Oil prices back at $60 and Thomas Cook shareholders fear for the worst

Markets

“A larger than expected decline in US oil stockpiles helped to drive a 0.9% rise in Brent Crude prices to approximately $60 per barrel and lifted WTI Crude prices by 1.2% to $55.5 per barrel. That was good news for shares in FTSE 100 giant BP (up 1.2%, also helped by a $5.6 billion deal to exit its Alaskan operations) but oddly not Royal Dutch Shell which fell 0.3%,” says Russ Mould, Investment Director at AJ Bell.

“BP’s gains weren’t enough to lift the overall blue chip index as the FTSE 100 was under pressure from weakness in some of its other large constituents including Imperials Brands which fell 2.3% as investors weighed up the impact of a potential $200bn merger between rival tobacco companies Philip Morris and Altria. The FTSE 100 fell 0.2% to 7,074.

“Markets were also weak in Europe and most of Asia with the exception of Japan’s Nikkei 225 index which rose 0.1%. Its biggest riser was pharmaceutical group Kyowa Kirin Co, up 3%.”

Thomas Cook

“Shareholders in the troubled travel company may have to accept that their investment could be worthless.

“An update on its refinancing reveals that Chinese group Fosun and Thomas Cook’s lenders are going to get the lion’s share of the equity, meaning very little – if anything – is left on the table for the other shareholders.

“That would explain why the shares have fallen another 14% on the latest news. Investors are simply trying to cash out and crystalise any value left in their investment before the refinancing, for fear there could be nothing left if they wait.

“The board’s intention to maintain its stock market listing, if possible, also seems a bit odd. Liquidity in the shares could be awful as neither Fosun nor the lenders may want to sell until there is a considerable uplift in the valuation of the business, so why incur the expense of listing fees?

“One can only assume that keeping the listing effectively provides some reassurance to Fosun or, more likely, the lenders that they have an exit route in the future.

“A similar situation exists with model train maker Hornby which is nearly 90% owned by two asset management businesses, Phoenix (c75%) and Artemis (c15%), yet remains a quoted company."

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