Tuesday 21/09/21

1. In MARKETS & ENERGY-RELATED NEWS, Evergrande rocks global markets, Kwarteng reassures on gas, CO2 problems persist and mini-nukes could be the solution
2. In M&A AND INVESTMENT, Shell sells assets to ConocoPhillips, EA buys Playdemic, Pimlico Plumbers gets bought, Mishcon de Reya does a deal before flotation and Raspberry Pi gets the cream
3. In TRAVEL/AVIATION NEWS, Boeing’s confidence continues and British Airways’ owner gets a Biden Boost
4. In MISCELLANEOUS NEWS, analysts predict the end of chip shortage, Coinbase abandons Lend and Aldi is to open a cashierless store
5. AND FINALLY, I bring you the new Mr P and a simple beer cocktail recipe…

So Evergrande panic rocks markets, Kwarteng tries to calm gas fears and CO2 problems could get worse but maybe mini-nukes are the solution…

Chinese property crisis rocks global markets (Daily Telegraph, Julia Bradshaw) highlights the effect of investor panic about the hugely debt-heavy Chinese property market – and specifically whether what’s happening at Evergrande will spread. The company’s share price has collapsed by over 80% this year as concerns have intensified regarding its enormous debt – something stoked last week by Evergrande bringing in restructuring specialists Houlihan Lokey. As things stand at the moment, China’s government has made no promises to bail the company out and Investors fear Evergrande will bring the house down (The Times, Tom Howard) outlines Evergrande’s story-so-far and the possibility that a big collapse could put the brakes on the construction industry whose seemingly insatiable thirst for materials has been powering mining groups for years. Still, Evergrande: predictability of defaults reduces the contagion risk (Financial Times, Lex) reckons that the most likely outcome is that Evergrande could be allowed to go bust, which could deal the final blow to shareholders and a massive headache to lenders such as Industrial & Commercial Bank of China, Agricultural Bank of China and China Minsheng Bank. * SO WHAT? * Evergrande’s heinously big debts have been public knowledge for quite some time now and it seems that it may finally default – something that has been predicted for years. I just wonder whether the Chinese government will let it go bust and make an example of it – like it did with Ant Group last year, for instance – to ensure other companies fall in line. This would be painful though, but may ultimately help the government’s vice-like grip on corporate China. This may stop the property market dead in its tracks…

The other big story that’s been on everyone’s mind recently is that of the state of gas – because it’s used to generate power and there are worldwide shortages at the moment! Kwarteng insists UK will avoid power shortages as gas crisis worsens (Financial Times, Jim Pickford, David Sheppard, George Parker and Nathalie Thomas) shows that the government is trying to reassure the public as the UK business secretary maintained that there is “no question of the lights going out” as concerns continued to

spread about whether everyone would be able to heat their homes in the winter due to gas shortages. Ministers are currently in talks to offer British energy companies state-backed loans to help them take on unprofitable customers if smaller rivals go under.

The related problem here is that some big users of electricity have shut down production facilities (because the electricity bills are getting too expensive). CF Industries produces 40% of the UK’s fertiliser and the process for making it produces 60% of the UK’s CO2, so when it shut down last week, the ripple effect has been felt across a number of industries. UK poultry producers take emergency measures as gas shortage intensifies (Financial Times, Judith Evans and Jonathan Eley) follows on from what I was saying yesterday as UK poultry producers are now taking emergency measures to conserve their supply of carbon dioxide while Britain’s soft drinks makers have joined in the panic by saying that they’ve only got a few days’ supply left of the gas. Gas/fertiliser prices: supply chain flaws prompt turkey tizzy (Financial Times, Lex) warns that this could spread from being a “poultry thing” to a broader “food thing” without major intervention.

So if we assume that renewables power’s variability is partly to blame for current power generation wobbles, what is the actual solution? If we can’t cope with current demands at the end of summer, how are we going to cope in future when everyone is going to be buying electric vehicles and charging them up at the same time? Step forward Mini-nukes and Musk’s batteries can solve the energy crisis (Daily Telegraph, James Titcomb), which suggests that it’s not just power generation that needs to improve – it’s the storage of it. It talks about big lithium ion battery installations (although there are fire risks) and other safer alternatives in the form of vanadium-flow or sodium ion batteries. Rolls-Royce could provide a solution with the production of mini-nuclear power plants called Small Modular Reactors (SMRs), which are cheaper and quicker to make and possess the huge advantage of having a much smaller footprint than the traditional ones. I guess if we can smooth out our power supply using better technology, we will be much less likely to see a repeat of the current situation. For now, though, the government is going to have to get involved otherwise we’ll be in for the second consecutive Christmas of discontent…

Shell sells assets, EA buys Playdemic, Pimlico Plumbers finds a buyer, Mishcon de Reya goes shopping ahead of its IPO and Raspberry Pi gets a nice investment…

In a quick scoot around some of today’s M&A and investment activity news, Shell to sell Permian assets to ConocoPhillips for $9.5billion (Wall Street Journal, Cara Lombardo and Collin Eaton) highlights the sale of all of Royal Dutch Shell’s assets in the Permian Basin – America’s most active oilfield – as the European oil super-major advances its efforts to cut carbon emissions and put money into renewable energy. Having said that, the company said it will return $7bn to shareholders (presumably in the form of dividends and share buy-backs) and the rest will help to consolidate its balance sheet.

