Tuesday 18/08/20

  1. In MACRO & MARKETS NEWS, Japan’s economy suffers and London IPOs are down
  2. In TECH NEWS, Huawei faces more US pressure, Apple turns it up with Epic, Tencent buys into Voodoo and Robinhood gets a chunky valuation
  3. In PHARMACEUTICAL NEWS, GSK profits and Sanofi buys
  4. In INDIVIDUAL COMPANY NEWS, Ryanair cuts flights, Uber & Lfyt hang in the balance and Geely cuts sales targets
  5. AND FINALLY, I bring you an “innocent” photo and sounds of the office…



So Japan’s economy suffers (but less than others) and London IPOs have gone very quiet…

Japan’s economy suffers record slump after Covid hit (The Guardian, Larry Elliott) cites official figures which show that Japan’s GDP fell by 7.8% in Q2, with falling consumption being the main driver. This was the sharpest decline in GDP since records began in 1980 – but even so, it has actually fared better than other G7 countries over lockdown. Just to give you an idea, the US contracted by 9.5%, Germany by 10.1%, Italy by 12.4%, France by 13.8% and then there’s the UK which contracted by 20.4%. * SO WHAT? * This signals nine months of recession in the world’s third biggest economy but analysts expect Japan to turn a corner in the third quarter, with the caveat that it could be knocked off course by increased US-China tensions. Domestic consumption was sluggish and the

economy was not helped by an anaemic performance in exports.

Floats since to 11-year low as City falls silent (Daily Telegraph, Lucy Burton and Michael O’Dwyer) cites data from Refinitiv which shows that the number of flotations – and their combined value of only £647m – is currently at its lowest level since 2009 with only six Initial Public Offerings (IPOs) so far this year! On the other hand, companies have raised a far healthier £27.5bn via 80 British private equity fundraisings that do not attract as much public scrutiny. * SO WHAT? * Some say that this could be indicative of a longer-term shift where companies stay private for longer. Investment bankers are struggling to stoke up hope of future company growth prospects against an uncertain economic backdrop and boardrooms have been increasingly avoiding merger talks. The other main thing they have to contend with is the private equity industry which apparently has $2.5tn in cash to invest, giving potential flotation candidates another viable source of financing.



Huawei faces more pressure, Apple gets feisty, Tencent nibbles on Voodoo and Robinhood’s valuation gets chunky…

US tightens restrictions on Huawei’s access to chips (Wall Street Journal, Dan Strumpf and Katy Stech Ferek) shows that the US Commerce Department is ratcheting up the pressure on Huawei as it is clamping down on its access to foreign-made chips. The new rules will ban non-US companies from selling any chips made using American tech without a special licence. They also cover off-the-shelf chips made by overseas firms, which is something that will be a real blow to Huawei because it’s been buying these as a work-around to the main ban. * SO WHAT? * These restrictions are not just clipping Huawei’s wings – they are making life difficult for US companies as well. Qualcomm has been lobbying for a relaxation of restrictions to keep business from going to foreign competitors. Again, I think that a lot of this is Trump trying to appeal to his voting public ahead of the presidential election.

Things are getting hotter in Apple takes battle with Epic to another level (Daily Telegraph, James Titcomb) as Epic Games said that Apple was revoking its developer accounts, cutting off access to the digital toolkit that many use to make apps and other software (especially its “Unreal Engine”) in retaliation for Epic violating Apple’s in-app purchases policy. * SO WHAT? * The revocation of its developer accounts is a major escalation in hostilities and prompted Epic to take emergency legal action yesterday. I have to say, I don’t fancy Epic’s chances against Apple on its own. The only way I can think that it will be able to push on is to try to join up with others in a kind of class-action type thing. 

Tencent takes minority stake in French mobile games maker Voodoo (Financial Times, Tim Bradshaw and Ryan McMorrow) highlights the Chinese tech giant Tencent’s investment in French mobile games maker Voodoo. The minority investment values Voodoo at $1.4bn, making it the first ever “unicorn” in the “hyper-casual” gaming market. The maker of Helix Jump, Crowd City and Paper.io has managed to build up over 1bn players around the world and now hopes to use its new alliance with Tencent to take on the likes of King’s Candy Crush Saga and Playrix’s Gardenscapes and move from “hyper-casual” to “casual” gaming. * SO WHAT? * This move perhaps signals Tencent’s desire to get back on track with its investments. It already has stakes in Epic Games, Supercell and Riot Games and is in the process of completing the purchase of Norwegian game developer Funcom, valued at $160m. The current trickiness going on between the US-China is certainly making Europe look like a calmer place to make acquisitions.

