Tuesday 29/10/19

  1. In MACRO NEWS, BoJo goes for an election while Argentina goes left again after its election
  2. In TECH NEWS, Google sees a dip in profits, Spotify adds users and TikTok’s parent mulls a Hong Kong listing
  3. In INDIVIDUAL COMPANY NEWS, Virgin Galactic launches, Aston Martin gets a kicking and Beyond Meat turns a profit
  4. In OTHER NEWS, I bring you a reluctant cat on a treadmill…



So BoJo goes on the offensive again and Argentina gets a new old regime…

Johnson raises stake in fresh election gambit (Financial Times, George Parker and Sebastian Payne) shows that BoJo is now calling for a December 12th “Brexit election”, just after the EU agreed to a deadline extension until January 31st. He failed last night to get an early election under the Fixed Term Parliaments Act and will aim to get a majority on a vote on an early election today. The LibDems and SNP want a polling day of December 9th partly because it would allow more students to vote in their university towns – and it sounds like a compromise could be on the cards. * SO WHAT? * When it all boils down to it, IF an early general election occurs, the electorate is likely to see it like this: LibDems = Remain, Conservatives = Leave and Labour = ?. Obviously, there are divisions in the Conservative Party in particular, but Labour won’t be helped by being perceived to be wavering. At least this way, it would seem that you are getting a second referendum and general election rolled into one. Obviously, it is not as cut-and-dried as that but I suspect this is how campaigning is going to go. BoJo is gambling on voters voting for him just to get something – anything! – done and the LibDems are pitching themselves as the party for Remain (although

what their other policies are outside that will need fleshing out). As things stand, I would argue that Labour has been wrong-footed and has certainly comes across in the press as not being decisive enough on Brexit. It’ll be interesting to see what each party does in an election campaign!

Argentina’s Peronists return to power as Macri concedes defeat (Financial Times, Benedict Mander and Michael Stott) highlights the return to power of the left-wing Peronists, this time under former cabinet chief Alberto Fernandez with a smaller share of the vote than they had hoped for. This signals an end to a brief flirtation with the centre-right wing current incumbent Mauricio Macri as Peronists have been in power for all but six of the last 30 years. * SO WHAT? * This latest victory shows that Latin America is going left again after Evo Morales won a fourth term in Bolivia in a controversial election last week. Mass protests in Chile are calling for higher wages and pensions and led to the resignation of all of the centre-right cabinet. Argentina is in massive debt, has been crippled by corruption (previous president Cristina Fernandez de Kirchner, Alberto Fernandez’s running mate, is still facing 11 corruption charges!), the economy is shrinking, inflation is running at over 50% a year, unemployment is over 10% and over one third of the population lives in poverty. For all Macri’s pro-business and pro-market policies since he took office, he didn’t do enough and the electorate has decided to give the old guard another go.



Google suffers, Spotify gets more users and ByteDance aims for a Hong Kong IPO…

Google hit by slowdown in users clicking on adverts (Daily Telegraph, Margi Murphy and Alan Tovey) signals a dramatic slowdown in paid clicks on adverts (they only showed 1% growth in the third quarter versus the previous quarter) as costs rose. This comes after decades of double-digit growth. Google’s parent, Alphabet, took a hit on profits due to undisclosed equity investments (thought to be the poorly-performing Uber mainly), but met revenue expectations despite operating losses from its “other bets” which include health companies Verily and Calico as well as the driverless car division, Waymo. The results came shortly after reports that Alphabet had made an offer for Fitbit, whose shares shot up by 25% on the news. * SO WHAT? * The ad slowdown is disappointing so the company must hope that this is a blip and not a trend. The Fitbit thing is interesting, though – if it DID buy the ailing fitness-focused tech company, it would help it to compete with Apple and its Watch. Given that Fitbit’s share price is now around the $4 mark versus the $50 it hit at its peak, it would seem that Google might have a “bargain” on its hands. Strategically, this sounds good to me given the increasing popularity of wearables, but it will be all about the price and subsequent execution if the acquisition goes ahead. I’ve always said that Fitbit is a one-trick pony – but if Google was its new owner it could no doubt teach an old pony new tricks!

Spotify hails record users as finance chief steps down (Daily Telegraph, Hannah Boland) shows that the music streamer gained another five million subscribers in the latest quarter to take it to 113m paying listeners. Spotify’s

66 year old CFO stood down on a high as the company announced an operating profit of €54m – only the second time that the company had been in profit since its flotation. * SO WHAT? * Spotify has continued to add users despite increased competition from Amazon and Apple – and Apple has actually overtaken Spotify in terms of US users. Chief exec Daniel Ek did say, though, that it is adding around twice as many subscribers as Apple every month and has double the engagement level from users. Anecdotally, I used to subscribe to Apple Music for quite a while, but then I switched because I realised that Spotify just has way more content (and no, I am not being paid by Spotify to say that). Although Apple Music was “easy” (because I’ve got an iPhone), I just thought Spotify had more to offer.

