M&S rumours propel Ocado higher

11th Jun 2013 11:48

The fortunes of what was once considered to be a company on the verge of disintegration - Ocado - without a clear differentiated offering, have been transformed in a matter of months. Certainly, that is what markets increasingly seem to be discounting, as shown by the fact that the percentage of shares on loan of the online grocery outfit has fallen from 31% in February to just over 10% (although that is still quite a high level), according to Markit data cited by FastFT. Above all that follows the announcement of a £200m, 25-year deal, in May, with Wm Morrison. The supermarket chain was the last of the nation's not to have yet made a foray into the online space, for which it had paid a steep price. Significantly, it has now become Ocado's second high-profile partner, as the FT points out.Yet profits attract new entrants, that is one of the basic Laws of Economics. Perhaps for that reason the market's rumour mill has begun churning, with some investors now apparently speculating that the company could become a take-over target. That line of reasoning is thought by some commentators to have contributed to yesterday's sharp rise in the shares as well as to Tuesday's. More poignantly, that share price appreciation has been taking place despite a backdrop of falling equity markets world-wide. More specifically, and on Tuesday morning, The Daily Mail reported rumours that department store M&S could 'gatecrash the online grocer's cosy joint venture deal with WM Morrison'. The paper added that speculation was heightened by the fact that Ocado's Chairman Stuart Rose is the former boss of M&S. The 'market chatter' in markets regarding a possible bid was first mentioned yesterday by the FT Alphaville blog. As of 11:46 shares of Ocado are rising by 7.8% to the 336.20p mark. AB