Elsewhere, Electronic Arts completes $1.4bn deal to buy UK video games maker Playdemic (Financial Times, Mark Sweney) announces EA’s purchase of the mobile games maker best known for its Golf Clash franchise as the latest British games developer on the American giant’s shopping list (it bought Codemasters in December last year), Pimlico Plumbers sale nets £100m-plus payday for Charlie Mullins (Daily Telegraph, Sam Hall) shows that the colourful founder of Pimlico Plumbers has sold his company to Neighbourly, a US home services company which is itself owned by private equity firm KKR – and Mishcon hopes to boost its flotation with merger deal (The Times, Jonathan Ames) highlights the law firm’s acquisition of tech and IP specialist law firm Taylor Vinters in a move that will keep momentum chugging along nicely ahead of its proposed IPO on the London Stock Exchange. The new business will be called MDR Taylor Vinters.

It was also interesting to see Raspberry Pi attracts $45m after lockdowns fuel demand for PCs (Daily Telegraph, Ben Woods) as the Raspberry Pi Foundation has managed to attract a $45m investment, following massive demand over the course of the pandemic.

Boeing’s confidence continues and British Airways takes heart…

After news of Boeing having the confidence to push back on Ryanair in negotiations, Aviation will return to pre-pandemic levels by 2023, says Boeing (The Times, Robert Lea) reflects Boeing’s predictions that demand for new premium priced cabins and travel overall will pick up in 2023 and that demand for new planes will increase because existing fleets are too thirsty, too polluting and cost too much to operate.

This prediction took a step closer to becoming reality in British Airways owner soars as US opens the door to Britain and Europe (Daily Telegraph, James Warrington) which reflects investor joy as President Biden announced that fully vaccinated travellers from Britain and Europe would be allowed to travel to the US from November, after an 18-month ban. British Airways owner IAG saw its share price jump by over 10% on the news. * SO WHAT? * It’s good to see that the massively battered airline industry is slowly getting back on its feet again. I just hope for its sake that there won’t be any more major travel bans because you just don’t know whether it’d be able to take on that kind of turbulence again. 

Analysts try to pin the tail on the donkey, Coinbase gives up and Aldi announces a cashierless store…

In light of all the ongoing chip problems we keep hearing about, Global microchip shortage to last until 2023 (Daily Telegraph, Matthew Field) shows that analysts at IDC reckon that the current chip shortage will end in 2023 due to increased production coming online from Intel, TSMC and Samsung. It reckons that we’ll be back in a state of oversupply in 2023 and that there are already signs that things are getting better. They also believe that the semiconductor market will expand to $600bn by 2025, which is 5.3% above earlier estimates. The end is (sort of) in sight! Woohoo!

Elsewhere, Coinbase abandons lending product after SEC pushback (Financial Times, Hannah Murphy and Stefania Palma) shows that America’s biggest cryptocurrency exchange has abandoned plans to launch a new digital asset lending product following pressure from the Securities and Exchange Commission, who said it would be an unregistered security that would have prompted legal action had it gone ahead. * SO WHAT? * This is a very embarrassing climbdown for Coinbase, whose CEO lashed out at the SEC earlier this month, saying that the product in question (called Lend) was NOT a security. You do wonder whether Coinbase will have a fiddle and come back with something that’s a bit more regulator-friendly, but for now it has had to play ball. Will other regulators around the world take heart from this and push back on crypto?

Then in Aldi to open store with no checkout in London (Daily Telegraph, Laura Onita) we see that Aldi is now going to have a go at cashierless checkouts and open one in London where shoppers will scan a smartphone app on entry and will get charged automatically and get an e-mailed receipt on exit. It will be rolled out if the experiment proves to be successful. * SO WHAT? * It’s interesting to see that a company other than Amazon is doing this. I’m not sure how successful this will be, but it will be interesting to see how this works out.

…in other news…

Today, I thought I’d bring you news of the makeover of a familiar face in Pringles change their logo for first time in 20 years – giving Mr P a bold new look (The Mirror, Courtney Pochin) and if that’s making you feel thirsty, how about quenching your thirst with Tabasco Japan says you should add hot sauce to your beer, but are they right? (SoraNews24). I think this looks like a pretty good shout!