Pepsi may need to batten down for a proxy fight 3 Oct 2014 Nelson Peltz’s Trian has a history of persuading companies to take its advice. So far, the snack and soda maker has proved immune to Trian’s charms. Pepsi stock has outperformed since it rebuffed calls for a breakup. That may give it confidence it can win a battle at the board.
Bernanke refi fail symptom of wider mortgage mess 3 Oct 2014 The ex-Fed chair blamed bank wariness for his home loan do-over being refused. Lenders are overcoming some of their caution. But without progress on regulatory reform and a willingness to move away from 30-year mortgages, many wannabe homeowners will be locked out of borrowing.
Sports Direct and Debenhams could make a good team 3 Oct 2014 Mike Ashley’s upstart retailer has bought a 4.6 pct stake in its struggling UK rival, taking its interest to 11 pct. Ashley has a reputation for teasing the market, and this could be just a blocking stake. But don’t bet against a full-blown Debenhams takeover. It makes sense.
Rocket and Zalando call top of Europe’s IPO market 3 Oct 2014 Despite being heavily subscribed, the tech incubator and the online retailer performed badly after listing, together wiping out 1.5 bln euros. The stock market has been the easiest exit route for European asset sales this year. Hereon, vendors won’t be able to name their price.
Banking quandary weighs on Catalan debate 3 Oct 2014 Catalonia’s independence looks remote. But Spain’s central bank has already said secession would mean the region losing the euro. Top domestic lender Caixabank would find it hard to relocate, as Scotland’s banks warned ahead of the recent referendum. But it would have little choice.
Chinese banks learn Western capital tricks 3 Oct 2014 The country’s largest lenders have changed the way they measure the riskiness of their loans. That has made their capital ratios look healthier. Western lenders have long taken the same approach. Even so, it’s another reason to question Chinese banks’ balance sheets.
Global airline IPOs still need tailwind to fly 3 Oct 2014 From America to Asia, airlines are eyeing share sales. Most offers since 2010 have lost altitude. The industry’s returns are improving but remain below the cost of capital. The latest listings will need a gimmick or something special to buck the trend of value destruction.
GoPro lockup dump ends valuation special effect 2 Oct 2014 The action-camera maker’s value has tripled since its going public, powered by a hot story and limited public share count. Allowing founder Nick Woodman to cash out a big chunk removes the stock’s safety net prematurely. GoPro’s value now depends on its business, not its float.
Sears’ Canada stake sale merits a discount 2 Oct 2014 Hedge fund boss Eddie Lampert’s struggling retailer wants to raise cash ahead of the holidays by selling a stake in its Canadian arm via a slimly discounted rights issue. If all goes to plan, Sears hopes to conjure up $380 mln. The market’s reaction suggests that’s optimistic.
Keep faith with the dollar rally 2 Oct 2014 The greenback is wobbling a bit after a stellar run. It’s a temporary setback. Dollar strength is supported by economic fundamentals, suits the euro zone, and is susceptible to a bandwagon effect. And the currency doesn’t look expensive on a long-term view. The rally will resume.
ECB keeps hands free with proxy QE 2 Oct 2014 President Mario Draghi gave little new detail on the ECB’s private debt purchase programme, and no hints that sovereign bonds will ever follow. Yet the central bank’s asset purchases could be large, and have major “spillovers.” That would indirectly help governments too.
Virgin Money float timed to beat bank IPO rush 2 Oct 2014 The Richard Branson-backed lender would be the fourth of up to a dozen UK bank floats. Virgin has done a lot with Northern Rock assets bought from the state in 2012. But needed diversification away from mortgages is embryonic. An IPO just now suits owners more than new investors.
Running Argentina’s central bank an impossible job 2 Oct 2014 Juan Carlos Fabrega’s resignation makes Alejandro Vanoli its fourth boss in as many years. He has to try to combat spiraling inflation and dwindling reserves while dealing with President Cristina Fernandez’ interventionist policies and a debt default. He’s unlikely to last long.
Rival solar IPO takes shine off Elon Musk halo 2 Oct 2014 Blackstone-backed Vivint is worth $1.7 bln, nearly double where it would trade if valued on the same rather flighty multiple as SolarCity, chaired by the Tesla boss. There’s some business logic to Vivint forging ahead. But at these prices, investors in either risk getting burned.
Double-digit oil forces majors into more self-help 2 Oct 2014 The Big Oil groups already had a profitability issue before prices started falling. There’s no quick fix. They will have to step up efforts to boost cashflow by cutting costs and capex, and selling assets. At least balance sheets aren’t stretched, so dividends are safe – for now.
