Groupon discounts dual-class share structures 30 Nov 2012 CEO Andrew Mason and Chairman Eric Lefkofsky are locked in a dysfunctional drama over how to run the flailing company. Super-voting shares like the ones both men own are meant to give founders flexibility. But Groupon is a reminder of just how dangerous the arrangement can be.
US utility watchdogs should flex muscle more often 30 Nov 2012 A state regulator has forced Duke boss Jim Rogers to retire after he pushed out the intended CEO following an $18 bln merger. The episode shows watchdogs’ power. A better use of it would be ensuring electric and gas monopolies invest enough and don’t abuse captive customers.
Temporary tax hike could end U.S. fiscal stalemate 30 Nov 2012 A decade ago, a budget surplus inspired an intended short-term tax cut. Why not do the same thing in reverse now there’s a deficit? The new revenue paired with reform of entitlements could put the debt on a safer path. And an expiry date should help Republicans come around.
UK could raid the rich to boost a poor economy 30 Nov 2012 George Osborne faces a big test in next week’s interim budget. The Chancellor must stimulate growth while tightening fiscally. His wiggle room is small. But he could serve both aims by grabbing back perks from the rich to fund tax cuts for the poor and a bit of capital spending.
HK exchange plays it safe with equity finance 30 Nov 2012 The Hong Kong bourse’s $1 bln share placing allows it to repay more than half the debt used to buy the London Metal Exchange. Ultra-low yields make bonds look tempting. But a recent share rebound - and HKEx’s hefty dividend payout - justifies its cautious approach to leverage.
Glencore-Xstrata re-rating to start in boardroom 30 Nov 2012 With the Xstrata takeover done, the market has work to do to get to grips with “Glenstrata”. Valuing the miner-trader is tricky. The shares look cheap, but a big integration looms. A re-rating depends on the trading business proving itself and the board getting governance right.
Chinese consumers move on from old favourites 30 Nov 2012 While China is still spending, some brands have lost lustre, judging by warnings from Yum Brands and jeweller Chow Tai Fook. Slower growth is natural as companies hit a certain size, but fast-shifting tastes are a factor too. Investors need new proxies for Chinese consumption.
Review: How a maverick CEO exposed a scandal at Olympus 30 Nov 2012 Society needs whistle-blowers, but it’s hard, lonely work. Michael Woodford fought a $1.7 billion cover-up at the company he led - using grit, friends, the media, and a few foreign investors. Woodford’s prose may clunk. But his integrity is welcome in an age of corporate scandal.
Argentina should grab chance for hedge fund peace 29 Nov 2012 A U.S. court has put on hold an order forcing the nation to pay holdout bondholders. That creates a window to settle an 11-year debt dispute that has blocked Argentina from global capital markets. Compromise could help the country’s economy and affirm that a deal is still a deal.
Aston Martin’s Casino Royale is a long way off 29 Nov 2012 Life’s hard for niche automakers, even if James Bond’s a fan. Supercar demand has wilted. Starved of funds, vehicles can grow as stale as Brosnan-era 007. A potential $400 mln injection from a new investor would boost Aston Martin. Just don’t expect decent returns any time soon.
Murdochs will sigh with relief at UK press probe 29 Nov 2012 The phone-hacking inquiry has rejected the idea that News Corp nobbled the government to back its BSkyB bid. Moreover, David Cameron has rejected the inquiry’s central proposal for state underpinning of press self-regulation. For the press barony, it could have been a lot worse.
Are Dublin and Lisbon ready for Greek bondage? 29 Nov 2012 Ireland and Portugal wouldn’t mind benefiting from the type of debt relief that Greece just received. But if Athens got sweet terms, it surrendered part of its fiscal sovereignty in return. Other countries are only half-serious when they call for equal treatment.
Unnamed UK banks shamed into capital action 29 Nov 2012 In June, the Swiss central bank publicly told Credit Suisse it was undercapitalised. The ploy worked. The Bank of England now says UK banks need capital but has stopped short of naming names. The doubts expressed by the BoE on risk-weighting, however, are reassuring.
Infrastructural upgrade belongs in US fiscal talks 29 Nov 2012 Before long, Democrats will want to throw economic stimulus into the budget discussions. And it’s not just a useful negotiating variable. Disgust over America’s crumbling roads, bridges and sea walls is bipartisan. The White House could build on this middle ground.
Spain’s bank rescue is part bail-in, part bail-out 29 Nov 2012 Madrid has lopped 10 bln euros off its bank rescue tab by cutting the value of its worst lenders’ hybrid debt. Ireland’s 2011 haircuts were steeper. Politics means Spain had to balance burden-sharing with ways to soften the blow for the retail punters who must share the pain.
