Wednesday 24/02/21

  1. In MACRO & BITCOIN NEWS, Bolsonaro cause Brazilian wobbles, UK unemployment rises, ministers debate vaccine passports/testing in addition to online tax and we look at potential economic hurdles
  2. In M&A, IPO & DISPOSAL NEWS, Estée Lauder makes a $1bn acquisition, Lucid, Oatly and WeWork aim for IPOs and Aviva slims down
  3. In TECH NEWS, Facebook’s Aussie turnaround could embolden others while chip shortages hit PS5 supply
  4. In INDIVIDUAL COMPANY NEWS, lockdown losers turn around while HSBC announces cuts
  5. AND FINALLY, I bring you Pokemon treasure…

1

MACRO & BITCOIN NEWS

So Bolsonaro ruffles feathers, UK unemployment rises, ministers discuss vaccine passports vs testing and implementing an online tax while we see possible economic headwinds…

Bolsonaro’s ousting of Petrobras chief unnerves Brazil (Financial Times, Michael Stott) highlights the effect of  Brazil’s president, Jair “Tropical Trump” Bolsonaro, deciding to oust the widely-respected chief exec of Petrobras with a military puppet. * SO WHAT? * Petrobras is one of the world’s biggest oil companies and its share price tanked on the news, as did the share prices of other state-controlled companies as investors surmised that they could get the Bolsonaro treatment in a wider abandonment of his professed commitment to free-market economics. Former Petrobras chief exec Roberto Castello Branco has been doing a decent job of cleaning up the scandal-riddled oil company and is a friend Paulo Guedes, the current economic minister. Both of them are free market advocates, but with an increasingly spendthrift government, it looks like Guedes could be next for the chop – plunging Brazil into further economic uncertainty.

Meanwhile, back home, UK unemployment rises to 5.1% as Covid lockdown freezes economy (The Guardian, Phillip Inman) reflects a rise in UK unemployment in December despite the government’s furlough scheme keeping a lid on pre-Christmas job-losses. Interestingly, the latest ONS figures showed that annual earnings growth increased sharply by 4.7% in the quarter to December, implying a drop in the number of lower paid jobs under lockdown and a potential rise in pay for those who stayed in work. The Resolution Foundation pointed out that the under-25s continue to be disproportionately hit by unemployment.

UK ministers weigh testing as alternative to vaccine passports (Financial Times, Jim Pickard, Daniel Thomas, Sarah Neville and Kate Beioley) shows that the UK government is debating the merits of testing and vaccine

passports with PM Boris Johnson considering the introduction of documentation or a smartphone app that will demonstrate that people are coronavirus-free. Cabinet Office minister Michael Gove will be leading an official review into this. * SO WHAT? * As I have said many times before, I believe that having some sort of app/QR code on your phone and a reader on the door of the venue to verify it has got to be the way forward because it is simple, quick and keeps people moving. Once you start mucking around with sticking swabs up your nose/down your throat and sitting around waiting for test results you are scuppered IMO because it just takes too long. I suspect that venues will choose to enforce this even if the government doesn’t and things will get very difficult for those who do not take the vaccine.

There’s been an ongoing debate about taxing online retailers such as Amazon in order to level the playing field with the taxes physical retailers are subject to and Online sales tax moves closer but some retailers get cold feet (The Times, Ashley Armstrong) shows that it may not be as cut-and-dried as you might at first think. IF a tax was imposed, online-only retailers – such as Amazon, Asos and Boohoo – would clearly suffer the most and offline-only retailers like Primark, Aldi and B&M would benefit the most. However, it’s the retailers in the middle who have a foot in both camps – like Next, John Lewis and M&S – who may suffer most because they will get squeezed both sides. The debate continues…

Six reasons the economy may take longer to bounce back than hoped (Daily Telegraph, Jeremy Warner) is a really interesting article that identifies a few headwinds that could get in the way of a sharp economic bounce-back to pre-pandemic levels. Potential headwinds include the danger of vaccine variants delaying restriction lifting, rising unemployment and insolvencies, cautious households not spending enough to put the boosters under the economy, the long-term impact of WFH on business that serve office workers, ongoing international travel restrictions and the depressing effect on tourism and a slower European recovery. I would definitely recommend that you read this article in full if you can. Let’s hope for the best, but perhaps prepare for the worst…

2

M&A, IPO & DISPOSAL NEWS

It’s all going on in M&A, IPOs and focusing on core businesses at the moment…

Companies are just taking advantage of markets and their varying degrees of purchasing power at the moment what with Estée Lauder agrees $1bn deal to buy owner of The Ordinary skincare (Financial Times, Leila Abboud) as the US cosmetics groups swoops to buy a majority stake in Deciem, parent company of cult skincare brand The Ordinary, in one of its biggest-ever acquisitions. It is paying $1bn to bring its stake to up to 76%.

