Shares in Daily Mail and General Trust (DMGT.L) rose as much as 4% on Thursday after the company’s chief executive touted a return of eight times on its investment in online car firm Cazoo.
The owner of the Daily Mail newspaper, which has an approximate 20% stake in Cazoo, invested £117m ($161m) in the firm and said it is now set to receive a windfall of $1.35bn from its initial public offering (IPO).
Cazoo is set to list on the New York Stock Exchange (NYSE) through a special-purpose acquisition company (SPAC), after securing a $7bn (£5bn) deal. This was more than double the $2.6bn valuation in its private funding round in October.
It is the latest company to take advantage of a growing SPAC trend. Known as “blank cheque companies,” SPACs are essentially empty cash shells — companies with no operations that are created simply to hold investor money and then spend it.
Management try to identify a company or assets to buy, thus giving the SPAC stake inherent value.
SPACs typically target deals to take private companies public. The benefit for companies that get acquired is it can be a quicker and easier way of listing on the stock market.
It comes as DMGT also reported a 12% fall in revenue to £580m in the six months to 31 March. The company, which also owns the i news website and Metro newspaper, has been hit by declining numbers of readers as people work from home, and a slump in advertising income.
Profit before tax also fell 45% to £42m over the period. Underlying growth from MailOnline of 9% was more than offset by a 38% decrease in print advertising revenues, the company said, reflecting particularly challenging market conditions for Metro and resulting in total advertising revenues decreasing by an underlying 17% to £148m.
Events and exhibitions revenue plunged 92% to £4m as gatherings were cancelled during the pandemic.
However, DMGT upped its interim dividend by 1% to 7.6p, from 7.5p a year earlier.
"We created significant value for our shareholders during the first half, through active management of the portfolio and continued strong operational execution,” said Paul Zwillenberg, chief executive.
“From a financial and operational perspective, DMGT delivered a solid performance in the first half of the year.”
The group has also made a number of deals in recent months; to sell its education technology arm Hobsons for £291m, and to acquire the weekly science and technology title New Scientist magazine for £70m.
Watch: What are SPACs?