It is not easy being predominantly short in a market that is yet again flirting with all time highs and so a bit of luck is always welcome. It was certainly luck rather than judgement that prevented me being hit by the proverbial bus on Thursday when not one but two of my recent shorts were the subject of takeover bids...
Earlier in the week, in a bit of housekeeping, I had closed a few short positions that were not really going anywhere, among them BCA Marketplace (BCA) and Premier Technical Services (PTSG). So I was mightily relieved not to be on the receiving end of TDR Capital’s 243p cash offer for BCA and Macquarie’s inexplicable 210p bid for Premier (what is it about Aussies making crazy plays for duff UK companies? This one seems right up there with Slater & Gordon’s tilt at Quindell). Still it was a timely reminder that we are very much in the climate where crazy things happen and it got me thinking about where else danger might be lurking.
Purplebricks (PURP) is certainly a possibility here but I have decided to remain short as I cannot see why Axel Springer would need to pay much of a premium for control, should it be idiotic enough to want it. If it approached Woodford at 100p per share it would more than likely be successful, and this would give it de facto control of the business whether or not the remaining shareholders accepted the mandatory bid that would ensue. I suppose it is possible it might pay a little more but Axel Springer is itself about to be owned by KKR who, being grown-ups, are just as likely to terminate what has been a disastrous investment by the Germans.
In my opinion, the risk reward remains favourable to still be short Purplebricks. Without a bid, the company is pretty much worthless, and, given the precarious position of Woodford, a bid should not be too painful for the bears. I remain short despite the high cost of borrow as I suspect that the results next month will demonstrate the massive flaws in the business model.
Filed under: Purplebricks, RM2, UK Oil & Gas, RPS Group, Bonmarche, Lucian Miers
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