Tesla rival Lucid Motors to go public in biggest Spac deal to date (Financial Times, Ortenca Aliaj, Patrick McGee and Peter Campbell) highlights the Tesla rival’s intention to go public in a hotly-anticipated $24bn SPAC deal with Churchill Capital IV. Interestingly, Lucid is run by industry veterans used to launching electric cars (lots of ex-Tesla people etc.), the implication being that they’ve got more of a shot at making the company a success. It says that its Lucid Air model, its $169,000 debut vehicle that is now in production, outperforms Tesla’s best model in range, quarter-mile speed and battery recharge time. Hmm. * SO WHAT? * It looks like this deal is hot enough to give early investors, like Saudi Arabia’s Public Investment Fund sovereign wealth fund, a very handsome return. SPACs continue to go crazy! However, a lot of the valuation will be powered by retail investors – but do they really know what they are buying?

Swedish alt-milk brand Oatly seeks $10bn US stock market listing (The Guardian, Zoe Wood) highlights the intentions of the Swedish alt-milk brand Oatly, favoured by the likes of Oprah Winfrey and Jay-Z, for a US stock market listing that could give it an implied valuation of up to $10bn. * SO WHAT? * This sounds like a great idea from the company’s point of view. Markets are hot, vegan stuff continues to be hot and it is coming off a year of doubling sales. With a rosy outlook expected, it looks pretty promising…

In other news, Dumped WeWork co-founder could reap $500m ahead of Spac deal (Financial Times, Andrew Edgecliffe-Johnson, Eric Platt and James Fontanella-Khan) shows that there could be a high price (about $500m in cash) to pay for investor SoftBank to pay to get rid of WeWork’s highly controversial founder Adam Neumann and the messy ensuing litigation. Negotiations between the two parties are in progress but if they conclude to both sides’ satisfaction, WeWork could finally get its IPO off the ground (remember, when it tried to do this 18 months ago, investors just didn’t go for it and the whole thing got cancelled), probably via a SPAC.

Then in Aviva to sell French unit for €3.2bn (Financial Times, Oliver Ralph) we see that the British insurer is aiming to streamline by selling its French business, which accounted for just over 10% of the group’s profits in 2019, to French insurer Aéma Groupe. This will catapult the latter into the top five players in the French market. Aviva: Blanc cheque (Financial Times, Lex) endorses this move, saying that it is a good sign that the company is jettisoning foreign assets and focusing on core markets and there may be more M&A activity within European insurance to come…

3

TECH NEWS

Facebook’s U-turn may embolden others and the ongoing chip shortage affects PS5 deliveries…

Facebook: Aussie rules (Financial Times, Lex) follows on from what I was saying yesterday about Facebook agreeing to restore news on its platform but says that it is not a complete capitulation by Facebook as the new Australian law will enable Facebook to do deals independently. Facebook has won few friends with deal Down Under (Daily Telegraph, Harry de Quetteville) highlights the fact that the value of news has still not been finalised by this latest development and that there is still wiggle room for Facebook. Interestingly, it suggests that Facebook’s ability to strike its own deals will mean that it can still circumvent the Aussie law. * SO WHAT? * For the

moment, Facebook looks to have given itself a bloody nose in terms of PR in this episode, but ultimately, it will no doubt hope that the dust will settle and it can carry on as before albeit with the mildly annoying extra of having to negotiate deals with media publishers – although I would imagine that will only benefit the giants rather than the smaller publishers due to differences in negotiating power.

There’s bad news for gamers in Chip shortage threatens PlayStation 5 supply as demand races ahead (Financial Times, Tim Bradshaw) as the chip shortage affecting car manufacturers is threatening supply of the hotly-demanded PS5 consoles for the rest of this year! Sony still hopes to sell more PS5 consoles in 2021 than it sold of PS4 consoles in their first 12 months on sale – but I guess this all depends on supply. The demand is there and I don’t think it’s going to wane particularly.

4

INDIVIDUAL COMPANY NEWS

Lockdown losers become winners and HSBC cuts…

Lockdown losers get back to their winning ways as economy reopens (The Times, Tom Howard) highlights a reversal in fortunes for leisure and travel stocks following the announcement of BoJo’s path to freedom. Shares in SSP, operator of airport and train station outlets, shot up by 17%, Cineworld was up by 9.5% and even EasyJet was up by 4.5%. * SO WHAT? * This all sounds great, but I think it would be prudent to concentrate on purely domestic stories given uncertainty surrounding international travel.

Then in HSBC to cut 40pc of its offices in jobs revolution (Daily Telegraph, Lucy Burton) we see more news from HSBC as it has announced that it will cut 40% of its offices globally, following announcements that key management will leave London. It looks like anything coming up for lease renewal will be vulnerable. The company also reiterated its commitment to flexible working in future.

5

...AND FINALLY...

…in other news…

There’s some interesting news for Pokemon fans/hoarders today in Collection of Pokemon cards expected to sell for £100,000 (Metro, Jen Mills). Wow 😱!

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Some of today’s market, commodity & currency moves (as at 0736hrs 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 **
6,626 (+0.21%)31,537.35 (+0.05%)3,881.37 (+0.13%)13,465.2 (-0.5%)13,865 (-0.61%)5,780 (+0.22%)29,672 (-1.61%)3,564 (-1.99%)
Oil (WTI) p/bOil (Brent) p/bGold Per t/oz£/$€/$$/¥£/€$/₿
$61.47$65.40$1,806.211.416981.21567105.521.1654949,958.17

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