Monday 25/03/19

1. In MACRO NEWS, we look at the latest options for May/Brexit
2. In INDUSTRY NEWS, UK bookies continue to look to the US and vape companies get nervous
3. In INDIVIDUAL COMPANY NEWS, Uber closes in on a deal with Careem and we look at what Apple might cover at tonight’s event
4. In OTHER NEWS, Marmite is set to create controversy with a new product. For more details, read on…

So we look at what might be next on Brexit…

What’s next for Theresa May and her Brexit deal? (Financial Times, Henry Mance) outlines another tough week ahead as there will be a special meeting of the cabinet today and an expected vote in the Commons on whether MPs should take control of the Brexit process that will give them the vote on alternative ways forward. May tried to win over leading Eurosceptic critics like Boris Johnson and Jacob Rees-Mogg in a meeting at Chequers yesterday, but failed to make any kind of meaningful breakthrough. At the moment, options include Theresa

May’s deal (but this would need the support of MPs and John Bercow who said last week that it would have to be substantially different to the one that has already been rejected), May’s deal + a customs union/membership of the customs union and single market (which could attract support from more MPs, including Labour leader Jeremy Corbyn but some see it as the worst of both worlds), a no-deal (which is threatenened but it seems that not many really want – although May would prefer a no-deal to a soft Brexit) and a second referendum (still a possibility although not favoured by Downing Street, but appears to be gathering momentum). A general election is threatened, but it would take another vote and a long Article 50 extension. We will just have to see how events unfold.

UK bookies continue to bet on the US and vaping companies continue their nervousness…

British bookmakers take punt on US (Financial Times, Alice Hancock) is a really interesting article that gives a decent commentary on why and how UK bookmakers are seeking to make inroads into the US. It all kicked off with the US Supreme Court ending a 25-year federal ban on sports betting in May last year which sent bookmakers salivating at the thought of revenues potentially reaching $19bn by 2023 (which seemed realistic when you consider that the American Gaming Association said that up to $150bn a year was being spent on illegal sports betting prior to the May ruling). New Jersey and Delaware were the first states to legalise sports betting and were then followed by Mississippi, West Virginia, New Mexico, Pennsylvania and Rhode Island. PaddyPower Betfair wasted no time in announcing the first major partnerhip with a US company by taking a 60% stake in FanDuel. Then GVC, owner of Ladbrokes Coral, signed a $200m deal with MGM Casinos to create Roar Digital and William Hill signed an equity deal in September with Eldorado, a casino operator. 888 then launched in New Jersey, focusing on the online market. * SO WHAT? * The opening up of the US market has come at a time when UK bookmakers are having a tough time at home with a huge cut in the maximum stake of previously lucrative fixed-odds betting terminals (aka FOBTs) and higher taxes on digital gaming revenues. The timetable of other states legalising sports betting is unknown and, currently, none of the UK

companies have made any money from their US joint ventures. FWIW, I think that this is a huge and largely untapped market that can benefit from the technical expertise of UK bookies. I believe that long term success for them will depend on how long the legalisation momentum will last and who can build the most scale in the quickest time.

In Vape makers fear profit going up in smoke (The Times, Tom Knowles) we see that the tobacco industry is still reeling from a proposal made by San Francisco last week to ban the sale of all electronic cigarette products. The main problem is that vaping is popular among teenagers, with a study by the Centres for Disease Control and Prevention finding that 20% of all high schoolers in the US “vape” and that their use of e-cigarettes has rocketed by 30% between 2017 and 2018 alone. San Francisco-based Juul has been responsible for a lot of this by making it “cool”, but it seems that the tide might be turning. * SO WHAT? * A spokesman for Fontem Ventures, which makes Blu e-cigarettes and is owned by UK listed Imperial Brands, voiced concerns about last week’s events as well as Reynolds American, which makes Vuse vapes owned by British American Tobacco. Altria (well known for making Marlboro cigarettes) must be getting particularly uncomfortable at this latest development given that it paid $12.5bn for a 35% stake in Juul last July. San Francisco apparently has a history of doing things like this, but the danger here is if what IT does starts to get adopted by everyone else. With an election on the not-too-distant horizon, you would have thought that vaping among youths could be important enough to become a campaign issue which I would imagine won’t be great PR.

Apple prepares for its big reveal and Uber edges closer to Careem…

So the hype has reached fever-pitch and With the iPhone sputtering, Apple bets its future on TV and news (Wall Street Journal, Tripp Mickle) has a stab at what is going to be revealed tonight as the company is expected to announce new video and news subscription services that will generate billions of dollars in new revenues. While mobile phone sales are reaching maturity, Apple hopes the slack will be taken up by the fast-growing services side of the business which grew by 33%  last year, making up about 15% of company revenues. Tonight, the company is expected to show the first footage from some of its new original TV shows, having used a $1bn budget to buy a ton of original TV shows. There is no word yet on how much

Apple will charge for the new programming. It is also expected to reveal a reworked News app that has a premium tier with access to over 200 magazines and newspapers – including the Wall Street Journal – for $9.99 per month. I would recommend you read this article as it does a brilliant potted history of what got Apple to where it is now. * SO WHAT? * This all sounds great, but its success will depend on how good its programming is. Also, $2bn sounds like a lot but it is dwarfed by what Netflix spends and what Amazon COULD spend on programming. We’ll just have to see what the company comes up with tonight.

Uber set to buy Careem for $3.1bn (Daily Telegraph, James Titcomb) shows that Uber is on the verge of buying Middle Eastern ride-hailing competitor Careem in what could be the company’s biggest ever acquisition. Careem was set up in 2012, is based in Dubai and has been something Uber’s had its eye on for years. Details are expected to be announced imminently.

And finally, in other news…

I’ll say it now – I love Marmite. However, I’m not sure about this new product: Why Marmite is about to be more controversial (Sky News, https://tinyurl.com/y3zhowg3). Just. Yuck.