Deficit-worry is so last decade 2 Oct 2014 David Cameron talks fiscal restraint, but the British PM is dangling tax cuts as a vote-winner. Other EU leaders are also eyeing political gains in unbalanced budgets. They’re not in denial. Rates are low and unemployment is high. For now, there’s room and reason to spend.
Evidence mounts against bonus caps 2 Oct 2014 An IMF study has shown that forcing ratios of variable to fixed pay on banks can increase risk. Deferring awards and tying them to a range of metrics does more to correct skewed incentives. It’s a shame the IMF stopped short of explicitly telling Europe to scrap its bonus cap.
Edward Hadas: In praise of restrained enterprise 2 Oct 2014 Business bosses tend to admire free enterprise. But in a complex economy, too much freedom leads to ruinous competition and persistent under-investment. Corporates appreciate the value of controlled rivalry. That’s why episodes like the current UK supermarket price war are rare.
Occupy misses real threats to Hong Kong’s future 2 Oct 2014 Most citizens have shied away from protests calling for electoral reform. Universal suffrage deserves public support, but erosion of rule of law and creeping censorship are bigger threats to prosperity. It’s unlikely these issues will erupt into an open standoff with Beijing.
BofA delivers good governance a kick in the teeth 2 Oct 2014 The mega-bank has given CEO Brian Moynihan the additional title of chairman. The move not only puts too much power in one person’s hands, it reduces the position to a perk that can be granted or taken away, depending on performance. That’s a lousy governance deal for investors.
Aussie companies face overseas growth dilemma 2 Oct 2014 The pressure to look beyond a consolidated home market is mounting as growth slows. A poor record of investing abroad has made companies down under cautious, and means they lag behind U.S. peers. Despite the challenges, expanding in Asia makes the most sense.
Relational closure emphasizes cult of fund bosses 1 Oct 2014 The $6 bln firm, one of the more prolific and measured U.S. activists, is shuttering as founder Ralph Whitworth battles cancer. Just days earlier, Bill Gross roiled markets by leaving Pimco. Such individual power is rare in banking, but big names reign in the world of investing.
General Motors starts to pull ahead of itself 1 Oct 2014 The car maker seems to have avoided the potholes Ford hit in Russia and Latin America. Now CEO Mary Barra is promising bumper margins. Trouble is, these rely on sales or pricing power GM has yet to demonstrate – and on the lack of geopolitical risk, which it cannot control.
Good Fannie-Freddie verdict bad for housing reform 1 Oct 2014 A federal judge rightly tossed out a shareholder suit to recoup $72 bln of profit from the bailed-out mortgage firms. That means Fannie and Freddie earnings will keep flowing into Uncle Sam’s coffers. For as long as that continues, revamping housing finance looks a non-starter.
Cameron takes deficit amnesia to a new level 1 Oct 2014 The UK prime minister crowed when opposition leader Ed Miliband forgot the deficit in a keynote speech. Yet David Cameron has gone further, insisting on the need to tackle the country’s biggest problem and then pledging a tax giveaway. It’s an electoral bribe he can’t afford.
Adidas buyback secures injury time for management 1 Oct 2014 The world’s second-largest sportswear maker is handing back 1.5 bln euros to shareholders. They may welcome a tighter balance sheet. But the move doesn’t address Adidas’ core profitability challenges. Management is still disappointingly short on ideas where it matters.
ECB can stomach Greek junk risks 1 Oct 2014 The central bank seems ready to break its own collateral rules to buy Greek or Cypriot asset-backed debt. That’s a side effect of policy success, not a cause for worry. The ECB needn’t be a slave of rating agencies, and the risks to its balance sheet are manageable.
Coke challenge goes beyond revising pay plan 1 Oct 2014 The beverage giant has backed off its controversial executive compensation scheme. That’s a win for Warren Buffett, investor David Winters and the company’s other shareholders. But the quibbles with Coke don’t end with excessive pay. Costs loom as the next activist target.
Ebola sets clock ticking on West African economy 1 Oct 2014 Growth may yet survive the deadly epidemic. The last four years’ 28 pct pace isn’t realistic, but controlling the outbreak soon should at least preserve investment. That won’t be easy, given the virus has now spread to the U.S. In saving lives and the economy, every day counts.
Victory equals loss in UK supermarket price war 1 Oct 2014 Sliding revenue at Sainsbury dashes hopes the grocer might circumvent the struggle enveloping UK rivals, including Tesco and Morrisons. A strategic review shows welcome determination to get a grip on Britons’ changing shopping habits. But the falling tide will lower all boats.