Member Info for ToffAppleton1

KKR are the only PE firm to show interest in taking over BT but it’s highly unlikely they’d bid for it alone. Other PE firms have publicly declared themselves out. KKR are shrewd operators though, so they might find a way to engineer a bid but I can’t see it exceeding £15 billion, which equates to about 151p a share. Alright for those who bought in recently but most shareholders would be left high and dry.
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The US private equity firm, which has been the industry’s most acquisitive since the pandemic erupted, has not drawn up any concrete plans or invested resources in detailed work on the company, the person added. No approach to BT has been made and the firm’s interest may not lead to a bid.

However, it comes as senior figures from several large rival private equity firms told the Financial Times they had decided not to consider a move for BT, one of the UK’s best-known companies, because of its large pension deficit and the potential size of a deal. Any bid for BT would likely require a consortium, according to multiple industry advisers“

Sorry

What’s the matter with me???

PIF stands for Public Investment Fund

Not Private

Even the great Toff Appleton makes mistakes

Nigel

“PIF anyone? “

PIF stands for private investment fund - and that’s exactly what it is. It’s a sovereign investment fund.

And unlike PE they don’t take companies over - they lack the expertise - taking companies over lock stock and barrel just isn’t on their agenda.

Of course I could be wrong
But I rarely am.
And if bkkbkk thinks it’s going to happen - then it almost certainly won’t.

For my money a bid is most likely to come from a consortium of PE sharks.

And although (hopefully) it won’t succeed it will boost the shareprice. Or better still - encourage a real player like deutsche telecom to enter the fray.

I’ll give you 5/1 against PIF making a bid if you’re up for a bet?

Toff

From what I know about KKR it’s a despicable asset-stripping-vulture-fund. A simple google search should turn up a lot of unpalatable stories. The fictional character of Gordon Gekko could have well have been at the helm - but rest assured its run by some particularly ugly Americans.

They circle around distressed companies which they believe than can asset-strip and make a killing at the expense of the business and all who work there.

Surely it hasn’t come to that has it?
The nation’s premium telecoms operator being bought out by school of sharks. What an ignominious end that would be for a once great company!

On the plus side - any attention is welcome which could boost the shareprice. But the idea of BT and KKR going to the altar would be like letting your beautiful daughter wed Frankenstein’s abominable monster.

Toff

‘One of Europe's biggest hedge funds has made a record bet against Lloyds Banking Group's share price, according to a report.’

Heavy short positions can boost a company’s shareprice considerably. What you have to remember is that shorts have to by bought back at a later date. And if they’re bought back at a higher price it will boost the shareprice. It’s just that they sell first and buy later to complete the transaction. We are all shorters when we sell; and shorters are buyers too.

Heavily shorted stocks tend to rise precipitously. Look at Ocado - once the uk’s most shorted stock at about £3 it now trades at close to £25. And it’s still heavily shorted. Valued at about £18 billion and has yet to turn a profit (huge loss making enterprise if truth be told - and probably always will be)

All market makers have to do is keep bumping the price up and wiping the short money off the table.
Be careful what you short.

Toff

Fleecy

“What makes no sense to me is that Telecoms aren't reaching highs along with the tech giants, who's business model wouldn't exist without Telecoms.
In valuation terms, Covid seems to have impacted Telecoms almost as much as Airlines, which also makes no sense.”

I agree, it’s twisted beyond comprehension.
The virus’ impact on BT’s earnings have been minimal but the MMs have hammered it just the same.

In previous times, before the Footsie was broken, telecoms were a textbook defensive share alongside tobacco and pharmaceuticals. It’s always worked that way - until now.

Pharmaceuticals have weathered the COVID-19 storm reasonably well but tobacco stocks (especially Imperial) have been hammered by the MMs. And yet their income is only a fraction down.

In the twisted world of UK markets it seems a 0.5 percent drop in revenue equates to a 30 percent drop in the shareprice.

The way UK shares are valued needs to be addressed, otherwise the global community will lose confidence in the integrity of UK markets.
And that could be catastrophic with Brexit on the horizon.

Toff

Vodafone beat expectations with their last update. Stunned the market makers and kept the dividend. The share rose initially to about 128p - although it had fallen from 240 despite the fundamentals remaining more or less the same.

All the good news has been forgotten- that’s evident in the current shareprice - a paltry 111p

I don’t know any other stock market that wipes the floor with its most valuable companies.

Isn’t it time there was an inquest to just how ftse 100 company valuations are reached?

Could it have something to do with 76 percent of bets are long on the index - so it has to go down.

The MMs are using Glaxo & Unilever to drive the market down today because they’ve beaten the oil majors into the ground and they can’t really hammer them down much further.

