Marston’s shares: what will I do now about the falling share price?

As a private equity bidder walks away, Marston’s shares have slid. Andy Ross asks whether this makes a buying opportunity?

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

On Thursday, Marston’s (LSE: MARS) shares fell by about 12.5% as Platinum, the US private equity firm, walked away from bidding for the pub group.

The pub chain rejected offers of 88p a share and 95p a share in December, and a third offer of 105p at the end of January.

Investing in pub groups as the vaccine rollout continues

There’s no doubt pubs have been hit hard by lockdowns. All over the country, pubs are shut and have been for a long time. Yet over the last few months, the group’s share price has risen (although it’s well down over the three-year and five-year periods). Nonetheless, why are the shares rising?

I think primarily it relates to the excitement around the unsolicited bid for the group. There’s now a growing expectation that the whole sector may go through a period of mergers and acquisitions as smaller rivals struggle and prices are depressed because of the pandemic. The original Marston’s bids did represent a modest premium to the share price at the time, so there could be other bids at a larger premium. This could potentially be good news for existing shareholders.

There’s also an expectation that the vaccine rollout will mean pubs can reopen later this year, which is helping lift share prices. Competitor JD Wetherspoon has seen a smaller boost to its shares in recent months as well.

There’s also Marston’s joint venture with Carlsberg which has given it cash, which is helpful at the moment. That too will likely have boosted investor sentiment and could help the group for years to come.

On the other hand, there are worries around new variants of the vaccine, and ministers have been unable to say when pubs can reopen. Because of this, I think buying the shares as the global pandemic carries on is still fraught with risk.

Would I buy Marston’s shares?

It’s this risk that would keep me awake at night if I was a Marston’s shareholder. There’s the question of when it might be able to grow revenues again, on top of the issue of its net debt. At the time of its first-half results last year, that was well over £1bn.

Despite falling recently, the share price is still well up on where it was just a few months ago. In that time, very little has changed, apart from the vaccine rollout success to date. For me, as a long-term investor, I’m not seeing much in the shares to suggest they are worth buying.

So, although the share price has fallen this week, I won’t be adding Marston’s to my portfolio. The shares haven’t fallen enough, in my view, to offer me a sufficient margin of safety. I’d only invest in the shares if multiple new bids came through for the group, at a significant premium to the current share price. That may happen, but it also may not.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Andy Ross owns no share mentioned. The Motley Fool UK has recommended Marstons. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Investing Articles

How much would I need to invest in income shares to earn £300 a month?

What kind of lump sum would be required to earn £300 a month by taking advantage of some of the…

Read more »

Investing For Beginners

Up 31% in a month, could this FTSE 250 stock be getting bought out?

Jon Smith takes a look at speculation that's pushing the share price of a FTSE 250 share higher and considers…

Read more »

Investing Articles

Here’s how I’d follow Warren Buffett to start building passive income in 2025

Ben McPoland highlights one FTSE 250 firm with a strong competitive edge that he thinks can continue rewarding investors with…

Read more »

Investing Articles

Burberry shares: undervalued FTSE gems that are ready to rocket?

Burberry shares soared at the beginning of the week as the takeover rumour mill went into overdrive. Is Paul Summers…

Read more »

US Stock

Here are the latest share price forecasts for S&P 500 giant Amazon

Amazon has generated monster gains for investors over the last decade. And Wall Street analysts believe the S&P 500 stock…

Read more »

Man writing 'now' having crossed out 'later', 'tomorrow' and 'next week'
Investing Articles

2 high-yield FTSE 250 shares I’d buy today — and 1 that I’d avoid

UK markets have felt some volatility after last week’s Budget and the FTSE 250 was no stranger to it. Our…

Read more »

Investing Articles

3 reasons the Rolls-Royce share price could soar over the next decade

Sustainable aviation fuel, narrow-body aircraft, and small nuclear reactors could all keep the Rolls-Royce share price climbing over the next…

Read more »

British flag, Big Ben, Houses of Parliament and British flag composition
Investing Articles

Here’s how much income I’d get if I invested my entire £20k ISA in cheap BT shares

BT shares are on the up but still cheap, while the FTSE 100 telecoms stock offers a good yield too.…

Read more »