- In DEAL NEWS, Saudi Aramco cancels its international roadshow, Airbnb becomes an Olympic sponsor and Kylie Jenner signs a massive deal with Coty
- In NEWS ON COMPANY EVOLUTION, TikTok aims to distance itself from its roots, Ford announces an electric Mustang, Walmart tries to narrow the gap with Amazon and Jamie Oliver’s at it again
- In INDIVIDUAL COMPANY NEWS, Tata Steel and WeWork announce job losses
- In OTHER NEWS, I bring you banana KitKats and a real Little Drummer Boy…
Following on from yesterday’s news that Saudi Aramco had cancelled its US and Japan roadshow due to lack of demand, Saudi Aramco abandons international roadshow for IPO (Financial Times, Arash Massoudi, Anjli Raval and Simeon Kerr) shows that originally ambitious plans have been scaled right back to just selling shares in the company domestically and to its neighbours as the European investor roadshow was also cancelled. 0.5% of the company’s shares will be sold to local retail investors and 1% will be allocated to big Saudi institutions and local regional funds. * SO WHAT? * Roadshows are a key part of the Initial Public Offering (IPO) process as the company that is listing goes on a big tour with their advisers to see as many of their prospective investors as possible to get them to buy shares in the offering. In my previous life as a stockbroker, I have arranged a number of these meetings myself! Sometimes, it’s dead easy to arrange – you call the clients and they say yes before you’ve even got a full sentence out and others really have to be persuaded into taking such a meeting. Then the bosses get on your back and it all gets competitive with colleagues as to who can get the most meetings! Sad, I know…but anyway, in this case, it seems that no-one was interested. Major investors have been telling Saudi Aramco that the deal just won’t fly at the valuation that Crown Prince Mohammed bin Salman is looking for – even though he eventually lowered his expectations – but the company is just going ahead anyway. The order book will be open until December 4th, pricing will be decided on December 5th and then trading will start on Riyadh’s Tadawul exchange a week later. There are various lock-ins and incentives in place to hold the shares, which should limit immediate selling (we used to call it a “stag” – where investors get allocated shares after the pricing is announced and then sell as soon as they can to lock in any gains as IPOs generally tend to go higher on the first day, especially if the deal is oversubscribed) and general volatility but it’ll be interesting to see how things go
as I am sure that the State will want to manufacture a successful IPO so it can flip overseas investors the bird and say how wrong they all were. I bet they will just put pressure on funds to buy to ensure that the thing at least goes up at launch, but once they’ve done all their squeezing and local investors can buy no more, overseas investors will be even less attracted to the shares. If it’s possible to short the shares I’m sure it will be a popular trade!
Airbnb seals $500m Olympics sponsorship deal ahead of listing (Financial Times, Murad Ahmed and Alice Hancock) heralds a major deal for the accommodation booking platform as it has decided to sponsor both the summer and winter Games until 2028, joining the likes of Coca-Cola, Alibaba and Toyota. * SO WHAT? * This is the first time that Airbnb has signed a big sponsorship deal and it sounds like this one will help to broaden its international footprint considerably. This is a nice bit of PR ahead of the company’s expected listing next year although $500m is a hefty sum. Good news for the International Olympic Committee, though, which has been under pressure to mitigate the massive cost of hosting the Games – and Airbnb sponsorship means that cities won’t have to build so many new hotels. The company is now thought to be worth around $42bn, made over $1bn in revenues in the second quarter of this year and is profitable. Onwards and upwards!
Kylie Jenner sells stake in cosmetics firm to Coty (The Times, James Dean) is a common story in today’s newspapers which shows that personality-turned-entrepreneur Kylie Jenner has just offloaded 51% of her four-year-old Kylie Cosmetics to Coty, the company behind brands including Max Factor and Cover Girl, for a cool $600m. Jenner will still be the face of the brand and will “continue to lead all creative efforts in terms of product and communications initiatives”. * SO WHAT? * This is an interesting development and will no doubt embolden other start-ups as there seems to be a trend of cosmetic giants buying them up. It’s great for the minnows who then get access to the resources of a big company and the giants get a quick injection of something fresh. Whether or not they last within a massive stable of other brands is a moot point, however…
NEWS ON COMPANY EVOLUTION
TikTok looking at ways to shake off its ties to China (Wall Street Journal, Georgia Wells, Yoko Kubota and Kate O’Keeffe) shows that the company is now apparently looking at ways to be “less Chinese” as it faces continued scrutiny from US lawmakers and regulators. It’s talking about expanding operations in South East Asia and is reducing the amount of content from China on the app itself (fun fact: TikTok isn’t TikTok in China, it’s Douyin). * SO WHAT? * It seems to me that TikTok has been a victim of its own (rapid) success as its expansion has been so fast that naysayers have become increasingly concerned that the Chinese government could demand information about the app’s users at any time, constituting a security risk that brings up all sorts of data issues. Everyone else has seen this success and wants a piece of the action! Instagram unveiled its version of TikTok last week called “Reels” following Facebook’s attempt to do something similar last year with “Lasso” but the latter is just nowhere in terms of popularity while the former is too new to know whether it’ll be a creditable threat. Also, Tencent recently said it was allocating an unlimited budget to its own short-video app Weishi in a specific attempt to take on Douyin – so ByteDance will be facing increasing competition in its domestic market as well as its overseas one! Things could get tricky but they definitely have first-mover advantage for the time being!