Retail trading app Robinhood’s value tops $11bn on new fundraising (Financial Times, Richard Henderson and Miles Kruppa) shows that the retail trading app managed to raise new equity to give it a valuation of over $11bn – a third higher than it was only one month ago – as it continues to benefit from an upswing in activity it has seen throughout the coronavirus pandemic. Speculation is increasing that the company – which is privately held – will float on the stock market given the momentum it is seeing. * SO WHAT? * The trading platform aimed at retail investors has been a big winner from lockdown as bored punters at home increasingly fancied their chances at making money on the stock markets. Robinhood gained about 3m new customers in the first quarter alone, raising its overall user base to more than 13m. Progress hasn’t been without hiccups, however, as it suffered outages in February and March and last month it cancelled plans to launch in the UK.



GSK profits and Sanofi makes an acquisition…

In GSK makes healthy profit after vaccine maker’s float (The Times, Alex Ralph) we see that GSK has made a nice paper profit from its 8.5% stake in German biotech company Curevac, which it bought recently for $130m. Curevac’s shares climbed by another 27% yesterday – in addition to its 250% rise when it floated on the New York

Stock Exchange (NYSE) on Friday! Curevac is developing a coronavirus vaccine.

Elsewhere, Sanofi agrees $3.4bn deal for Principia Biopharma (Financial Times, Leila Abboud) shows that the French drugmaker has announced the acquisition of a company that is making a promising treatment for multiple sclerosis. * SO WHAT? * This is part of a broader strategy to focus more on treatments for cancer and rare diseases and less on mass-market cardiovascular and diabetes drugs, which have been its bread-and-butter in the past. The company is open to more acquisitions if they are the right fit.



Ryanair cuts flights, Uber/Lyft get nervous and Geely slashes sales targets…

In other news today, Ryanair cuts autumn flights by fifth after Covid surge (Daily Telegraph, Simon Foy) shows that Ryanair has cut capacity by 20% for September and October following a massive drop in demand due to a rise in coronavirus cases in the last 10 days. It said that it will cut the numbers of flights rather than whole routes. * SO WHAT? * This will make Ryanair the first European airline to cut back its flights since they resumed in July. I suspect more will follow suit…

Uber and Lyft’s California operations hang in balance (Financial Times, Dave Lee) shows that things are getting increasingly desperate for ride-hailers Uber and Lyft as a Californian Superior Court judge has given both companies until the end of Thursday to switch its classification of

drivers from contractors to employees. The companies argue that the switch will be expensive and take time to roll out and are pleading for more time. Will these pleas fall on deaf ears?? * SO WHAT? * Converting drivers from contractors to employees will need new systems and training, which will result in big cost rises. This cost is likely to be passed on the customer, who will see fare rises of anything between 20 and 210% and any decision could well have a knock-on effect to other parts of the gig economy in both the US and other countries.

Geely Auto slashes sales target as profits plunge (Financial Times, Christian Shepherd and Emma Zhou) shows that the Chinese carmaker’s profits cratered by 43% in the first half of the year, prompting it to cut its sales target for the year. Geely Auto is the listed business of the Geely Holding group which owns Volvo Cars – it also owns almost 10% of Daimler – and it had been doing better than rivals in the early part of lockdown. However, the pace of recovery in the world’s biggest car market is now having a detrimental effect on sales.



…in other news…

I thought I’d leave you today with an unusual photo in Woman’s innocent photo of supermarket shelf mocked as she misses X-rated detail (The Mirror, Courtney Pochin) and some inspiration for if you are missing the office in The Sound of Colleagues Recreates the Office Ambiance (trendhunter.com, Grace Mahas). That sounds quite desperate to me – I prefer listening to either rain sounds or sounds of the sea! Wild, I know 😱

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Some of today’s market, commodity & currency moves (as at 0743hrs green is up, red is down). THIS IS INTENDED AS A ROUGH GUIDE ONLY!

FTSE 100 *Dow Jones *S&P 500 *Nasdaq*DAX *CAC-40 *Nikkei **Shanghai **
6,127 (-1.55%)27,845 (-0.31%)3,382 (+0.27%)11,130 (+1.00%)12,921 (+0.15%)4,972 (+0.18%)23,051 (-0.20%)
Oil (WTI) p/bOil (Brent) p/bGold Per t/oz£/$€/$$/¥£/€$/₿

(markets with an * are at yesterday’s close, ** are at today’s close)