The Stock Market And The Fate Of The UK Economy
During the week the below graph of the number of companies listed on the main market of the London stock market was published, and I tweeted it out to my 28,000 followers. It looks dire, and drew comment. The main thrust of these comments was how politicians could let this happen? They must be incompetent. Well, they may be.
However, it remains the case that in order to build something, create something, one has to be determined and competent. As a contrast though, to destroy something very often takes no effort at all, and is relatively easy. In the case of the number of listed companies on the London market dwindling, this has been the result of years of deliberate neglect. Indeed, there has been something of an irony here, in that the neglect of the London market has resulted in the valuations of many of the best companies falling to ridiculously low levels, and hence an increasing spate of companies getting taken over – like EasyJet (EZJ). This has depressed the number of listed companies yet further. Of course, one of the main points of being listed, apart from raising money is to be acquired, so nothing wrong there.
The problem has been and remains the dearth of new companies coming to market. This is perfectly understandable. If you are a successful private company, why take a leap into the unknown, with all the extra scrutiny, mudslinging and cost of being listed. Plus if things go pear shaped, they go pear shaped in public. But then of course, there is the journey to going public: raising £2m plus, all the paperwork, up front fees to pay et al. Why there is not a universal template for the prospectus, a corporate advisor provided by the exchange, and all the legal / accounting fees included in a subscription model no one knows? Well, actually they do. A lot of people live off listed companies. Whether the listed company succeeds or fails, their bills are paid.
So what are the remedies, apart from say a £50,000 a year fixed fee for being listed – like the proposal for already listed foreign companies? Much less red tape would be great, as currently listed companies are a clay pigeon for every rule and regulation. The worst thing is that even after complying with everything, no one believes the RNS announcement anyway. This week it was reported that the FCA reduced MiFID transaction reporting from 65 fields to 52. It has also removed the seven-day pause between an IPO prospectus being published and the bank research that follows it. Who cares? Even worse, who knew these rules in the first place. Oh yes, and why is MiFID still a thing? Wasn’t that red tape from the EU?
As was pointed out on X in reply to my tweet of the graph by Andrew Monk of VSA capital, the fate of the UK economy is inextricably linked to the fate of the UK stock market. One can only assume that the powers that be are fully aware of this, and think that everything is tickety boo, even as the nation debt tops £3tn.
They might even be cheeky enough to point to the way that the FTSE 100 has recently hit record highs. I might suggest that the reason that the blue chip index has hit record highs is actually a factor of entrepreneurs and investors deciding it is easier to take a punt on stocks than set up a company in the real world. All those business rates, employment rules, rent, and then if you actually make any money, get hammered by HMRC. I would venture to suggest ISAs and then spreadbetting is the way forward. Although, given the online comments and the recent share price plunge, people might be looking to do this in places other than IG Group…
This Week’s Risers
Although this is supposed to be the week in small caps, it was actually the elephants on the stock market that were galloping, and on the US stock market SpaceX (SPCX) roared from $110 to $130 at the end of the week. Back on Planet Earth we saw that many of the companies reporting on the London market delivered in spades for the people who bought ahead of time. They included S4 (SFOR), WPP (WPP) and Diageo (DGE). Indeed, in the recent past, just taking a punt on company results would normally have been a winner. Even if it was not initially, if there was a rug pull, you average down as in the case of Ocado (OCDO) and Bob’s your uncle.
For instance, next week we have Finals from Rank Group (RNK), with Interims from Antofagasta (ANTO) and Intercontinental Hotels (IHG). These could all deliver interesting moves. For instance, from a technical perspective on Rank, a break of a 104p resistance line from April at 104p could lead to a December resistance line projection at 125p by the end of this month. I hope the call ages well. In fact, I am going to start charting companies ahead of results from now on here at this website.
Anglesey Mining
This week Anglesey Mining (AYM) was brought to my attention by the a couple of reliable sources, and I am pleased to look at the company again. This is especially so given the way that apparently the company has sorted out its debt and reorganised itself. There is also a new CEO with his feet under the desk in the form of Andrew Fulton. The shares were up nearly 50% this week to close at 6p from 4p. However, from a charting standpoint, above the 200 day moving average at 5p we could see as much as 9p at the top of a rising trend channel from October last year, by the end of next month. From a fundamental perspective the market clearly liked Monday’s RNS entitled “Parys Mountain: A Historical Mining Asset and a Platform for the Future Why a UK advanced brownfield copper project matters in a market defined by the UK’s security of supply.” And so did I.