Then we see more companies attempting to change direction in Ford saddles up electric Mustang to take on Tesla (Daily Telegraph, Alan Tovey) which highlights Ford’s attempt to take on Tesla’s Model Y with its brand new Mach-E SUV in its first big push into electric cars.
* SO WHAT? * The company is investing $11bn in electric motoring by 2022 and has thus far lagged many of its competitors in this area. This should be a compelling offering in theory as the entry price for this model is $44,000 versus $70,000-plus for its main rivals that include the Audi e-tron, Jaguar’s I-Pace and Mercedes’ EQC. Ford’s chief exec Jim Hackett says that every Mach-E will be profitable straight away despite its relatively low price. Wow!
Jamie Oliver pins hopes on new format for restaurants (The Guardian, Simon Goodley) is a another story that’s doing the rounds today – not surprising considering that Jamie Oliver’s UK operation came crashing down just six months ago. Basically, he’s trying to build a mid-market restaurant chain starting with two of his Jamie’s Italian restaurants in Bali and Thailand with the format being all-day dining with local dishes. Another 19 are planned going into the end of next year. Good luck to him – let’s hope he’s learned some lessons from his UK experience.
Walmart plays catch-up in Amazon ecommerce battle (Financial Times, Alistair Gray) highlights the fact that Walmart is actually coping quite well in the face of the constant threat of Amazon – but it is conscious that it has a lot more work to do in order to narrow the gap with the giant e-tailer. * SO WHAT? * Walmart is currently losing money in online sales, although they have gone up by 41% versus a year ago. This has been due to the company pumping more money into this part of the business but its investment has divided opinion. Doubters say that online grocery delivery will never be profitable for Walmart given the size of the country meaning delivery distances are longer and that costs for employees packing a load of low-value items (which is what shoppers obviously do themselves when they are physically shopping at stores) are too high. Supporters say that Walmart is the only retailer that has the scale to be able to take Amazon on in online grocery sales and is at least making a decent stab at it currently. I say that Walmart needs to give this a decent go now and maybe revisit in a year or two to review, otherwise it will just get left behind.
INDIVIDUAL COMPANY NEWS
There’s bad news for employees at Tata Steel and WeWork…
Tata Steel cuts 3,000 European staff (Daily Telegraph, LaToya Harding) shows that the company is planning to cut 3,000 jobs across Europe in order to reduce costs. Two-thirds of the cuts will be to office-based workers and over half of them will be in the Netherlands. * SO WHAT? * The company said that this was part of a “transformation
programme to build a strong and more sustainable business in Europe” and it added that this will “lead the way towards a carbon-neutral future”. This is clearly complete cr*p. It’s all about company survival. Things have been bad for years and these measures are all about keeping the company alive IMO.
It’s not much better in WeWork spending cuts threaten 4,000 jobs (Daily Telegraph, Hasan Chowdbury) as a third of the company’s workforce worldwide is expected to be laid off later this week following the company’s sudden downfall. This is part of a five-year plan to curtail spending, but things certainly aren’t looking good at the moment.
And finally, in other news…
Regular readers of Watson’s Daily may well be aware of Japan’s obsession with KitKats and the myriad of flavours you can get there. Well Japanese KitKats now come in Gold Caramel Tokyo Banana flavour (SoraNews24, Oona McGee https://tinyurl.com/vbv4gaf) shows the latest developments on that front! Banana!!! Anyway, given that we are getting closer to Christmas, I thought I’d bring you a heart-warming story about a real Little Drummer Boy in 5-year-old drumming prodigy lands full band scholarship 13 years before his high school graduation (USA Today, Wilton Jackson https://tinyurl.com/ua9lr4h). Amazing, don’t you think?? And for those who don’t know what I’m going on about when I refer to Little Drummer Boy, here’s a rendition of the song by the incredibly talented Pentatonix.
Some of today’s market, commodity & currency moves (as at 0909hrs green is up, red is down). THIS IS INTENDED AS A ROUGH GUIDE ONLY!
|FTSE 100 *
|Dow Jones *
|S&P 500 *
|Oil (WTI) p/b
|Oil (Brent) p/b
|Gold Per t/oz
(markets with an * are at yesterday’s close, ** are at today’s close)