Publication of the register has confirmed what many in the City suspected at the time: British institutions shunned the float.
Stung by the suggestion that they were being sold a pup by the private-equity owners of Debenhams (and claims that they had sold the business too cheaply in December 2003), many of the City’s best-known names appear to have boycotted the issue.
Of the 10 institutional shareholders who owned stakes in “Old Debs”, only three own shares in “New Debs”.
Schroder, M&G, Morley and Newton are all notable by their absence. Even those that did participate bought tiny stakes. Standard Life, for example, owned 6% of “Old Debs”, but it owns a mere 0.2% of “New Debs”. To date, the British institutions look smart. Having floated at 195p, shares in Debenhams have barely budged, closing this week at 196p.
The “New Debs” shareholder register is dominated by hedge funds and value investors, with Americans owning a larger slice of Debenhams than British funds, according to Citywatch Global, the investor-relations research service.
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John Lovering, Debenhams’ chairman, will be keen to build a more stable, long-term shareholder base. The dominance of hedge funds and value investors will make the share price highly volatile. It could also make life uncomfortable for the Debenhams management if they stumble — hedge funds are far more activist than traditional British investors.
But building a more long-term base of shareholders will be a tough task, particularly as Debenhams’ private-equity backers are free to dump their 30% stake on the market from October.
Stagecoach
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WITH stock markets enduring a shaky period, it can’t be long before we hear companies preaching about their fabulous “defensive qualities” — often the same companies that boasted of their wonderful growth prospects when the market was more bullish.
Sorting out the real defensive stocks from the mere pretenders is tricky — particularly when some of the normal suspects (harbour companies like PD Ports and airport operators like BAA) have either disappeared from the market or are about to. Another favourite sector for defensive investors, food, also looks iffy, with companies being squeezed by changing eating habits and aggressive supermarket buyers.
It could be time to look at bus and rail companies. You may think they do not qualify as typical defensive stocks — after all, passenger numbers should drop if economic activity falls. But the transport analysts at Merrill Lynch point out that, since 1990, bus and rail companies have outperformed the FTSE 350 during months of negative stock-market returns.
The big quoted British companies — Arriva, National Express, First Group, Stagecoach and Go Ahead — now enjoy stable cashflows from their bus businesses and much more predictable performance from their rail interests, because of changes to the government’s franchising regime.
My pick is Stagecoach, run by the canny Brian Souter, whose shares closed last week at 105½p. Not only does it offer the defensive qualities outlined above, but it also has elements of a punt about it.
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The company is bidding to retain its South West trains franchise, the busiest and most lucrative rail company in Britain. If it wins, the shares should surge ahead — if not, shareholders might reasonably expect a share-buyback programme.