Low valuations don’t make China stocks a bargain 29 Nov 2012 Conventional gauges of value make them tempting, particularly amid signs growth may be picking back up. But even if the economic rebound lasts, stocks haven’t proved to be great proxies for corporate growth. Even China bulls should be ursine on equities.
Siemens outsmarts market with $2.8 bln rail deal 29 Nov 2012 The German group will buy the rail arm of Invensys for a hefty $2.8 bln - surprising analysts and investors who had soured on the UK group and its pension deficit. For Siemens there’s strategic logic and synergies. For pension trustees, relief. For the Invensys chairman: déjà vu.
Mongolia gets $1.5 bln licence to play hardball 29 Nov 2012 The nomad state got a good deal on its first government bond, but the effects on its development may be less welcome. The money is more likely to plug budget holes than fund needed infrastructure - and could strengthen Mongolia’s hand in tense dealings with foreign investors.
Corporate America fears taxes more than recession 28 Nov 2012 Hence the flurry of special dividends. If the “fiscal cliff” of tax hikes and spending cuts really risks a downturn, companies ought to hoard cash. Instead Costco and others are giving it to shareholders while tax rates are low. That’s fine, but suggests the hype is overdone.
Musk elan powers SolarCity IPO valuation 28 Nov 2012 The solar panel installer backed by Tesla’s billionaire founder is clouded by complex accounting and government-related risks. The mooted share price puts SolarCity at six times revenue, far exceeding what similar business models elsewhere fetch. Elon Musk moon dust costs extra.
Equities bankers get hit again where it hurts 28 Nov 2012 It has been a lousy year for IPOs. Fees are down by a third and Facebook was a painful flop. Losing the Archstone deal to M&A colleagues is the latest blow. Despite some consolation business issuing shares for the buyers, ECM is cementing itself as a Wall Street weak spot.
Swiss Life’s ill-advised M&A nightmare lives on 28 Nov 2012 The Swiss insurer has drawn a line under the ill-fated 2008 acquisition of AWD, the financial adviser. The brand will disappear, with 478 mln euros of book value. What remains is a problematic business that still sits uncomfortably within a conservative insurance outfit.
U.S. student loan trouble discredits their value 28 Nov 2012 If pricey education provided the hoped-for labor market edge, then 11 percent of student loan balances shouldn’t be overdue. The proportion of delinquent education debt has surpassed even late credit card balances. Maybe students need better vetting.
SAC investors set to stew alongside founder Cohen 28 Nov 2012 The $14 bln hedge fund received notice that the SEC may take civil action against it. Those with money at SAC need to weigh the risk. The law moves slowly, but so does the redemption process - it would take investors months to withdraw cash. And they’d risk never getting back in.
Carney at BoE changes the game for UK banks 28 Nov 2012 The new Bank of England governor is known as a strong supporter of bail-ins and Basel III rules. But his views on Vickers-style structural reforms are not so hawkish. And as the euro zone plans its banking union, his international clout and contacts will benefit the City.
BoE likely to see three changes in monetary policy 28 Nov 2012 New governor Mark Carney prefers to give clear guidance on interest rate prospects - in contrast to Mervyn King’s studied ambiguity. He’s also likely to lead the monetary policy committee more assertively. And his appetite for money printing seems lower than his predecessor’s.
Olam should show, not tell in Muddy Waters fight 28 Nov 2012 The commodities trader has rejected the short-seller’s belief that it’s heading for an Enron-style collapse. But claims of solvency may not be enough. To convince creditors, the company could follow the example set by U.S. broker Jefferies and liquidate some of its assets.
China’s big-cap bond issuers are in a sweet spot 28 Nov 2012 Issuers like Baidu and China Cosco are finding they can sell bonds in U.S. dollars at attractive rates. Floods of liquidity have pushed down yields, and investors who had underweighted China are regaining interest. Investment banks, meanwhile, are keen to get deals done.
One crime in SAC probe is letting snitch go free 27 Nov 2012 An ex-trader at Steve Cohen’s hedge fund firm faces criminal insider-trading charges. But the doctor who allegedly gave him secret data won’t, after agreeing to help prosecutors. Flipping suspects to land bigger game is standard. Going easy on serious wrongdoing shouldn’t be.
What do bullish investors see in Argentina? 27 Nov 2012 Latin America’s third-largest economy is losing a debt restructuring battle with hedge funds, faces questions about its ability to stay solvent and suffers from mounting domestic discontent. But some investors reckon Argentina’s plentiful energy reserves offer a ray of hope.