Last week was a great one for UK supermarket chain Morrisons. The company saw its shares beat the rest of the London Stock Exchange. We take a look at the reasons Morrisons shares performed so well and consider what the future might hold.
What’s up with the price of Morrisons shares?
According to online trading and investing platform Saxo Markets, Morrisons shares were up 28% last week, putting the supermarket chain at the top of the LSE’s weekly risers list.
On Monday 21 June, the company’s share price topped 240p. It’s the first time in more than two years that the company’s shares have traded at this level. The price has since stabilised, and at the time of writing, they are trading at around 233p.
Why did the price of Morrisons shares rise?
Morrisons is the UK’s fourth largest supermarket chain after Tesco, Sainsbury’s and Asda.
It has a market share of just over 10% and a workforce of approximately 110,000.
Over the last two years, the price of Morrisons shares has dropped significantly. The tide turned last week, with the company recouping most of its losses from the previous two years.
This rise in the company’s shares price follows a takeover bid by US private equity firm Clayton Dubilier & Rice (CD&R). According to several news reports, the equity firm offered to pay Morrisons 230p a share in cash.
However, the conditional cash offer that valued Morrisons at around £5.5 billion was rejected by the company’s board of directors.
A statement from Morrisons said, “The board of Morrisons evaluated the conditional proposal together with its financial adviser, and unanimously concluded that the conditional proposal significantly undervalued Morrisons and its future prospects. Accordingly, the board rejected the conditional proposal on 17 June 2021.”
Despite the rejection, the takeover bid was enough to trigger high investor confidence in Morrisons and cause the price of its shares to skyrocket.
What does the future hold for Morrisons shares?
There is a chance that CD&R could come back with a higher offer. Under UK takeover rules, the company now has until 17 July to announce a firm intention to make an improved offer.
Meanwhile, other firms may enter the fray, resulting in a bidding war. The end result may be even more gains for the company’s stock.
It’s important to remember, though, that the bidder could just as easily walk away. If that happens, the company’s stock price could fall just as quickly as it has risen.
What other companies have performed well this week?
According to Saxo Markets, other companies that have seen significant gains this week include:
- ITM Power PLC (+15.88%)
- Next Fifteen Communications PLC (+12.27%)
- Draper Esprit PLC (+11.76%)
- Daily Mail & General Trust PLC (+11.47%)
- Liontrust Asset Management PLC (+11.28%)
Can I buy Morrison’s shares?
Morrisons shares are easily available on most share dealing platforms. If you don’t have a share dealing account, check out our comparison of the top-rated providers of share dealing accounts to find one that’s a good fit.
If you want to shield your investment from tax, you should consider using a tax-efficient vehicle like the Saxo Markets stocks and shares ISA.
Any investment growth or income held in a stocks and shares ISA is exempt from UK income and capital gains tax. Keep in mind, however, that tax rules can change and that tax treatment depends on your individual circumstances.
Finally, remember that investing is inherently risky. So before you part with your money, do your research. If you are unsure of the suitability of an investment for your own circumstances, consider getting professional advice first.
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