Marks & Spencer Has Lost a Third of Its Value on Ocado Jitters

(Bloomberg) -- Marks & Spencer Group Plc investors are increasingly pessimistic about the U.K. retailer after it announced a joint venture with tech startup Ocado Group Plc to deliver grocery orders in the U.K. and boost its food business.

M&S shares have fallen 34% since the company said in February that it will finance the deal with a rights offer and dividend cut. Meanwhile, Ocado shares have surged 19% in the period, helped by a technology-licensing pact with Australian grocer Coles Group Ltd. in March.

Morgan Stanley analysts resumed coverage of M&S stock Monday with an equal-weight recommendation. The broker’s previous rating, before the joint venture was announced, was overweight.

“We spent 2018 as increasingly lonely bulls on M&S, because we thought its recovery prospects were considerably better than the investment community appreciated,” Morgan Stanley analysts including Geoff Ruddell wrote in a report. “We had not anticipated the company buying a 50% shareholding in Ocado’s U.K. retail business, financing the transaction with a rights issue or cutting its dividend.”

To contact the reporter on this story: Lisa Pham in London at lpham14@bloomberg.net

To contact the editors responsible for this story: Beth Mellor at bmellor@bloomberg.net, Tom Lavell, John Viljoen

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