Musical debuts will produce financial syncopation 26 Dec 2017 Look for Spotify and Vivendi's Universal to float in 2018, thus presenting investors with a choice of content versus distribution. One is an unprofitable tech darling, the other a cash-generative rebound story. Both will be valued too richly, and Spotify is more apt to fall flat.
Ebenezer Scrooge is ripe for shareholder activism 22 Dec 2017 Companies are swerving toward more active corporate giving and better conditions for workers. Investors should be pleased, but they might also have to recalibrate their idea of what makes a good company. One activist fund in particular isn’t feeling the festive spirit.
Even rich geeks can’t escape the Grim Reaper 22 Dec 2017 Silicon Valley’s best and brightest have earned fortunes by solving complex problems. Now many are turning brains and wealth toward conquering death. Applying an engineering mindset to health issues may benefit humanity, but it’s more likely to burn capital than discover the fountain of youth.
Big Oil’s discipline reinforces shale’s swing role 22 Dec 2017 OPEC’s restraint has put a floor under the price of crude, but big oil companies will put a lid on it in 2018. Majors worried about oversupply will tighten budgets and focus on areas with quick payback. U.S. shale will be the big beneficiary, reinforcing its global influence.
Taxes done, Paul Ryan has pick of Midwest boards 22 Dec 2017 The U.S. House speaker just delivered Corporate America its biggest gift ever by cutting rates to 21 pct. As he considers his next move, Ryan's wonkiness wins out over his schmoozer credentials, making Wall or K Streets a bad fit. Breakingviews imagines a recruiter's pitch.
Catalonia poll delivers no Christmas joy 22 Dec 2017 Parties seeking to break with Spain won a majority of seats in local elections. Their support didn’t strengthen, but it didn’t really weaken either. PM Mariano Rajoy now faces the challenge of appeasing the region with greater autonomy. The political uncertainty will linger.
Bank compliance-cost explosion will abate in 2018 22 Dec 2017 Next year watchdogs will finalise big set-piece regimes for capital levels and investor protection. For banks from JPMorgan to HSBC, rampant growth in spending on due diligence, reporting and the like will level off. That in turn should be positive for lending margins.
Britain will take the high road out of the EU 22 Dec 2017 Leaving the European Union will hurt manufacturing and financial services and make the government more willing to explore controversial ideas to help the economy. Legalising cannabis would help employment, lift tax revenues and reduce law enforcement costs.
U.S. debut restores faith in Chinese micro-lender 22 Dec 2017 LexinFintech slashed the size of its IPO and priced the deal at the low end, amid a crackdown on online lending. That was enough to get the flotation away and spark a healthy first-day rise of nearly 20 pct. The $1.7 bln firm now has a chance to grow into a higher valuation.
Hadas: Christmas presents and economic humbug 22 Dec 2017 Are gifts generous gestures or an awkward waste? Addictive materialism or open-ended exchanges of valuable tokens? Is it better just to swap envelopes of cash? Children and retailers know what Christmas means, but economists are less certain. Anthropologists have good ideas.
Xiaomi IPO could plug into Internet of Things hype 22 Dec 2017 Sales at the Chinese tech company are booming, Reuters reports, probably thanks to a turnaround in smartphones. A mooted $100 billion valuation at listing sounds aggressive, but Xiaomi might be able to position itself as the first big consumer-facing play on the connected home.
Pushy investors on board for 2018 Pacific cruise 22 Dec 2017 Campaigns at BHP and Myer could set the stage for a pick-up in Australian shareholder activism. Sydney offers enticing targets, shareholder-friendly rules and potentially supportive institutional owners. Expect to see more governance skirmishes Down Under in the coming year.
Alphabet’s Eric Schmidt sails off before the storm 21 Dec 2017 The executive chairman of Google’s parent is stepping down as the $740 bln search giant heads into a showdown with EU regulators led by Margrethe Vestager worried by its dominance. Hiring a strong, independent chairwoman would reflect well on founders Larry Page and Sergey Brin.
A Western money manager will turn Chinese in 2018 22 Dec 2017 While U.S. and European outfits battle competition and regulation, wealth is ballooning in China, and many firms are looking for growth. It’s the perfect recipe for a big cross-border deal, perhaps involving a name such as Franklin Templeton or Deutsche Bank's DWS unit.
Boeing’s tie-up with Embraer brings co-pilot risk 21 Dec 2017 The $177 bln aerospace giant is in talks to acquire the $3.7 bln Brazilian jetmaker. It makes strategic sense, given rival Airbus’s deal with Bombardier. But Embraer’s government shareholder means the deal may come with a high premium and low returns.
