Thursday 17/06/21

1. In MACROECONOMIC & VACCINE NEWS, the Fed signals an earlier-than-expected rate rise, UK inflation overshoots target and CureVac has some disappointing news
2. In M&A AND IPO NEWS, Sony Music buys into podcasts, Addison Lee hoovers up ComCab and made.com’s IPO flops
3. In CAR-RELATED NEWS, GM commits more to EVs, Polestar considers a float, the government’s in talks for gigafactories and Waymo raises even more money
4. In MISCELLANEOUS NEWS, the government’s decision to extend the commercial eviction ban causes relief and frustration while Suning’s shares are suspended
5. AND FINALLY, I bring you an amazing back garden…

So inflationary pressures increase both sides of the Atlantic and CureVac has some disappointing news…

📢 It’s Thursday – so it’s time for my 30-minute Instagram Live At Five where I will run through the week’s key stories AND the one hour weekly ZOOM call for paying subscribers where I will do the same but in more detail and with much more interaction 👍 The ZOOM call will start at 5.30pm and run until 6.30pm. See you there!

Fed pencils in earlier interest-rate increase (Wall Street Journal, Paul Kiernan) shows that pressure continues to build on the Fed  to increase interest rates as the economy recovers rapidly, pushing up inflation. Officials indicated that they expect to raise interest rates by late 2023, which is earlier than they said in March. They also discussed a tapering of the government’s bond-buying programme but didn’t give any detail of timings during the two-day policy meeting that concluded yesterday. * SO WHAT? * This change in stance comes as a result of the economy growing faster than they had anticipated. It is interesting to note that 13 out of the 18 Fed officials said they expected to raise short-term rates by the end of 2023 versus 7 who said so in March, 7 of them expected a rate rise by the end of 2022 versus 4 who said so in March – but NONE of them thought that rates would need to rise this year. You may recall that my prediction is that the UK and/or US will have to raise interest rates by the end of THIS year, so I am going against the official line! What a rebel I am 😂! I just think that house prices, retail sales, consumer spending, oil prices, food prices etc. are all rising so quickly – and when you add in supply chain problems I just don’t think that the central banks will be able to hold out for that long without stepping in to cool the economy down.

Talking of which, Inflation jumps to 2.1% as petrol and clothing prices rise (The Guardian, Phillip Inman) cites the latest figures from the Office for National Statistics which show that inflation has now breached the Bank of England’s 2% target for the first time in two years as fuel costs rose by 20% and the prices of clothing, meals, booze, books and bicycles also went up. Interestingly, the ONS pointed out that wages have only increased by 3% overall over the past year, despite super-high job vacancy rates, supporting the argument that current high inflation will not last. The Bank of England reckons that inflation will stay below 3% this year and then pull back to 2% over the next two years. * SO WHAT? * I think that if things stay mostly as they are and if there is an uptick in unemployment when furlough ends (which is what is generally expected) then the Bank of England might be right. However, I think there is a potential risk that this sudden rise in unemployment may not be as bad as everyone is predicting – and this could lead to wage hikes across the board as employees get more confident about asking for raises. If THAT happens, I believe people will spend more and inflation will accelerate.

There’s some disappointing news in CureVac’s mRNA Covid vaccine flunks clinical trial (Financial Times, Nikou Asgari) as the German pharmaceutical company unveiled the results of its mRNA Covid vaccines –  that the jab was only 47% effective at protecting against coronavirus in late-stage trials. CureVac’s share price cratered by 50% in after-market trading yesterday. * SO WHAT? * This just goes to show that it’s not all unicorns and rainbows as far as making vaccines is concerned. The company blamed the plethora of variants for the poor results. Back to the drawing board!

Sony buys into podcasts, Addison Lee buys a rival and Made.com’s IPO flounders…

Sony Music buys Somethin’ Else in global podcast push (Financial Times, Alex Barker) highlights the acquisition (for an undisclosed sum) of the UK’s biggest independent producer of audio programmes as Sony’s record label makes moves in the global podcast market. * SO WHAT? * This is just the latest example of a giant buying a minnow in order to get a seat at the podcast high table. The Ringer, Serial Productions, Stitcher and Megaphone have all attracted buyers over the last year, for instance. The likes of Amazon, Spotify and Apple have all been busy developing their podcast offerings and have been trying different ways to help podcasters monetise their content – Apple launched a subscription service on Tuesday, for instance, which allowed podcasts to offer separate subscriptions to their shows. Sony has spent over $3.5bn over the last two years on video and audio content for its entertainment business which generates over 50% of its profits. The Somethin’ Else acquisition sounds like a decent strategic move and they will be making the founder and chief content officer co-heads of global podcast for Sony. 

Meanwhile, Addison Lee buys ComCab as it takes on Uber in London (Daily Telegraph) shows that Addison Lee will be acquiring the London operations of ComCab, London’s biggest taxi firm, as well as those of City Fleet Networks and Flightlink International for an undisclosed sum. Once the deal finalises, customers will be able to book taxi and courier services in one place. Clearly this is a fightback against the likes of Uber.

