Tuesday 23/11/21

  1. In MACRO, ENERGY & CRYPTO NEWS, Jay Powell gets the nod, the European economy suffers, Bulb goes into administration and the China exodus fuels a crypto mining boom
  2. In M&A NEWS, Athenahealth is sold for $17bn, Ericsson buys Vonage and Netflix buys Scanline
  3. In TECH-RELATED NEWS, Zoom takes a hit, Twitter teams up with Walmart and Macy’s sells NFTs in parade balloons
  4. In MISCELLANEOUS NEWS, UK consumer spending increases and British Airways’ owner threatens flight cuts
  5. AND FINALLY, I bring you a biker dog…

1

MACRO, ENERGY & CRYPTO NEWS

So Jay gets another go, Europe suffers, Bulb’s light goes out and China stokes a crypto mining boom…

📢 Hello everyone! I just wanted to alert you to the fact that I will be doing a monthly roundup NEXT MONDAY of the business and financial markets news of the month of November! As always, I will be doing this in conjunction with the fantastic Jake Schogger of Commercial Law Academy. I will be doing the roundup and Jake will be overlaying this with his legal insight. You will need to sign up HERE to attend, so hopefully see you there for our final roundup this year!

So after quite a lot of recent speculation, Joe Biden nominates Jay Powell for second term as Fed chair (Financial Times, Colby Smith and James Politi) shows that Biden has gone for continuity and kept Powell on in his role with the alternative candidate, Lael Brainard, getting the job of vice-chair. Jay Powell faces significant challenges in second act as Fed chair (Financial Times, Colby Smith and James Politi) goes into more detail about the issues he has to face in his second term, particularly how to steer the economy through a period of very high inflation. He is widely believed to have done a decent job during the pandemic – in the face of huge pressure exerted by Trump – but the taming of inflation is going to be high up on his agenda whilst simultaneously trying to raise employment numbers.

Meanwhile, Return of virus curbs sends a chill through the Continent (Daily Telegraph, Tom Rees and Russel Lynch) shows that anti-lockdown protests in Rotterdam, Brussels and Vienna over the weekend have happened in reaction to new movement restrictions that are, in turn, expected to hold back Europe’s economic recovery. The prospect of a fourth wave sending the Eurozone’s recovery into reverse could have far-reaching consequences as German state leaders and French president Macron face elections in the not-too-distant future. Concerns about this potential reversal in fortunes are also affecting the currency – as per Lockdown fears send euro tumbling to 16-month low (Daily Telegraph, Tom Rees) which highlights a notable collapse against the dollar and the pound – and Bundesbank warns inflation will surge higher in Germany (Daily Telegraph, Russell Lynch) shows that the Eurozone’s biggest economy expects more headwinds to come,

something that is particularly worrying because Germany accounts for 29.6% of the bloc’s GDP, according to Holger Schmieding, chief economist at Berenberg.

Back in the UK, Taxpayers on the hook to keep lights on at Bulb (Daily Telegraph, Rachel Millard) highlights Bulb as being the latest energy supplier to go bust and it looks like the taxpayer is going to keep it going as rivals have balked at taking on the UK’s seventh biggest energy supplier with 1.7m customers. The company is effectively being nationalised until administrators can find a buyer or package off its customers in some way. It is the largest energy company to go bust so far and so although customers are immediately passed on to an existing supplier under “normal” circumstances when such a company goes bust, the sheer number of Bulb customers makes this impossible, hence the government’s action. Bulb’s collapse signals the urgent need for energy market reforms (The Guardian, Nils Pratley) uses the benefit of hindsight to point out that it was a mistake to let so many undercapitalised companies bet on wholesale energy prices and that lessons should be learned from this. Specifically, the price cap should change more frequently than every six months and that more should be done to ensure that the companies involved can withstand any shocks like we are experiencing now. I guess the implication is that if nothing is done now, more companies will go to the wall and we’ll end up with the same old energy behemoths that the upstarts were encouraged to take on in the first place all those years ago!

