Market movers: Micro Focus, Opentext, Peloton, energy price cap

Victoria Scholar, interactive investor's head of investment, runs through today's big stories and how financial markets are reacting. 

GLOBAL MARKETS

European markets are inching higher with the FTSE 100 leading the gains, up nearly 0.5%, trading above 7,500. Focus in the UK is on Ofgem’s increase in the energy price cap for households, increasing average energy bills by 80% from October. In Germany, consumer confidence hit a fresh low of -36.5 for September, below expectations and down from the prior month’s reading as Europe’s gas crisis and fears of a recession weigh on sentiment. Markets await Federal Reserve chair Jay Powell’s address at the Jackson Hole Symposium in Wyoming as Fed watchers look for clues into the path for interest rates and inflation stateside.

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MICRO FOCUS/OPENTEXT

Shares in Micro Focus International (LSE:MCRO) surged more than 91% on Friday after Canadian software company Open Text Corp (NASDAQ:OTEX) announced an all-cash deal to acquire the business for $6 billion. OpenText is paying 532 pence per share, representing a 98.7% premium to Micro Focus’ Thursday closing price. 

This is a loss for London’s listed technology market as one of its key players, Micro Focus prepares to shift overseas under Canadian ownership. However, it is most certainly a win for the software company itself, which is subject to an unrefusable offer at a drastic premium to its previous share price. Since going public in 2005, investors enjoyed a stratospheric rally with the stock gaining more than 1800% to the peak around the end of 2017. However in 2018, the departure of Micro Focus’ CEO at the time combined with disappointing sales and an unsuccessful merger with HP’s software division saw its share price plunge, and resulted in the company dropping out of the FTSE 100 the following year.

The pound’s weakness, nervousness in the public markets, low valuations and significant dry power have bought about M&A possibilities for opportunistic overseas investors lately, with OpenText clearly making the most of the current environment.

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PELOTON

Shares in Peloton Interactive Inc (NASDAQ:PTON) closed lower by more than 18% yesterday after it reported a quarterly net loss of $1.24 billion, widening from a loss of $313.2 million a year earlier. This is its sixth consecutive quarterly loss as the company aims to reach break-even cash flow in the second half of fiscal 2023.

Once the stay-at-home darling of the stock market, Peloton has struggled in the post-pandemic era with the reopening of gyms and the wider economy stunting demand for its bikes and treadmills.

It has been an extremely volatile week for the stock. Peloton shares surged 20% on Wednesday after it reached an agreement with Amazon.com Inc (NASDAQ:AMZN) to sell its equipment and clothes on its platform, in its first partnership with another retailer. It comes as the home-fitness firm attempts desperately to grow its customer base and increase investor confidence after a series of problems at the company.