Then there was another London Stock Market IPO failure in Made.com valued at £775m in London IPO (Financial Times, Sarah Provan) as the online furniture retailer saw its share price fall by 8% on its first day as a public company despite pricing itself at the bottom of the pre-float price range. It could be worse – Deliveroo’s share price fell by up to 30% on its first day and its share price is still more than 30% below its flotation price. Investors were clearly sceptical about the company’s ability to achieve profitability and scale in the UK market and Made.com’s first-day flop is another case of pandemic IPO opportunism (Financial Times, Bryce Elder) adds that its success is highly dependent on housing transaction volumes and how it manages its supply chains – which are likely to be hard to call. * SO WHAT? * Making money in furniture has proved to be very difficult business overall with companies such as Ikea and Wayfair being notable exceptions. Made has not turned a profit since it was founded in 2010 and it still has a lot to prove in order to get investors onside.

GM commits more money to EVs, Polestar considers an IPO, the UK government is looking at gigafactories and Waymo raises another ton of cash…

GM raises electric-car bet, will add more battery factories (Wall Street Journal, Mike Colias) shows that GM is upping the ante for the second time in recent months by committing more investment into EVs. It also raised its pretax profit guidance, saying that it was more upbeat about the US vehicle market in general and that the semiconductor shortage would ease. The company said yesterday that it will spend $35bn on electric and autonomous vehicles through to 2025, which is 30% more than they earmarked last November.

Polestar explores listing as it pushes for global expansion (Financial Times, Peter Campbell) shows that the EV maker backed by Volvo Cars and Geely, is thinking about doing a SPAC-backed IPO in order to boost its ability to compete against rivals. Polestar raised $550m from Chinese investors in April and wants to raise more money to boost its manufacturing capabilities in the US. It is just talk at this stage but Polestar/Volvo Cars: navigating a course to more capital (Financial Times, Lex) reckons that it has a decent chance for a bright future but an IPO would also boost the potential valuation of a future IPO of Volvo Cars. * SO WHAT? * There’s obviously a lot of hype surrounding the IPOs of EV manufacturers at the moment, but their performance has been mixed. However, Polestar has developed quite nicely under Geely and although it’s probably still loss-making you would have thought that its solid backing means that it has more substance than other EV manufacturers who have come to market armed just with projections and an unproven track record.

Meanwhile, UK in talks to build battery ‘gigafactories’ for electric cars (The Guardian, Jasper Jolly) shows that the UK government is currently in talks with six manufacturers – including Ford, LG, Samsung, Nissan, InoBat and Britishvolt – about building EV battery “gigafactories”. * SO WHAT? * It would be a real coup to have a number of gigafactories in the UK as it would safeguard jobs that will be lost as the transition is made from internal combustion engine cars to EVs. It would also presumably boost our EV production capacity as we would not have to import as much – something that would be pretty useful in a post-Brexit world. Clearly, the companies involved are going to want support in terms of investment given the potential benefits to the local economies, which is what they are trying to hammer out at these negotiations.

Then in Waymo raises further $2.5bn for self-driving car project (Financial Times, Patrick McGee) we see that Alphabet’s driverless car division Waymo has raised a significant chunk of change as rivals consolidate. Uber’s driverless division merged with Aurora, Lyft’s “Level 5” unit was sold to a division of Toyota and GM’s Cruise bought start-up Voyage – and all of this happened over the last year! They are all vying for leading positions in the race to driverless cars. * SO WHAT? * I think that driverless is an absolutely massive money pit and so it makes a lot of sense for companies to consolidate and share the load. The problem is, will they still have any money left to burn by the time driverless cars actually become “a thing”?? I’m not so sure because if you take away all the hype, there are still a lot of regulations to obey and, of course, there’s the matter of trying to convince people that these things are safe. This will continue to take time to come to proper fruition IMO…

The government causes kerfuffle and relief from extending the eviction ban and Suning hits some major issues…

In UK Treasury to extend ban on commercial evictions until March 2022 (Financial Times, Jim Pickard, George Hammond, Daniel Thomas and Jonathan Eley) we see that the government has decided to throw businesses a bone after extending lockdown by moving the ban on commercial evictions deadline to March 2022. * SO WHAT? * Clearly tenants are loving the extra breathing space but Landlords’ anger over eviction ban (The Times, Ben Martin) highlights the landlords’ frustration. Under this ban, landlords are prevented from taking commercial tenants to court and it would seem that businesses such as bars, restaurants and retailers in particular stand to gain most from this change.

Talking about struggling businesses, Shares in China’s Suning frozen as fears grow about debt pile (Financial Times, Edward White and Thomas Hale) shows that shares in the main part of Chinese retailer Suning (which owns Carrefour in China) were suspended due to concerns over its debt levels. Suning is a Chinese conglomerate that is being closely monitored by investors due to concerns that its financial problems will spill over into other sectors. Property group Evergrande and distressed debt investor Huarong are also being monitored for the same reasons. Chinese authorities continue to clamp down on debt and things could get messy.

…in other news…

I thought I’d leave you today with the amazing labour of love in Incredible garden behind plain brown house that took dad 10 years to create (The Mirror, Rosaleen Fenton). How amazing is this?!?