Market Prognosis

A concise summary of the major macro events of the past 24 hours, and selected UK company-specific news.

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October 31, 2023

Zegona SPACtastic!

Macro & Overnight

The land invasion of Gaza is not the blitzkrieg event some had expected but more of a special forces incursion. Iran and Hezbollah remain on the sidelines as the policy of containment continues.

Japan slightly loosened the way it controls its yield curve overnight, pushing JGB yields towards the 1% level.

While most think Japan is a sideshow regarding global monetary policy, it is traditionally a sizeable overseas buyer of US Treasuries. The higher Japanese rates rise, and they remain exceptionally low by comparison to the rest of the world, the less inclined Japanese investors will be to fund the burgeoning US deficit.

UK Equities

Spectris, the precision instrumentation provider, updated on solid sales growth in Q3 and guided that its FY operating profit is expected to be in the top half of the guidance range. It has cash of £164.1m, completed four acquisitions and initiated a £300 million buyback.

Spectris, under CEO Andrew Heath, has done well to avoid the sluggishness Renishaw highlighted from the semiconductor sector. He is also signalling a firm grip on capital allocation with a mix of M&A and shareholder returns. 

Yellow Cake, the physical uranium investment fund, said that the uranium price increased 31.3% to $73.5/lb in the quarter to September. Its NAV rose 37.2% over the quarter. It cited concerns regarding the future production of sufficient Uranium to underpin both operating and planned nuclear reactors, as well as geopolitical risks associated with several producing countries such as Russia and Niger. It said that prices may need to rise to incentivise necessary uranium development.  

The world is short of Uranium as our priorities for energy have changed. Nuclear energy has come in from the cold, as countries turn to nuclear power for its zero emissions and security of supply. Estimates of the incentive price for new uranium deposits to be brought on stream range from $75/lb to $90/lb.    

Zegona is to acquire Vodafone Spain for €5.0bn. Vodafone will provide up to €900m in financing. It also has committed debt financing of €4.2bn and a revolving credit facility of €0.5bn. Additionally, it will launch an equity raise with a target of €300m to €600m in gross proceeds via an institutional placing. 

Zegona shares have been suspended pending this reverse takeover of the far bigger entity in a deal that echoes of the dreamy days of the 2021 SPAC boom. This deal is a brave move, some might say foolish. This financing structure will test the metal of the UK’s equity market. 


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