Should you hold on to these stocks: BT, PurpleBricks, Metro Bank?

Highlights

  • Last week, Telecom company BT reinstated dividend to protect itself from a takeover by its biggest shareholder.
  • Share prices of Metro Bank also surged by around 50% after takeover approach by Carlyle.
  • Share prices of PurpleBricks plummeted after being warned of running out of houses for sale.

British telecommunications company BT, retail banking company Metro Bank, and online estate agent Purplebricks have been in news recently. Let’s briefly look at why they are under spotlight.

BT Group plc (LON: BT.A)

One of the biggest telecommunications and network providers in the UK, BT Group plc, has been in news because of a potential takeover of the company by its largest shareholder. It has, thus, brought back its dividend and accelerated plans for saving costs to protect itself from the takeover.

An interim dividend of 2.31p per share has been declared by the telecom group in its recently published half year results. The cash-starved shareholders of the company are expected to laud the decision as they have been waiting for a payout for 18 months since dividends were done away with to compensate for the funding of its fibre broadband expansion.

By 2024, the company is also aiming for £2 billion in cost savings. The target has been reset for a year as planned earlier because of the news that the £1 billion savings target was realised by the company 18 months ahead of schedule.

As BT is worried about a likely swoop from its biggest shareholder, French billionaire Patrick Drahi, it is strengthening its defence by bringing back dividend, quick cost-saving, as well as ditching of its partner for Openreach.

The shares of the FTSE100-listed company were trading at GBX 160.00 as of 8 November 2021 morning.

Metro Bank plc (LON: MTRO)

UK-based retail and commercial bank Metro Bank plc was approached for a takeover by Carlyle, a US-based private equity firm, making its share prices surge by around 50% on Thursday last week. After the potential offer to take it private, Metro Bank has become the most recent firm in the UK that has captivated the interest of an overseas bidder. This year, in general, has been very busy for the mergers and acquisitions of UK companies by foreign firms.

Deals worth around £27.7 billion for mergers and acquisitions of UK companies by foreign firms have taken place between April and June this year, as per ONS data. This figure has gone up by £8.3 billion on the last 3 months and its growth doesn’t appear to slow down.

The amount to be paid by the suitor isn’t disclosed by the Metro Bank, but by 2 December, an announcement must be made by Carlyle regarding its decision of placing a bid for the company or walking away.

As the news about the takeover came, the shares of Metro Bank rose by around 50% from a low of £100.50 to a high of £147.80 just before midday on Thursday. Its price closed at GBX 131.40 as of 8 November 2021.

PurpleBricks Group PLC (LON: PURP)

UK-based online estate agent Purplebricks has been in news recently as its share prices slumped after getting a warning that it was about to exhaust its supply of houses. Following a housing boom during the pandemic, there was a significant slowdown in the sector that the estate agent was instructed to sell and thus it was very hard for the group to trade in the six months to the end of October 2021. The boom during the pandemic was due to a cut in the stamp duty, falling mortgage rates, and an increase in demand for green and specious places for employees working from home.

However, sellers are now scared due to the drying up of the housing stock, end of the stamp duty holiday, and a potential rise in interest rates. Housing prices have recently hit record highs in the UK, with the average cost of more than £250,000 for a home for the first time last month.

Around 22,000 property sale deals are expected to be conducted by the company in the period, which has fallen by 38% year-on-year due to supply shortfalls. The full-year profits of the company are also anticipated to be lower, and the shortage will likely continue next year as well.

The shares of the AIM-listed company were trading at GBX 34.00 as of 8 November 2021.

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