Toff

This must be some sort of a record, the index is at the same level now as in 1998.

During that period the Dow has tripled_____
The Dax has more than double___

Hardly sets the ground for an investment does it?

The Permabear is down 21 percent from its 12 month high
Compared to Dow - 2 percent
Dax - 3.5 percent

Beaten down stocks...
Britain’s most valuable companies trashed by coke snorting market makers who run the stock market like their own private casino.

An engine of wealth destruction.
The worst performing stock market in history... in the universe.

Global oil majors down 33 percent since the crisis
Shell & BP smashed down 55 percent by uk market makers.

Everywhere - carnage - companies trading on 3/4 time future earnings

Because the forces that value them don’t value them fairly. Fraud: manipulation: rigging. A casino where the house always gets to choose its own cards so it never loses. A fix. Rotten to the core. As corrupt and crooked as any third world kleptocracy.

British companies deserve better than this
When is there going to be an inquest.

Fleecy

I know the BT business model is embroiled in politics but it is a private company wholly owned by shareholders. Obviously for security reasons the government would have some influence over any bid but it would be limited to a few guarantees by any successful bidder.

Those guarantees would be investment in the infrastructure and the proposed rollouts. And it would have to be taken over by a uk or eu company for reasons of national security. I’m sure any reasonable bidder could navigate the political minefield. Then it would be subject to shareholder approval.

Toff

"At a share price of 100p, BT has an implied EV of just £40bn (post IFRS16) on our estimates. Unlike the public market, the private markets tend to appreciate the longer-term benefits of guaranteed cash flows generated after the completion of FTTH rollout, especially in an environment with low interest rates," was Deutsche Bank's take on the speculation around BT Group.“

https://www.investopedia.com/terms/e/enterprisevalue.asp

One thing the bid rumors have done is thrown the spotlight on BT’s ridiculously cheap valuation. The obscenely cheap valuation is acknowledged by all except the ones who apply the price tag.
Despite fundamentals being little changed since it was £5 they’ve marked it down to £4 then £3 then £2 then £1. And I’ve little doubt they’d mark it down to 50p or lower on a whim.

There was a sea change after the financial crisis. Market makers suddenly decided there were no standards that couldn’t be breached. To value a share like BT at £1 would have been unthinkable in previous times. A lot of the problems lie in the omnipotence of UK market makers - they see themselves as indispensable and act only to further their own agenda.

And it’s not as though BT has been singled out for this treatment, market makers have trashed the majority of ftse 100 stocks.

It makes one wonder if this issue will ever be addressed. No other stock market In the world trashes it’s most valuable companies like the UK does.
Will there ever be an investigation into it. Will the market dynamics responsible for it ever change.

The bid rumors have not so much highlighted BT’s valuation, as the ones who set it.

Today’s a great example of market maker fraud.

The slightest pretext to hammer the market down - and that came as a small drop in the Dow which the ftse immediately doubled. The MMs can now mop up on their ftse100 index side bet by driving shareprices down.

Case in point. The oil majors - the MMs favorite means of hammering the index down. Oil prices are up today but the MMs have hammered Shell mercilessly.

Other global oil companies have fallen by 25-33 percent since the virus but uk oil majors have fallen in excess of 50 percent.

The uk market is run along the same lines of a third world coconut republic.

Toff

New

The Dax - 68 percent short positions on the index
The Dow - 65 percent short on the index

Both indexes are near all time highs and bullish

The ftse 100

70 percent long on the index

Beaten down stocks trading at historic lows
The index falls heavily when global markets fall
The index falls or makes tepid gain when global markets soar

It’s obvious market makers are pricing it for their own gain and paying no heed to intrinsic value or fundamentals.

There’s been a lot of financial scandals over the years LIBOR for example. - but none of them Come close to this.

Investors really have drawn the short straw when trading the ftse. And there’s absolutely no protection from price fixing

The Dow is three and a half percent off its 12 month high.
The Dax is 4.75 percent off its 12 high
The ftse 100 is 21percent off its 12 month high.

That statistic alone should be enough to put the louses who value UK shares in the dock. I’ve worked in the industry and I can tell you there’s something very wrong with the way ftse100 companies are valued. If a casino was run the same way it’d be closed down.

Ftse 100 companies make over 70 percent of their revenue overseas so the rock bottom valuations cannot be blamed on domestic issues.

The trouble lies in long and shorts on the index. Market makers are compelled to drive shareprices down to ensure the majority lose.

Example. The index today is 6100
70 percent of positions on the ftse are long as you’d imagine given how cheap it is.

If the market makers were to let it rise, 70 percent of punters would be on the winning side - they’re never going to allow that to happen.

