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Post-pandemic opportunities for Wetherspoons

Pub group has raised £93.7m in a placing backed by its largest existing shareholder
Post-pandemic opportunities for Wetherspoons
  • JD Wetherspoon has raised cash to capitalise on recession-induced property price declines
  • Fundraising was at only a slight share price discount 

Previous recessions have sparked a decline in property prices, which presented opportunities to well funded companies. That is the thinking behind JD Wetherspoon's (JDW) £93.7m fundraising. Institutional investors who backed the placing - including its largest existing shareholder Columbia Threadneedle - agree with the logic. The company raised the full amount it was asking for at 1,120p a share - only a slight discount to the mid-market closing price of 1,183p a day earlier.

Private investors, who have been diluted by this placing, will be hoping that the money can help Wetherspoons replicate its last post-recession performance. Between 2009 and 2019 the company opened a net 185 pubs and increased average weekly sales from each pub by almost £20,000. 

Not all pub groups will be as well funded as Wetherspoons and opportunities are almost certain to emerge as peers go out of business - government restrictions have made it almost impossible for smaller businesses to survive. Curfews, lockdowns and a ban on takeaway alcohol sales have reduced Wetherspoons current revenue to zero, while pre-Christmas restrictions removed the seasonal spike in business that most pub groups usually enjoy. 

The company also points to the fact that it spent £13m on measures to keep its establishments ‘Covid-secure’. That expenditure offsets the aid offered by furlough schemes and business rate reductions - support that is set to unwind far too quickly.

But Wetherspoon’s current challenges - reflected in share price weakness in 2020 - present opportunities for investors looking to pick up a bargain. True, margins are weaker at Tim Martin’s company than they are at some of its peers, so investors looking for more certainty from a pub group should perhaps look to Youngs (YNGA). But the fundraising is optimistic, so we say buy at 1234p.