JD Wetherspoon’s pubs are shut, so one doubts the chairman, Tim Martin, is any less grumpy than usual. He should, though, view his pint as half full. The stock market clearly buys his thesis that conditions are ripe for big players, including Wetherspoon, to prosper by snapping up boozers at knock-down prices.
Look at the response to the company’s latest £93.7m fundraising. You might have assumed that a second pandemic equity placing, plus confirmation that cash is still being burned at a rate of £4m a week, would depress shareholders. Far from it. The shares rose 5% to £12.44, continuing their steady recovery from lows of 600p last March. Suddenly Wetherspoon’s pre-pandemic share price of £15 doesn’t look far away. Mitchells & Butlers, still working on its rights issue plan, rose 9% in sympathy.
“Additional capital will facilitate the acquisition of new properties, which are likely to be available at favourable prices, as a result of the pandemic,” said Wetherspoon in its pitch. “It may be possible to achieve a higher-than-average return on capital on properties acquired in the next few years, based on the company’s past experience.”
Yes, it’s a fair bet that pub-land’s big players will emerge into a vaccinated, socially undistanced world with their competitive positions enhanced. Smaller unquoted rivals tend not to have the same easy access to capital. Some stragglers won’t make it. Others may be so shaken they’ll be desperate to sell their freeholds, even at sub-2019 prices. Licensing authorities, contemplating vacant high-street shops, may be more inclined to approve conversions into pubs.
The same thought seems to have occurred to the former Greene King boss Rooney Anand who was reported by Sky News this week to be raising £200m of US private equity money for a spot of bargain hunting in the UK pubs sector. It looks a buyer’s market.
This hardly feels fair, of course. At one end of the industry, a chunk of smaller pubs are “hanging by a thread” and awaiting meagre grants just to survive, according to the British Beer & Pub Association. At the other end, war chests are being assembled to capitalise on the likelihood that some threads will break.
All operators have been recipients of government support in the form of furlough payments, VAT holiday and business rates, of course. But one can understand why the Treasury is hesitating about confirming an extension for everyone. If the stock market signals are correct, the national chains don’t need more beer money from the public purse.
Pulled IPO suggests more to the Jack Ma Beijing story
Jack Ma is back and, to nobody’s surprise, the theme of the Chinese billionaire’s video wasn’t another analysis of the failings of the country’s banking regulators and their “pawnshop mentality”.
Instead, the co-founder of Alibaba, who had not been seen in public since those same regulators halted the flotation of payments spinoff Ant Group, proclaimed his devotion to the cause of Chinese rural education. Very bland, very diplomatic.
What does the whole saga mean for Alibaba, Ant and the general freedom of manoeuvre for China’s tech titans? James Anderson, the co-manager of FTSE 100 investment trust Scottish Mortgage, which has enjoyed huge success by backing high-flying Chinese tech firms including Alibaba, attempted to answer that one last week. “What we think is happening is that China is moving principally to a policy of greater antitrust requirements in a way that, actually, I think, would have been beneficial in America and Europe,” he said.
He may be right that a rough-and-ready process of competition policy is at work in China (and, note, he wasn’t excusing the political system). Viewed that way, Ma has merely been reminded who is boss. And Alibaba, the dominant online platform, has simply had its wings clipped in a way that Facebook, say, has never seriously faced in the west. That could indeed be viewed as pro-competition.
But there is still an unexplained part. Ant Group’s $37bn (£27bn) flotation would have been the world’s biggest fundraising. It was meant to be a showpiece event, not just for Ma’s empire but for China’s stock market. Yet it was cancelled at the 11th hour, seemingly because of a single speech. That detail smacked of panic. There’s more to come on this tale, one suspects.
