Moves to ensure London’s listing rules are fit for the 21
st century cannot come too soon.
A review released alongside Rishi Sunak’s Budget this week suggests the UK aims to become Europe’s leading destination for special purpose acquisition vehicles (Spacs). The move could help reverse the London Stock Exchange’s dwindling share of global floats, but their history in the US suggests investors need to take care.
Spacs essentially offer a “backwards IPO” and easy route to market for a private company. They are cash shells, known in the US as “blank cheque” companies, with no commercial operations. They raise capital through an initial public offering for the purpose of acquiring an existing company. As the companies have no operations, the disclosure requirements and listing documentation are much easier and less costly.
‘I lost £170k on GameStop due to Reddit investors and incompetent stock broker’
Has a company treated you unfairly? Our consumer champion, Katie Morley, is here to help
Credit: Illustration by Veronica Grech for The Telegraph
Has a company treated you unfairly? Our consumer champion, Katie Morley, is here to help. For how to contact her click here.
Dear Katie,
As an experienced investor, I recently became heavily invested in a short position in GameStop, the American consumer electronics store, which was doing terribly as a business. But then, a few weeks back, when things started kicking off on Reddit and people started piling into the stock to artificially boost its value, I started rapidly losing money. I was down around £170,000, and my account fell into negative equity.
This column is still on the lookout for firms whose financial performance and share price have suffered at the hands of the pandemic but whose business model remains sound: they may have the potential to deliver some positive surprises as the vaccination programme continues, the virus is (hopefully) beaten off and lockdowns ease.
One possible candidate in this respect is medical equipment specialist Smith & Nephew, perhaps best known for its replacement hips and knees.
Last month’s full-year results bore the scars of the pandemic. Sales fell by 11pc year on year in 2020, while operating margins and earnings per share both fell by around a third on an underlying basis.
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