Viewsroom: Saudi Aramco’s path may lead to China 21 Dec 2017 That the Hong Kong Stock Exchange will join Riyadh in hosting the world’s largest IPO is one of Breakingviews’ 2018 predictions. We also explain the method to our fortune-telling and lay out why China will win the 5G standards race and why Wall Street will learn to love bitcoin.
Oil shareholders try capping sorry governance well 21 Dec 2017 SandRidge adopted a poison pill to fend off investors unhappy with a recent deal. Hess faces another fight with Elliott. Exxon is only now allowing owners to talk to the board. The shareholder pushback is welcome, but the industry’s slow response leaves it exposed to other risks.
Capital glut will overwhelm rising disaster losses 21 Dec 2017 Hurricanes and wildfires doubled estimated catastrophe-related insurance claims to $136 bln in 2017. Reinsurers and cat-bond holders have had a bad year. A hotter planet suggests more pain. But a surfeit of investors chasing uncorrelated returns will keep the cash flooding in.
Domino’s Pizza is 2018’s most unlikely tech stock 21 Dec 2017 True, there’s nothing high-tech about pizza. But the take-out chain also dominates the “last mile” that delivery companies covet. Its app-to-infrastructure model makes Domino’s a little bit Uber, and a little bit Amazon. Investors are already baking in some futuristic assumptions.
Sun will be setting on Silicon Valley imperialism 21 Dec 2017 Expect tech firms to keep going public with lopsided share-class structures like Snap's that treat public investors as serfs. Rising pressure from fund managers and index creators, however, will bear fruit in 2018, mainly by imposing temporal limits to super-voting tendencies.
Tax cuts crystallize haves, wants, can’ts, won’ts 21 Dec 2017 AT&T, Comcast, Boeing and Wells Fargo are among companies sharing the wealth from lower levies with workers. Most have reason to curry favor with the White House. So such deals may be less than they seem – while others will struggle to hold on to any benefits at all.
Fannie and Freddie get band-aid instead of surgery 21 Dec 2017 The U.S. housing finance firms will be allowed to keep $3 bln in capital to absorb losses, just as their cushion was slated to go to zero. A draw on their $258 bln bailout fund could’ve also spooked markets. An overhaul is needed, but political will remains an obstacle.
Uber for everything will arrive in 2018 21 Dec 2017 The tech industry spent 2017 awash with cash and keen to disrupt the entire global economy. But loopy ideas, on everything from juice-making to how to treat co-workers, suggest a little hubris is creeping in. Breakingviews duly offers a few investment pitches for the year ahead.
Fed calls time on monetary and regulatory activism 21 Dec 2017 After nearly a decade of zero rates, asset purchases and tighter rules, the central bank is stepping back. Janet Yellen started the trend as the crisis receded, but her chair apparent promises a real laissez-faire shift. Markets may struggle to adapt to life without a Powell put.
Who’s driving global growth in 2018? 21 Dec 2017 Here’s how forecast global GDP expansion breaks down for the coming year, based on World Bank estimates. Flex the individual country numbers to change their relative shares, and the overall result.
Italy’s web tax is wrong solution to real problem 21 Dec 2017 Parliament is backing a 3 pct levy on web transactions to grab more from global U.S. tech titans. The digital economy requires new tax thinking. But an EU-wide approach would carry more force. And low projected revenue doesn’t justify the added burden on domestic internet firms.
SoftBank’s ride-hailing roadmap is unreadable 21 Dec 2017 The Japanese group invested yet more in China’s Didi, as part of a $4 bln fundraising, and wants to put billions into Uber. Yet as Didi expands abroad, fresh conflict with Uber is inevitable. SoftBank may envisage a merger, but for now it is funding both sides of an arms race.
Activists are at the back door of fortress luxury 21 Dec 2017 Big family stakes allow purveyors of high-end brands to hoard cash and tolerate second-rate governance. But Elliott’s Samsung campaign shows that entrenched owners are not immune. And minority shareholder rights make names like Prada more vulnerable than they look.
Dealmakers find a fickle friend in hybrid bonds 21 Dec 2017 Companies are increasingly funding deals with hybrid bonds. Rating agencies' willingness to treat the debt as equity flatters their credit scores. And with interest rates low, investors are hungry for funky, higher-yielding securities. It’s a fertile but unstable combination.
India bids adieu to “promoter” capitalism in 2018 21 Dec 2017 The country's errant tycoons have fewer places to hide as Prime Minister Modi ushers in a new era of governance, starting with a strict insolvency code. This will send serial defaulters packing and signal a shift towards more market, creditor and shareholder-friendly forces.