British companies are falling off the London Stock Exchange like ten pins knocked over on a bowling alley. Very literally.
Ten Entertainment has become the latest listed midcap to be toppled by a knockout strike from US private equity firm Trive Capital Partners.
The all-cash offer values Ten's shares at a premium of more than a third, and almost a quarter above levels reached just before the pandemic.
Understandably, Ten's directors have given a resounding thumbs up to the £287m bid, with almost half of the group's investors already giving their blessing.
Ten also made it abundantly clear how frustrated people are with the continued valuation discount at which the shares have been trading compared to their market peers.
Overwhelmed: Ten Entertainment is Britain's second largest bowling operator, with more than 1,000 lanes
This, combined with poor liquidity, has made it more difficult for investors to exit the market.
Unfortunately, Ten's bosses are exactly the same. The country's second-largest bowling operator, with more than 1,000 lanes, is another classic example of a stock that is valued too cheaply, despite good financial results.
Caught in a Catch-22 situation, there has been little liquidity in the shares, meaning Ten has flown under the radar for pension funds, and even retail investors. But not for the American private equity guys: they can sniff out a bargain from a mile away.
More strikes are coming. Holiday giant Tui Travel is considering moving its primary listing from the LSE to Frankfurt.
Tui has good reasons for this. In recent years, the company has attracted a larger share of German investors and increased trading on the Frankfurt Stock Exchange. Switching to a full listing in Frankfurt would improve the valuation of the share, according to Tui.
That makes perfect sense. Yet such a move would undermine London's attractiveness. Britain's public markets are already reeling from a number of major companies migrating to the US to go public, with Arm Holdings choosing New York rather than London to go public.
Neither the loss of Ten nor Tui marks the death knell for London, where more than 1,800 companies worth more than £2 trillion still operate.
But both moves further demonstrate the extraordinary discount at which UK shares trade to their peers in the US and across Europe.
It is a phenomenon that top economist Simon French of Panmure Gordon has been highlighting over the past seven years.
In 2016, it was possible to blame the disruption on the political instability caused by Brexit. That's no longer an excuse.
This also applies to the slow recovery from Covid, as the economy has now more or less caught up to pre-pandemic levels.
French has looked at all possible comparisons – valuations based on all indicators such as sector differences or share price gains – and still comes up with a discount for the UK markets of 19 percent compared to the rest of the world.
What's worse is that the discount has been self-reinforcing as liquidity has fallen while efforts to stimulate capital markets have failed.
In the meantime, savvy American and foreign investors will continue to look for hidden treasures among Britain's smaller companies, right under the noses of domestic investors.
What a pity. It's time for the London stock exchange – and the authorities – to focus on finding the right trigger to close this ridiculous discount.
Cash on the rise
According to a study by the British Retail Consortium, the use of cash has increased for the first time in a decade to 19 percent of all transactions by 2022.
This was up from 15 percent in 2021. This reflects two trends: a return to cash following the increase in contactless card payments during the pandemic, but also the fact that more consumers are turning to the hard stuff to help budget.
However, overall, the use of cards is still dominant and imposes significant costs on merchants. Retailers spent £1.26 billion on card processing fees in 2022.
Therefore, the BRC calls on the payment systems regulator to increase competition and the Ministry of Finance to review fees.
Still, it's a positive sign that cash is on the rise, just as governments are increasing the pressure on us all to go contactless.
Being able to keep cash under the mattress is an essential freedom in any democracy worth its name.