China’s exiled crypto machines fuel global mining boom (Financial Times, Martha Muir) is an interesting article which shows how China’s ban on crypto mining in May has resulted in a mass exodus of miners from the country and a race to relocate all the big power-hungry machines needed to extract bitcoin. Fourteen of the world’s top crypto mining companies have relocated over 2m machines out of China immediately after this and most of them have ended up in the US, Canada, Kazakhstan and Russia. Sudden liquidations of Chinese mining companies meant that the market was suddenly flooded with specialist machines and the cost of an Antminer S19, the model of choice among industrial miners made by Chinese manufacturer Bitmain, fell by a whopping 41.7% between May and July. * SO WHAT? * It just goes to show that even if you ban Bitcoin, it just pops up somewhere else. You do wonder what will happen if more countries ban it whether there will be serious spikes in electricity demand in countries that don’t as more and more miners converge. This is a really interesting article that I recommend you read in full!

2

M&A NEWS

Athenahealth is sold for big bucks, Ericsson buys Vonage and Netflix buys Scanline…

M&A continues apace with Athenahealth to be sold for $17bn in private equity deal (Financial Times, Antoine Gara) as private equity firms Hellman & Friedman and Bain Capital are buying health-tech company Athenahealth in what is one of the biggest leveraged buyouts this year. Current owners Veritas Capital and Evergreen Coast Capital took the company private in 2019 for $5.7bn and merged it with assets from GE Healthcare, cutting costs and returning it to growth. The new owners reckon they can squeeze more out of the company that digitises health records and prompt double-digit revenue growth by winning more customers. * SO WHAT? * It’s interesting to note that this is the latest deal where private equity firms have clubbed together to buy an asset worth $10bn or more – Hellman & Friedman, Blackstone and Carlyle combined in a $34bn leveraged buyout of medical products supplier Medline back in June and, earlier this month, Advent International and Permira Partners got together to take McAfee private.

Then in Ericsson to pay $6bn for cloud-based services group Vonage (Financial Times, Richard Milne and Nic Fildes) we see that the Swedish telecoms equipment

maker is making its biggest ever acquisition in the form of Vonage, the cloud services group, as it tries to broaden its offering from the core mobile infrastructure business. * SO WHAT? * Ericsson aims to bring 5G networks to business customers and Vonage, which serves 120,000 business customers and one million developers, can certainly enhance this. The enhancement of its cloud communications tech will provide an important boost to its ability to compete with the likes of Cisco, Microsoft, Zoom and Twilio. Ericsson/Vonage: telecom pioneer finds a successful second act (Financial Times, Lex) highlights the fact that things weren’t always so great at Vonage but that its focus on business customers proved to be particularly prescient in the pandemic and its consumer business remains very profitable. It also suggests it managed to do this deal at a decent price given the growth potential.

Netflix scoops up Game of Thrones visual effects whiz Scanline (The Guardian, Mark Sweney) highlights the streaming giant’s acquisition of Scanline, the visual effects company behind productions including Game of Thrones, Zack Snyder’s Justice League and Stranger Things. This is the company’s first foray into digital special effects and it will enable Scanline to focus on its growing roster of TV and films. * SO WHAT? * This sounds like a good strategic move by Netflix as a way to enhance its content.

3

TECH-RELATED NEWS

Zoom suffers, Twitter experiments and Macy’s does NFTs…

In Zoom shares skid as sales growth slows (Wall Street Journal, Aaron Tilley) we see that Zoom’s sales slowed down over the latest quarter on signs that the stellar growth rates it achieved in the past are now waning. * SO WHAT? * The company’s share price is over 40% lower than it was a year ago and it is facing increasing pressure to innovate/broaden its horizons in order to stave off the ever-present threat of Microsoft’s Teams.

