FTSE 100 higher, Shein IPO in sight according to reports, retail investors shun Boohoo fundraise, Melrose sticks with guidance and Begbies Traynor delivers insolvencies warning

“The FTSE 100 ticked higher on Monday, helped by a decent showing for resources and financial stocks,” says AJ Bell Investment Director Russ Mould.

“Business recovery specialist Begbies Traynor delivered a stark warning that the UK will see more companies facing insolvency after the changes in the Budget, as it announced a strong start to its current financial year.”

Shein

“The rumour mill has whirred back into action regarding Shein’s London IPO. Reports suggest it is targeting the first quarter of 2025 to join the UK stock market in a float that could value the business at £50 billion. It’s been 12 months since Shein was first thought to have filed registration papers for a UK IPO and normally it doesn’t take this long to bring a company to market.

“One can only imagine the number of questions from prospective investors, given uncertainties around business practices, supply chains, corporate governance, alleged intellectual property infringement, costs, margins and tariffs. All these need to be answered before Shein has a chance of getting its IPO away.

“Under normal circumstances, Shein’s position as a fast-growing retailer expanding across multiple geographies and taking market share from established players would have made it a no-brainer for investors. However, there is an element of ‘it’s too good to be true’ with Shein that makes it a harder investment decision.

“Many people think there is a catch with how it is able to sell goods so cheaply – namely that it is using a supply chain that relies on workers that are poorly paid and poorly treated. Shein will need to rigorously prove this is not the case if it is to win over investors for the IPO.

“Fund managers might like the potential earnings growth on offer from Shein, but few are going to risk their career by backing a business if there proves to be skeletons in the closest. They might rather miss an opportunity than go all-in and then be associated with a bad egg, should that turn out to be the case.

“Just look at how fund managers shunned Deliveroo’s IPO in 2021 amid concerns over workers’ rights. That led to its shares being priced at the bottom end of the guided range and the company earning the nickname ‘Floperoo’ when the shares fell 26% below their listing price on day one. Shein’s advisers will be desperate for the retailer not to follow in Deliveroo’s steps.”

Boohoo

“The general public didn’t fancy dressing up their investment portfolio with Boohoo shares, judging by the shocking take-up of the company’s retail share offering. While institutional investors were keen to buy more stock, the retail component fell flat on its face. Boohoo had offered up to £6 million worth of shares, but it only received orders for £388,508, representing a mere 6.5% of the available stock.

“Retail investors might have been turned off by the stock being priced at a premium to the market value at the time of the fundraise. They could have just placed an order on the market for shares to increase their position without having to pay over the odds. It feels as if Boohoo offered the retail component on the grounds of inclusivity, rather than realistically expecting the general public to pay up for stock.

“Share placings at a premium to the market price aren’t that common, certainly not with a company going through a bad patch such as Boohoo. Nevertheless, institutional investors are sometimes happy to pay a small premium if it means getting their hands on a decent block of shares rather than having to pick up small parcels on the market.”

Melrose

“There will be genuine relief at a lack of further downgrades at aerospace business Melrose after its warning this summer.

“Supply chain issues remain in the background amid problems at the world’s two major plane makers Airbus and Boeing, yet Melrose has felt able to stick with its current guidance.

“Historically Melrose bought up industrial businesses and executed a buy, improve, sell model – investors will hope the ‘improve’ bit has been retained now its entire focus is being brought to bear on the old GKN aerospace business. Next year will be a key test with the company promising a significant increase in cash flow as the bulk of the restructuring of the business concludes.

“For now, it is the company’s engine division that is really powering things, with the bit of the business which builds the body and wings of planes trailing in its slipstream.”

These articles are for information purposes only and are not a personal recommendation or advice.