It was the fear of losing everything that ultimately persuaded
Eurotunnel investors to back plans for a company restructure, says Reg
Hoare, director at the Ludgate Group.
Given that Eurotunnel shares have fallen from a peak of 800p to 75p, one
is reminded of the difficult PR/IR task in hand of persuading
recalcitrant investors to approve the terms of the company’s
restructuring at last week’s shareholder meeting in France.
Unfortunately, the only available weapon to advisers has been the
somewhat blunt instrument of threatening them with the loss of their
final 75p should the deal not be approved, while no doubt bombarding
them with bumph.
Coupled with the unfortunate events of the fire, compounded on top of
cost overruns and construction delays, the project has been one that the
stock market bears have had a field day with.
Or have they? Because the truth is that despite all the negatives
predictions by the doom mongers, from a travelling punter’s perspective
it has been a great success, and the analysts and bears are no doubt
regular users of the product (first class, nocourse).
Meanwhile, bloody-minded French shareholders, having learnt a few
lessons from their bloody-minded lorry driver cousins, no doubt, have
been somewhat unrealistically trying to bully the company into giving
them better terms.
The problem remains that, even if the latest rescue act proves to be
successful, according to pessimistic City forecasts shareholders will
still not get much of a dividend, or perhaps even their money back. This
simple reality was not missed by any of last week’s coverage and in the
event the punters voted with their feet to accept.
Indeed, UBS’s transport analyst Richard Hannah, the doyen of Eurotunnel
bears for the last ten years, remains extremely sceptical of the future
prospects for investors. As he says, the story has moved on from the
’politics of shareholder/bank brinkmanship to a reassessment of the
underlying value of the shares’.
Fortunately for advisers, he is the only analyst who seems to be quoted
on the company’s situation and thus it seems they were able to frighten
investors into accepting the deal.
On that basis the worst is yet to come for the army of small
shareholders who are still gamely holding the shares for the benefit of
their travel perks.