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CPP shares rocket on bid rumours

A bid rumour swirling around CPP has caused shares to rocket - but investors should consider the parlous state of the suitor's finances before diving in.
November 1, 2012

Shares in CPP (CPP) have taken off like a rocket, rising more than 10-fold from lows of 4p just weeks ago as bid rumours circled the beleaguered provider of identity protection products. The company is still mired in an FSA investigation into mis-selling claims, but the bid rumours pushed shares up sharply and forced CPP into a statement confirming it had received "a preliminary approach from Affinion Group, which may or may not lead to an offer being made".

IC TIP: Sell at 43p

Under stock market rules, Affinion Group now has until 28 November to put up, or shut up. But investors should proceed with caution. Affinion Group has its own problems, with less than a year before it could breach covenants on a $2.3bn debt pile - the result of a debt-fuelled 2005 buyout by private equity house Apollo Global Management, according to a Bloomberg report.

Major customers such as mobile provider Everything Everywhere are cancelling contracts with CPP and banks are desperate to distance themselves from the mis-selling scandal. The shares have come a long way from the 235p float price in March 2010.