Meanwhile TikTok owner ByteDance eyes initial public offering in Hong Kong (Financial Times, Henny Sender) shows that the $75bn start-up owner of smash hit app TikTok is aiming to list in Hong Kong as early as the first quarter of next year. An IPO would give early investors a way to crystallise gains they’ve made and give it currency to develop existing and new products. * SO WHAT? * The seven-year old company is no stranger to controversy as it was banned in India earlier this year amid accusations that it incited racial hatred and spread pornography and it is currently under investigation in the US over the “national security risks posed by its growing use” (I also saw something recently about ISIS using TikTok as a recruitment/propaganda tool). Still, the potential preference for a Hong Kong listing over one in New York is a much needed victory for the former, which has been hit by ongoing protests in the last few months. I would imagine that SoftBank (which was an early investor) could also do with a windfall by selling at least some of its stake in ByteDance given that its investment in WeWork continues to haemorrhage cash at the moment…



Virgin Galactic launches, Aston Martin backfires and Beyond Meat makes a profit…

Following the usual hoo-ha of the launch of anything involving Sir Richard Branson, Virgin Galactic hits $2.3bn valuation in public launch (Financial Times, Richard Henderson) heralds a muted first day on the markets for the world’s first space tourism company as initial gains fell flat by the end of trading. The company hasn’t yet launched any paying customers into space and is currently running at a net loss of $138m. Virgin Galactic: up and atom (Financial Times, Lex) highlights the fact that the company’s projections rely on some very punchy assumptions. Although the company says that 600 astronauts have already signed up going into 2022, all of their $80m deposits are fully refundable. Virgin Galactic wins space tourism race to float on stock market (The Guardian, Nils Pratley) is more blunt in its assertion that the company’s success depends on its ability to persuade multimillionaires to pay $250,000 to go from New Mexico to 50 miles above the earth and back on a 90 minute ride. The company argues that it only needs to capture 0.1% of the “high net worth” market over the next few years to hit targets. * SO WHAT? * As I said yesterday, I think this is a massive money pit. Assumptions will mean nothing if ANYTHING goes wrong because potential passengers will abandon in their droves. That said, I DO think that any innovations made here that could actually have practical “real world” implications – like advances in hypersonic flight that could cut journey times from London to New York to an hour – would be way more interesting. In the meantime, Virgin Galactic has got a lot to live up to and will need to deliver. To infinity – and beyond!

Aston Martin float adviser gives its shares the red light (Daily Telegraph, Alan Tovey) shows exactly why you should never trust the adviser to a deal to give an accurate valuation of the company it is floating! Bank of America Merrill Lynch (BAML), which got a share of £30m in advisory fees from Aston Martin’s stock market flotation last year, cut its rating on Aston Martin from Neutral to Sell and its price target from £5.50 to £4 citing weak near-term

demand and increased financial risks that could include Aston Martin asking investors for even more money! BAML is the first of the four banks which advised on the deal (HSNC, Credit Suisse and UniCredit were the others) to pull the plug and it said that Aston bosses are likely to cut their own forecasts for the coming year. * SO WHAT? * It just goes to show how biased (and wrong) “experts” can be. I think that Aston’s future depends even more now on the success of its upcoming 4×4, the DBX.

In Beyond Meat books first profit as competition mounts (Wall Street Journal, Jacob Bunge) we see that the plant-based meat-alternative company has hit an important milestone as it reported sales more than tripling in the last quarter. It is going to be focusing even more on marketing its product as being healthier for consumers and better for the environment than meat and it continues to sign up more restaurant chains. Dunkin’ Brands Group said it will be selling Beyond breakfast sandwiches nationwide, McDonald’s has been trialing a Beyond patty in Canada and Denny’s Corp said it would be introducing Beyond Burgers in Los Angeles. * SO WHAT? * It’s not all been rainbows and unicorns as some trials just haven’t gone particularly well. Canada’s Tim Hortons said it wouldn’t continue selling Beyond Burgers (although it WOULD continue with its sausage product for breakfasts) because its provision had limited impact and some have said that Beyond’s prices are still quite high. Shares in the company shot up from $25 in the IPO in May to a peak of $239.71 in late July, but have halved since due to concerns of more competition and investors shorting the stock. There may be further downward pressure on Tuesday as an insider selling restriction will lift, freeing up about 77% of the remaining shares so investors who felt they’d missed the train may yet have more chances to take a bite of the cherry. Chief exec Ethan Brown said he won’t be selling his stock and he has asked employees to hold off selling. But hey, if you had stock surely you’d take at least a LITTLE bit off the table, no?? Whatever happens, meat alternatives is a red hot area – sales grew by 9.2% over the last year versus meat sales which grew by 1.9% over the same time period, according to figures from Nielsen. Yes, competition is increasing, but then the message is still spreading that meat alternatives are actually quite tasty – and there’s a huge market to go for IMHO.



And finally, in other news…

I thought I’d leave you today with a cat that many of us can identify with sometimes in Obese cat Cinderblock really cannot be bothered with vet’s treadmill (Metro, Richard Hartley-Parkinson https://tinyurl.com/yywtce4p). Yup, been there…

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Some of today’s market, commodity & currency moves (as at 0911hrs 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 **
7,331 (+0.09%)27,091 (+0.49%)3,039 (+0.56%)8,32612,942 (+0.37%)5,731 (+0.15%)22,974 (+0.47%)2,954 (-0.87%)
Oil (WTI) p/bOil (Brent) p/bGold Per t/oz£/$€/$$/¥£/€$/₿

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