M&S holds on to gains despite denial from Qatar - UPDATE

Takeover speculation surrounding High Street retailer Marks & Spencer (M&S) pushed the stock sharply higher on Monday, but an outright denial by rumoured Qatari bidders failed to dampen the share price in afternoon trade.

Takeover speculation surrounding High Street retailer Marks & Spencer (M&S) pushed the stock sharply higher on Monday, but an outright denial by rumoured Qatari bidders failed to dampen the share price in afternoon trade.

According to The Sunday Times, the Qatar Investment Authority, which already owns high-end department store Harrods and a 26% stake in Sainsbury, was said to be assembling a consortium of private-equity investors and had spoken to banks about financing a potential offer.

Rumours over a buyout lifted the retailer's stock last week, with the share price finishing nearly 3.0% higher at 372.5p by Friday's close, leaving its market capitalisation just shy of £6.0bn. The Qatari offer was thought to be for a price of 500p a share, valuing the company at £8.1bn. The stock surged as much as 9.0% in early trading on Monday.

However, Reuters reported in the afternoon that a source close to the sovereign wealth fund had quashed the rumours, though no official statement was released. Despite the denial, M&S's share price remained elevated, up 27.9p (+7.49%) at 400.4p by 15:20.

A series of disappointing trading updates are thought to have left the company vulnerable to a takeover bid over the last few months. In the third quarter in particular, M&S missed sales forecasts for the key Christmas period with like-for-like sales in the UK dropping by 1.8%.

As such, M&S had failed to join in with the wider stock-market rally, dropping 3.2% (as of last week) since the start of 2013, underperforming the benchmark FTSE 100 which has jumped over 10%.

However, with no firm offer materialising for the company - as has been the case many times in the past - market chatter has suggested that the stock could have been subject to so-called "share ramping", a way of deliberately spreading rumours on the market to illegally boost share prices.

Shares hovering around resistance levelsFrom a technical point of view, the 400p resistance level for the stock has been a tough one to breach, according to Rik Thakrar, the Risk Manager and Senior Dealer at Spread Co, with the share price bouncing lower from these levels in early November and again in mid-December.

He said: "If the stock price makes a further failed attempt to breach the 400p resistance then a technical charting triple-top feature may well result in one way movement to the downside for the equity. Either way, Investors with Qatar have expressed unambiguous interest in M&S and this has provided continual buying pressure, if this continues then an announcement under the Takeover Panel rules may give investors the transparency they desire."

Thakrar said that many of Spread Co's clients took long positions in early trading on Monday, running close stop losses and selling at 400p, while the same amount short sold the stock as it hit 400p, "presumably on the basis that once the story runs out of puff, M&S shares will return from whence they came".

Recommended

Why it pays to face up to your investment mistakes
Investment strategy

Why it pays to face up to your investment mistakes

Buying stocks can be a complicated business. But selling stocks can be tricky, too – even if you sell for the right reasons. Max King explains how to …
17 Sep 2021
Share tips of the week – 17 September
Share tips

Share tips of the week – 17 September

MoneyWeek’s comprehensive guide to the best of this week’s share tips from the rest of the UK's financial pages.
17 Sep 2021
Royal Mail will deliver for investors – here's how to play it
Trading

Royal Mail will deliver for investors – here's how to play it

Royal Mail Group has found its feet in the past 18 months and looks cheap. Matthew Partridge looks at how to trade the shares.
14 Sep 2021
The times may be changing, but don’t change how you invest
Small cap stocks

The times may be changing, but don’t change how you invest

We are living in strange times. But the basics of investing remain the same: buy fairly-priced stocks that can provide an income. And there are few be…
13 Sep 2021

Most Popular

The times may be changing, but don’t change how you invest
Small cap stocks

The times may be changing, but don’t change how you invest

We are living in strange times. But the basics of investing remain the same: buy fairly-priced stocks that can provide an income. And there are few be…
13 Sep 2021
Two shipping funds to buy for steady income
Investment trusts

Two shipping funds to buy for steady income

Returns from owning ships are volatile, but these two investment trusts are trying to make the sector less risky.
7 Sep 2021
Should investors be worried about stagflation?
US Economy

Should investors be worried about stagflation?

The latest US employment data has raised the ugly spectre of “stagflation” – weak growth and high inflation. John Stepek looks at what’s going on and …
6 Sep 2021