His company was one of life’s struggling businesses, and almost every time its results were due they would be
preceded by a lurch, one way or the other, in the share price – accompanied by wild rumours over an impending bid or asset sale as the boys had their fun. Inevitably, he said, there would be an analyst who would pick up and then write about the rumours – and thereby give them further credence.
This is not an isolated occurrence. A recent Financial Times article noted that Merrill Lynch’s John Inch had scored a coup by predicting that American GE was about to do a deal, just days before it bought the aerospace division of Smiths. But it also revealed that his colleagues had declared Bank of America’s interest in buying Barclays – to both parties’ surprise.
Similarly, JP Morgan Cazenove last autumn predicted that Resolution Life could soon be taken over. Others prophesied that Prudential was going to sell its UK business.
According to other predictions, Alliance & Leicester should by now have merged with Bradford & Bingley, while chemicals firm Akzo should have merged with ICI. Elsewhere, Electrocomponents should have cosied up to components firm Premier Farnell. And these are just the ones that spring to mind.
There is no mystery as to why these things happen. Analysts know it is hard to stand out from the crowd if their comments are confined to predictions about profitability– because everybody is working from the same data. So they look for something else to generate excitement and interest – and sometimes their imagination runs away with them.
But when that happens it is not funny for the company in question.
Another FTSE 100 CEO tells me with considerable irritation that one of the major challenges of his job is dampening down rumours deliberately started by investment analysts. So, what does he do about it? ‘Just keep my head down, not talk to anyone and get on with the job,’ he replies.
Anthony Hilton is City commentator on London’s Evening Standard