceiling to November 22nd. After a 90-minute meeting last night no formal deal was agreed however on-going discussions suggests that an agreement should come today. The idea being the temporary push-back will allow the sides to come to a more productive and long-term deal. This combined with the announcement of the next Fed chairman Janet Yellen has provided the US markets with a huge boost with global indices and futures up.
The implications for the next 6 weeks however are less positive, simply delaying the issue could lead to further volatility in the markets with both sides seemingly unwilling to budge up until this point, only the possibility of global economic Armageddon and the pressure of public opinion has forced the Republics to temporarily yield. The egregious failure of bi-partisan politics throughout this ordeal suggests this decision and apparent willingness to deal by the Republicans should be taken with a grain of salt.
Royal Mail IPO, opened 450, trading 440 Shares in Royal Mail rose more than 38% to 456p at the start of conditional dealings on the London Stock Exchange this morning. The stock opened at 450p a share, over £1 higher than the initial 330p price given during the IPO. The hugely oversubscribed sale valued the 500 year-old-company at £3.3 billion.
The floatation itself means the government’s stake in the Royal Mail is reduced down to 38% with the possibility of a further reduction to 30% through an over-allocation option. The price rise is likely to fuel debate over whether the sale of Royal Mail has been undervalued whilst business Secretary Vince Cable has insisted that the taxpayer has not been short-changed by the privatisation.
Anglo American, +2.2% Leading the FTSE 100 risers, Anglo American shares traded over 2 percent higher after announcing the resolution of the strike action. The striking miners have stated returning to work after it clinched a deal with a South African union to end a near two-week strike over job cuts. AAL.L said in a statement it would grant “voluntary separation” packages to 3,300 employees it had decided to lay off.
Whitbread, +2.2% Citigroup upgrades Whitbread to buy from neutral and raises target price to 3570p from 2900p. The upgrade comes after "Improved sentiment around the European economies suggests that we could be at the start of a renewed upgrade cycle for European focused hotel names," Citi says. They also stated Whitbread are best exposed to any recovery in European trading. Whitbread generates over 90% of EBIT from the UK which has seen the most aggressive upgrades to economic forecasts.
XP Power, +10% The global computing-component production company, XP Power Limited announced Friday that due to a positive trading environment in its third quarter it has increased revenues 11% year on year for the three months ended September 30. They also announced that sales were boosted 7% for the nine months ended September 30 compared to the same period in 2012.
Chemring Group, -24% British military equipment maker Chemring Group warned that would take an 8 million pound hit to 2013 operating profit from continuing production and quality problems, and that it saw 2014 performance behind this year's. The hit was due to production issues at its Kilgore facility and movement in dollar-pound exchange rate would adversely affect its bottom line.
Kenmare Resources, -10% The explorer for commercial deposits of natural resources company has announced it had raised £66.33 million by placing 250 million new shares at 25.6 pence each. Each subscriber to the new shares will also get one warrant for each five shares bought. The warrants have an exercise price of 29.09 pence and can be exercised after 13 months, but expire in five years.
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