💰 SPACs Aren't Dead

PLUS: JD Sports is benefitting from a shift to casual attire, Purplebricks sold itself for £1 and China tech giant Tencent returned to growth during Q1.

May 18, 2023

Good morning. In today’s update - SPACs made a comeback in London, JD Sports is benefitting from a shift to casual attire, Purplebricks sold itself for £1 and Chinese tech giant Tencent returned to growth during Q1.

Markets

London markets struggled for momentum on Wednesday, dragged lower by the real estate sector after investors read across to results from Land Securities and Savills. On the upside, Melrose (+4.4%) led the pack within the FTSE 100 after the industrial giant upped its forecasts for 2025 and signalled it would buy back between 5%-10% of shares from 2024 onwards. More widely, the FTSE 100 and FTSE 250 fell 0.4% and 0.3% respectively.

Top Stories

💰 SPACs aren’t dead

A special purpose acquisition company led by Sir Martin Franklin - once the youngest CEO on Wall Street - raised $550m on Wednesday in the biggest listing in London this year. In terms of a target, Admiral Acquisitions didn’t give any specifics around industry or geography but said they were looking for a “leading competitive industry position with a defensible moat”. Admiral differs from US-style SPACs in that it doesn’t give free shares to the founders at the point of acquisition. Shareholders will also not be given the chance to redeem shares once a target has been found (unlike US SPACs). (For bedtime reading - see the prospectus here)

👟 JD benefits from shift to casual wear

The sports retailer boasted record revenue and profits, driven by its continued global expansion, an increase in prices and a shift from formal to casual wear. Revenues topped £10bn for the time time (2022: £8.6bn) whilst adjusted pre-tax profit rose to £991m (2022: £947m). CEO Regis Shultz said JD was more cushioned than others, as its target customers were younger in age and benefitted from record low unemployment. The group has also been expanding aggressively in the US; JD plans to add up to 600 stores in the next five years and recently opened a new flagship store in Chicaco. (Official)

🏠 Purplebricks sold for £1

The troubled online estate agent - which was once worth around £1.3bn - sold itself for a nominal £1 to rival Strike, after putting itself up for sale in February. The deal puts around 750 jobs at risk, with Strike intending to cut costs through “reducing” the employee base. Purplebricks will retain £5.5m in cash, however shareholders are only expected to see around £2m of that after costs are deducted; Strike will also assume most of its liabilities.

What Else Happened?

Economics / Politics / General

Inflation "unlikely to go away as quickly” as it appeared according to Bank of England Governor Andrew Bailey, as the UK suffers wage price spiral.

House prices need to come down, says Labour leader Keir Starmer, who told business leaders in Westminster that the party would be “builders, not blockers”.

Deals

Shell is looking to sell its French floating wind developer Eolfi, just three years after buying it. (BBG)

Today’s VC round up:

  • Pledge - a London-based sustainability platform - raised an £8m Series A funding round led by Zinal Growth.

  • TidalSense - who produce devices for respiratory disease detection - raised a £7.5m funding round led by BGF and Downing Ventures.

  • Nory - an AI-powered startup helping restaurants manage workflow - raised €7m in seed funding led by Triple Point Ventures.

Company News / Trading Updates

British Land echoed rival Landsec’s reports of a significant drop in property valuations, however CEO Simon Clark thinks we’re “close to the bottom” for prime London real estate. (Official)

London listed software business Sage Group saw shares jump 2.7% after increasing full-year forecasts, driven by strong performance in its Business Cloud division. (Official)

FTSE 250 pub chain Mitchells & Butlers sees signs of an easing in cost inflation, despite posting a 17% fall in operating profits over the last six months. (Official)

Troubled banknote printer De La Rue is reportedly looking to bring in a Rothschild to help turn around their fortunes.

🌎 Global Snapshot

Tencent posted an 11% jump in revenue during Q1, driven by a return to growth in its gaming business, as well as an increase in payment volumes after China’s reopening. (Official)

Software AG shareholders are furious that the Board failed to take Bain Capital’s rival bid seriously, despite being €2 per share higher than Silver Lake’s. (BBG)

Shares rose across the board at US regional banks after Western Alliance Bancorp reported a $2bn increase in deposits over the last three months.

Shares in Take-Two Interactive - maker of Grand Theft Auto - jumped in after-hours trading after it beat market’s sales forecasts for the first quarter; CEO Strauss Zelnick claimed the next year would be tough given the “challenging consumer backdrop”, with the company’s next phase of growth starting in 2025. (BBG, Official)

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