Friday High Five – the news this week

An eagerly anticipated stock market float, a symbol of the animal spirit and ambition of North West businesses embracing new frontiers in a growing sector.

No, not the big news about Applied Nutrition edging closer to a market debut, but a loop back ten eventful years ago and the headlines that greeted the market debuts of boohoo at £560m (peak valuation £4billion in 2020) and the only way was up.

Boohoo’s share price has tanked over the last five years by more than 85 per cent.

The markets are now openly pricing in a break up of the fast fashion giant that is also fighting fires on all fronts, not least with Sports Direct’s Mike Ashley surpassing the founders as the largest single shareholder.

In a compressed time frame and on a smaller scale, we’ve also seen a collapse in value at Stockport-based ‘circular economy’ retailer musicMagpie, which floated in 2021 at a market cap of £208 million.

This week AO World bought the business for £10m, a move that could well turn out to be bargain of the century for the Bolton-based white goods retailer, which has had ups and downs of its own in its stock market journey.

Both boohoo and musicMagpie (and THG) will stand as salutary lessons that will be on the minds of the advisory team behind Applied Nutrition. Price too high and the significant market event becomes seen as an exit event for the founders and for investor JD Sports. At stake is longer term credibility of the business as a growth play.

At least the value proposition of Applied Nutrition is rooted on its core product and target market, and not a backroom engine that’s difficult to comprehend.

There’s a sense however that the timetable is being influenced by the current market nervousness over Chancellor Rachel Reeves’ intentions in the forthcoming Budget.

We’ve christened this period Mad October; with intense activity, late nights in the office, copious amounts of coffee – and journalists asking annoying questions, the like of which is normally only seen on football’s transfer deadline day.

It has certainly triggered a scramble to complete deals before anticipated changes to Capital Gains Tax (CGT) or meddling with Business Asset Disposal Relief (BADR).

It’s in no-one’s interests for there to be a dysfunctional stock market that’s failing in its core purpose of providing a source of capital for the purposes of value creation. However, I genuinely don’t think that’s what’s going on here.

If ever there was a need to apply long term strategic thinking, that time is now.

Have a great weekend.

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