So they contrive to control the index - oil shares are an obvious target if they want to drive the index down. That’s why Shell gets hammered down. Its shareprice now is the same as when oil was trading at $20. Another miss-valued share
On the other side of the scale - to cap gains they mark up heavyweights such as miners on the rare occasions the index rises. By marking miners and a few other up the market can rise 70-80 points even though 80 percent of the index falls or makes negligible gains.

Retail shares - the more popular a share is with retail investors- the more it gets hammered down by the market makers.

BT
Vodafone
Shell
Aviva
Imperial

Among the most popular retail shares - and the ones with the lowest valuations. The ones that trade at historic lows. The ones that trade on p/es of 3-5

Lesser known shares such as

Bunzl
Ferguson
DS Smith
Johnson Mathey
Renishaw

All massive companies but none of which are popular with retail investors - trade at much higher valuations and don’t get hammered down by market makers.

The point I’m making is compared to retail investors in Europe and the US, UK retail investors are at a terrible disadvantage. We are targeted by unscrupulous market makers who are valuing shares to suit their own agenda with no semblance of fair value.

BT is one of those shares. There is no other market in the world that would slap a £10 billion price tag on a company like that. In Europe or the US it would trade at about £3.

Toff

Nige

The clues are in the shareprice. Watch out for anomalous price movements with no apparent news; the market always finds out before the public and when it does it will reveal itself in the shareprice

Nige

My understanding of the situation is this..

A number of private equity firms have met to discuss a possible bid for BT. Their intention is to divide the business and break it up. The main players are interested in openreach, which they know is out of reach unless they make a bid for BT in it’s entirety. As I posted yesterday any bid would be similar to the consortium which took ABN over in 2008 where the proceeds are divided up among different parties.

They’ve already sounded the BT board out regarding Openreach. The reason BT gave appointed Goldman Sachs to defend them is because word has got back that the same PE firms that were interested in Openreach are considering a hostile takeover bid.

Interestingly today’s negligible shareprice rise makes a bid more likely, as a depressed shareprice means it’s more likely to succeed. PEs main concern is a counter bid by another telecoms which is considered likely (Deutsche Telecom) And this is the elephant in the room. PE would have to be virtually certain DT wouldn’t make a counter bid before tabling an offer as this would push the price to more than they’re willing to pay.

Toff

Nige

‘Toff, did you manage to get back on board the good ship BT?’

Yes. I put an automated order in which bought at 109
As you know I sold at a loss a few months back (134) so I’ve bought the same sized position back cheaper.

Toff

Even after Monday’s 7% gains, sparked by a Sky News report that Jansen asked Goldman Sachs to bolster his takeover defences, BT’s enterprise value is around 29 billion pounds, or just 3.5 times next year’s forecast EBITDA. That’s only slightly more than Openreach alone, if you put the 2.9 billion pounds of EBITDA that the broadband unit is likely to make on the 9 times multiple of Liberty Global-owned rival Virgin Media. Throw in BT’s other units, like its EE mobile phone outfit, and its enterprise value could be as much as 50 billion pounds. After deducting 18.3 billion pounds of net debt, BT’s equity would be worth around three times its current value.

That alone should be enough for buyout funds sitting on record amounts of dry powder, and with access to ultra-low credit, to pull out the slide rule. There would be inevitable public and political opposition, especially with the economy reeling from the coronavirus. But a potential buyer – the Financial Times reported in May that infrastructure fund Macquarie was interested – could argue that it would be better placed to finance Openreach’s broadband needs away from the scrutiny of public markets, especially if sovereign wealth funds also joined in. In return, the buyers get the infrastructure that will be throwing off cash for decades. That sounds like something for both sides to talk about.

Takeovers, takeover rumors don’t happen very often. I believe there’s substance to the rumors. I also believe that people who have bought in at current levels have got very lucky and stand to make a killing.

Market makers battered BT into the ground, as it stands now the share is miss-valued. The current shareprice isn’t a starting point for a bid. If it rises closer to £2, that will be a starting point for a bid, with a 50 percent takeover premium loaded on to make £3 a share.

Toff

Simon

“Any serious take over bid needs to include around 17 Billion to pay off debt and several Billion injection into Pension so that's around 20 Billion on top“

You need a crash course in economics. You talk about debt as though it’s only specific to BT. And you’re too hung up in debt, when debt is actually good.

Almost all ftse 100 companies are loaded with debt. Quite often as high as their market capital value or more. What you’re doing is putting yourself in the shoes of the business and getting swept away by the numbers.

Debt is currently so cheap it’s virtually free. This is a great era to take on debt for expansion and growth purposes; that’s why so many companies have done it.

Debt is okay as long as you can make the repayments. You may not be able to meet your credit card payments but there’re no indications that BT cannot service its debt.

Toff