Twitter launches live shopping trial with Walmart (Daily Telegraph) heralds a rather interesting development as Twitter is going to be testing a live shopping feature on its platform in the US this weekend in partnership with Walmart. Walmart will broadcast on Twitter with Jason Derulo and users can browse a product catalogue while watching the video. Clicking on a product will take you to Walmart’s website where you can complete the transaction. * SO WHAT? * This is an interesting experiment as Twitter tries to broaden its revenue stream from digital advertising, which accounts for 89% of sales currently. Twitter unveiled a new “shop module” in July that allows a small number of retailers to add products to their

profiles and, at the moment, the company isn’t getting involved in payments processing or taking a slice of the transactions. I think that this is quite interesting because social media generally seems to be moving in this direction what with the likes of Meta and Pinterest already offering live shopping and YouTube making more efforts in this area in order to get a piece of the online shopping boom. I guess every platform has to have this functionality as users will grow to expect this as the new norm.

Then in Macy’s turns Thanksgiving Day parade balloons into NFTs (Wall Street Journal, Joseph Pisani) we see that the American retailer is dipping its toes into NFTs for the first time by auctioning off 10 digital images of its iconic Thanksgiving Day parade balloons from years gone by. In addition to this, it will be giving away 9,000 NFTs to people who go onto its website on Thanksgiving morning and it is doing so in order to celebrate the parade’s 95th birthday and to bring in new customers. * SO WHAT? * This is just the latest example of what I think will be a proliferation of NFTs in the coming months at least. We’ve seen BTS and their tradeable digital cards, Martha Stewart selling holiday-related digital images and the company that owns the Toys ‘R’ Us brand offering digital images of its Geoffrey the Giraffe mascot! As at yesterday, the Macy’s NFTs all had bids of at least $2,500, but there’s a while yet until the end of the auction on November 30th, with proceeds going towards the Make-A-Wish Foundation of America.

4

MISCELLANEOUS NEWS

UK consumer spending continues and IAG warns of a reduction in flights…

UK consumer spending continues to rise despite surging inflation (Financial Times, Valentina Romei) cites the latest figures which show that UK consumer spending is still rising despite rising prices across the board squeezing household finances. Rising employment numbers, loads of vacancies, falling Covid infection rates and an end to the September fuel crisis (plus the imminent prospect of Christmas!) have cheered consumers enough to keep their wallets open. As I keep saying, I expect this final run to Christmas to be strong, but that the real test will be how everyone is feeling in Q1 next year when reality could

potentially kick in. If current trends in employment continue, for instance, I think that there is a possibility that we’ll get a second wind. If it gets worse, things could slow down considerably in a relatively short time frame IMO.

Then in British Airways owner warns it could cut flights over higher charges (The Guardian, Gwyn Topham and Jasper Jolly) we see that BA owner International Airlines Group (IAG) is threatening to move flights out of Heathrow if the airport brings in a 50% increase in charges. He said that it would not be alone in this and, given that it is the hub’s biggest operator, this threat could carry some clout. * SO WHAT? * The argument here is that the higher charges will have to be passed on to the passenger, and that situation at the moment is still pretty delicate. I think that this is just a spat and will come to a compromise because no-one is going to want to make things worse in the aviation industry after such a terrible time last year and this.

5

...AND FINALLY...

…in other news…

I have to say that this is impressive, although I do worry a bit about the safety aspect of this: ‘Superdog’ corgi kitted our with cape and goggles can’t get enough of motorbike rides (The Mirror, Chloe Bowen). However, the owner and Enzo seem to make a great team and do some brilliant things for charity!

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Some of today’s market, commodity & currency moves (as at 0759hrs 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 **
7,255 (+0.44%)35,619.25 (+0.05%)4,682.94 (-0.32%)15,854.76 (-1.26%)16,116 (-0.27%)7,105 (-0.10%)HOLIDAY3,589 (+0.20%)
Oil (WTI) p/bOil (Brent) p/bGold Per t/oz£/$€/$$/¥£/€$/₿
$75.98$79.16$1,806.671.339661.12500114.711.1907756,015

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