Watson’s Weekly 19-12-2020

This is an amalgamation of the “best bits” of the daily weekday newsletter/blog woven together to form a concise and coherent view on the things that matter in the commercial and economic news of the week. 

THE DAY IN BRACKETS REFERS TO THE EDITION WHERE THE STORY APPEARED IN WATSON’S DAILY. Clicking on the day will take you to the appropriate edition of Watson’s Daily.

• Brexit negotiations are ongoing as the deadlines continue to get extended but in the meantime, ports will be facing IT problems as they don’t know what systems to input re tariffs (Monday) so it’s looking increasingly unlikely that they will be able to meet the end of the year deadline for testing and implementation
• Still, hopes of some kind of deal buoyed the pound this week as it broke through the $1.36 level (Friday) and Bitcoin had a ridiculously good week (Friday) as it edged further towards the mainstream with news that Ruffer buying over half a billion pounds-worth for its clients (Thursday)

• Tiers changed in the UK this week, but Germany went one further and went into lockdown (Monday), potentially putting it at risk of falling into a double-dip recession (Tuesday)
• There was good news as Moderna’s Covid vaccine got FDA emergency approval (Friday), meaning that it will be the second vaccine to have received approval in America – and, as such, it will be delivering about 20m doses to the US government by the end of the year. The company expects to have 100m-125m doses available during the first quarter of next year, of which 85m-100m will be allocated to the US
• It seems to me that there are a number of hurdles with regard to Covid vaccines. The first one is getting vaccines in the first place (we’re starting to see this sort of thing come through), the second one is how to distribute them (how to allocate limited doses, especially at the beginning) and then the third one is how to combat scepticism (people are wary of taking a vaccine that has developed over months rather than years). Both Americans and Russians seem to be rather sceptical (Monday), so I am sure that there will be ongoing campaigns in every country that will encourage people to get vaccinated

• Electronic Arts decided to break up the Codemasters/Take-Two Interactive deal (that was for cash-and-shares) and put in a higher all-cash bid (Monday). This will go some way to addressing shareholder complaints that management were too hasty to take the first deal. It’s not clear yet whether Take-Two will come back with a counterbid
• Reddit bought Dubsmash (Tuesday), but I’m not entirely sure what the rationale is there given that there is arguably not much overlap in terms of audience
• JD Sports bought Shoe Palace for $680m (Wednesday) as part of its US expansion. Good luck with selling sneakers to Americans in a hugely competitive market both online and offline
• Canadian cannabis companies Tilray and Aphria announced a $2.8bn merger (Thursday), which will create the world’s biggest weed company in an all-share deal

Then in IPOs,

• Last week’s stellar performers DoorDash and Airbnb share prices weakened (Tuesday) although they are still comfortably above their respective flotation prices. Given their huge rises, you can hardly blame any holders from crystallising the value! Or is the weakness a sign of the top of the market?!?
• Roblox seemed to think so as it pulled its IPO (Monday)
• …but a company that probably wished it had pulled its IPO was e-tailer Wish, who saw its share price fall on its stock market debut (Thursday). Stock markets can take one or two duff IPOs before people start to get concerned, but if this becomes a trend investor sentiment can evaporate very quickly indeed!
• American doggie food and treat subscription seller BarkBox still plans on doing an IPO via a blank-cheque company (Thursday) but, given what I said above, it’ll be interesting to see whether SPAC-led IPOs lose their lustre…

In the UK,

• Residential property prices are said to be trending upwards into next year (Monday), being partly driven by the return of landlords to the property market (Monday) and NatWest bringing back 90% mortgages (Tuesday). Having said that, sellers cut prices last month (Tuesday) but Purplebricks has definitely been recovering from the doldrums (Wednesday) of lockdown
• Retail property continues to have a nightmare as the west end London REIT Shaftsbury saw the value of its property take a massive hit (Wednesday) when it did a revaluation. I’d say that things are not going to get better any time soon given current lockdown trends, unfortunately…
• In contrast, things are going very well for Segro, which bought a 74.9% stake in Sofibus Patrimoine (Wednesday), taking its holding in the French urban warehousing company to 94.4% – with the added bonus that it comes with a property that has 17 hectares of development land suitable for more warehouse developments! Nice! This company is doing well on both sides of the Channel!

• It seems that the regulators are trying to tighten the noose on Big Tech in the UK (Tuesday) and Europe (Wednesday). The UK wants the industry to tighten up on illegal content while the EU released the draft of its Digital Services Act. It is also threatening to break up companies that are fined three times within five years under its new rules. Whether it can/will actually do so is debatable, though!
• Google was slapped with a lawsuit on ad-price rigging (Thursday) and behaving monopolistically on internet search (Friday)
• Facebook sided with Epic Games’ lawsuit against Apple (Thursday) accusing the latter of monopolistic behaviour regarding its AppStore. I would have thought this would give Epic Games’ case a decent boost!
• The Massachusetts securities regulator is launching a legal action against Robinhood (Thursday), the online trading app, saying that it has insufficient controls in place to protect inexperienced investors. This is interesting given that the volatility of US markets during lockdown has been partly put down to the success of this app attracting market newbies. I think it is high time that businesses like this are regulated properly because trading on markets is not a game and it is not easy!

• Watson’s Yearly updates: These will be left until the next edition of Watson’s Yearly that will be published on January 5th.

My favourite “alternative” story this week was the very cute Christmas tree snap is ‘driving people mad’ as they try to find ‘camouflaged’ kitten (The Mirror, Courtney Pochin). This is actually quite tricky!