Marston’s shares: what will I do now about the falling share price?

As a private equity bidder walks away, Marston’s shares have slid. Andy Ross asks whether this makes a buying opportunity?

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

On Thursday, Marston’s (LSE: MARS) shares fell by about 12.5% as Platinum, the US private equity firm, walked away from bidding for the pub group.

The pub chain rejected offers of 88p a share and 95p a share in December, and a third offer of 105p at the end of January.

Investing in pub groups as the vaccine rollout continues

There’s no doubt pubs have been hit hard by lockdowns. All over the country, pubs are shut and have been for a long time. Yet over the last few months, the group’s share price has risen (although it’s well down over the three-year and five-year periods). Nonetheless, why are the shares rising?

I think primarily it relates to the excitement around the unsolicited bid for the group. There’s now a growing expectation that the whole sector may go through a period of mergers and acquisitions as smaller rivals struggle and prices are depressed because of the pandemic. The original Marston’s bids did represent a modest premium to the share price at the time, so there could be other bids at a larger premium. This could potentially be good news for existing shareholders.

There’s also an expectation that the vaccine rollout will mean pubs can reopen later this year, which is helping lift share prices. Competitor JD Wetherspoon has seen a smaller boost to its shares in recent months as well.

There’s also Marston’s joint venture with Carlsberg which has given it cash, which is helpful at the moment. That too will likely have boosted investor sentiment and could help the group for years to come.

On the other hand, there are worries around new variants of the vaccine, and ministers have been unable to say when pubs can reopen. Because of this, I think buying the shares as the global pandemic carries on is still fraught with risk.

Would I buy Marston’s shares?

It’s this risk that would keep me awake at night if I was a Marston’s shareholder. There’s the question of when it might be able to grow revenues again, on top of the issue of its net debt. At the time of its first-half results last year, that was well over £1bn.

Despite falling recently, the share price is still well up on where it was just a few months ago. In that time, very little has changed, apart from the vaccine rollout success to date. For me, as a long-term investor, I’m not seeing much in the shares to suggest they are worth buying.

So, although the share price has fallen this week, I won’t be adding Marston’s to my portfolio. The shares haven’t fallen enough, in my view, to offer me a sufficient margin of safety. I’d only invest in the shares if multiple new bids came through for the group, at a significant premium to the current share price. That may happen, but it also may not.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Andy Ross owns no share mentioned. The Motley Fool UK has recommended Marstons. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Investing Articles

Could the Rolls-Royce share price end 2024 above £5?

As the Rolls-Royce share price continues its remarkable run, our writer considers where it might be at the end of…

Read more »

Investing Articles

UK stocks are hitting all-time highs! Yet these 2 still look cheap to me

The FTSE 100's on a roll. But it's still possible to pick bargain UK stocks, provided we know where to…

Read more »

Satellite on planet background
Investing Articles

At just under £14, can BAE Systems’ share price still be a prime FTSE 100 bargain? 

Despite its bullish price run, BAE Systems’ share price still looks undervalued to me and appears set for strong growth.

Read more »

Photo of a man going through financial problems
Investing Articles

2 dividend shares I’d avoid like the plague in today’s stock market

The UK stock market is full of high-yield dividend shares that could equate to a steady stream of passive income.…

Read more »

Abstract bull climbing indicators on stock chart
Investing Articles

£17,000 in savings? Here’s how I’d aim to turn that into a £29,548 annual second income!

Generating a sizeable second income can be life-enhancing and can be done from relatively small investments in high-dividend-paying stocks.

Read more »

Investing Articles

With as little as £300 a month invested, this stock could net £16,000 a year in passive income

Putting a few hundred pounds each month into the stock market could eventually generate a five-figure annual passive income, this…

Read more »

Black woman using loudspeaker to be heard
Investing Articles

This dividend stock could pop next week!

This dividend stock happens to have one of the biggest dividend yields I've come across -- 10.7% -- but I'm…

Read more »

Investing Articles

Up 81%, can this FTSE 100 turnaround share keep surging?

This recovering retailer has been one of the FTSE's greatest performers over the past year. Royston Wild considers whether it…

Read more »