Good morning!

Graham here.

its going to reach 24 degrees today, so I'll to have to get this report done early, before the heat kicks in. One of the few benefits of corporate offices, that I do miss in the summer, is the powerful air conditioning!

Building a list for today:

All done at 5pm.


Boohoo (LON:BOO)

In mid-caps, I see that Boohoo (LON:BOO) has attacked the bear argument head-on and bought out the rest of PrettyLittleThing for £320 million. The certainty this provides and the lower-than-feared valuation should be received positively, I think.

Market open - Boohoo is up 11% and is threatening to break out to an all-time high.

Shadowfall's research note speculated that the cost of buying out PrettyLittleThing could have been almost £1 billion, if Boohoo waited until 2022 and if it paid a very high EV/EBIT multiple (in line with stock market multiples for Boohoo, Asos and German peer Zalando)

The much, much lower price paid is terrific news for Boohoo shareholders and takes away the fear around this impending deal. I think it makes sense that the Boohoo market cap has increased by over £400 million - that accounts for most of the difference between the worst-case PLT scenario, and the reality which has transpired.

Boohoo argues that it is using its existing cash to fund the £162 million cash portion of the deal, not the £200 million it recently raised from investors.

Since all money is the same, regardless of where it came from, this is stretching things! The facts are that it recently raised £200 million, and it is spending £162 million in cash (plus more in shares) to buy out the Chairman's son.

And it could have bought the PLT stake several years ago, at a much lower level, but chose not to.

Conclusions - this short attack looks to have failed within 48 hours, in my opinion.

I do want to make it clear that I think Matt Earl is a brilliant analyst. He has scalped companies before and…

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