Despite the recent sharp run-up in the price of Shire's stock investors should resist the urge to take their money and run. In the first place, it is entirely possible that AbbVie will come back with a higher offer that obtains the approval of the board of Shire. To take note of, any fresh bid from the American company will need to be substantially higher than its last, perhaps even as high as £55 per share, according to one analyst. Hence, as long as the possibility of another offer from AbbVie continues to exist investors should stick around. On the other hand, the company may decide to stick to its plans and go it alone. That would not be such a bad thing if it sticks to its pledge of doubling sales by 2020, even if its plans are not without risks. As well, there is scope for Shire itself to carry out acquisitions, to which one must add the benefits of the company's two most recent purchases.
For all of the above reasons, to The Daily Telegraph's Questor column what all the recent speculation surrounding the shares
has in fact achieved is to bring their valuation in line with the company's long-term prospects.
Motor insurance and breakdown specialist AA seems headed for an uneventful stock market debut on Thursday. The stock took a hit in conditional trading on Monday, perhaps as a result of investors associating it with Saga, one of this year's poor floats. Then again, in essence what broker Cenkos did yesterday was flip the shares onto the market while at the same time issuing an additional £185m pounds' worth to reduce its debt, which now stands at £3bn.
That mountain of liabilities explains why the firm is trading at a price-to-earnings ratio of just 7.5. In particular, there is a tranche of debt which is getting paid 9.5% interest, with interest payments eating up nearly half the company's yearly operating profits of about £380m. Furthermore, motor insurance is a viciously competitive market, the initial dividend which will be on offer next summer will be low and the number of personal members has been falling and it is not clear where future growth will come from. "Ignore", writes The Times's Tempus.
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