Hadas: Wealth tax offers low-risk test of MMT 26 Feb 2020 Most taxes redistribute money that is already circulating in the economy, but proposed levies on capital would bring new funds into play, without increasing the fiscal deficit. If Modern Monetary Theory is right, a rush of well-spent new money would strengthen the U.S. economy.
Blackstone bets big on Boris British housing hedge 26 Feb 2020 The private equity giant is buying iQ Student Accommodation for $6 bln from Goldman Sachs in what it calls the biggest private UK real estate deal ever. It’s a play not on whether Brexit is a boom or a bust – but rather the continuing global allure of a proper English education.
Consumer giants take rosy view of epidemic damage 26 Feb 2020 Spirits maker Diageo reckons the coronavirus outbreak could cost it 325 million pounds in sales this year, while Danone is forecasting a 100 million euro hit. But neither is factoring in the effect of the disease spreading much beyond Asia. Investors are already more bearish.
Rio Tinto’s green pivot suffers by new comparisons 26 Feb 2020 The miner wants carbon emissions to be net zero by 2050. That’s good, but unlike BP’s recent goal it doesn’t include CO2 produced by customers. A post-virus stimulus from Beijing will be a boon to the China-dependent Rio, but could strengthen the case for greener credentials.
Hong Kong applies Band-Aids to virus-related ills 26 Feb 2020 The city rolled out a $15 bln support package as it lurches into recession. Employers get more than workers, but there are handouts for all. It’s a move in the right direction for a notoriously tight-fisted government. It may soon need stronger financial medicine, however.
Virus only strengthens Peugeot merger logic 26 Feb 2020 The $17 bln French automaker warned of lower sales growth and margins. The effect of the coronavirus will be a further blow. Still, combining with Fiat Chrysler should lead to a more profitable and resilient group. Investors aren’t giving boss Carlos Tavares enough credit for it.
Metro Bank survival plan hangs on illusory growth 26 Feb 2020 New CEO Dan Frumkin wants to open fewer branches and squeeze more income from unsecured lending. That’s hard in a cut-throat market. Even if he succeeds, an 8.5% return on tangible equity by 2024 is uninspiring. Absent a merger partner, the upstart UK lender looks like a zombie.
Nio’s $1.4 bln lifeline may pave a smoother road 26 Feb 2020 The cash-strapped U.S.-listed Chinese electric-car maker is close to securing funding from a municipal government in Anhui. Similar past agreements have failed to materialise but this one, with official ties, is a more promising immediate and longer-term pillar of support.
South Korea could spend more on picking itself up 26 Feb 2020 The central bank is expected to cut rates 25 bps to 1%, a record low, but that will have muted impact if consumers stay at home on virus fears and more. Low government debt gives President Moon Jae-in space to deliver a bold spending plan including tax breaks and income support.
Disney boss Bob Iger writes his first sequel 25 Feb 2020 The $240 bln media firm anointed Bob Chapek as CEO picking a Disney vet with theme park experience. His predecessor will hang around as executive chair and keep a watch over “creative endeavors” until the end of 2021. It’s a path towards an exit, but the Iger show drags on.
Mastercard CEO gives Wall Street example to avoid 25 Feb 2020 Ajay Banga will step down next year as the $300 bln payments firm’s boss – and become exec chair. It’s a bad governance habit many U.S. companies indulge. Banga has served shareholders well, but even talented leaders owe investors a clean exit, a challenge some peers also face.
Facebook tax fight slaps a levy on its reputation 25 Feb 2020 The social network is fighting U.S. authorities in court over a $9 bln tax bill. Its defense has merit. But for a $620 bln company to say it should pay less because its future was uncertain a decade ago defies common sense. That will only win Facebook more enemies.
Jamie Dimon plays it too cool on global warming 25 Feb 2020 It’s encouraging that JPMorgan’s boss wants to finance more green projects. But he’s only turning the fossil-fuel lending spigot off where it or the sector is a bit-part player. And JPMorgan is now the only big U.S. bank that has yet to commit to measuring its carbon footprint.
Thomson Reuters new CEO inherits breakup blueprint 25 Feb 2020 Steve Hasker will take over a grab bag of businesses. But predecessor Jim Smith has left a helpful playbook. By selling a stake in data unit Refinitiv to Blackstone, Smith doubled Thomson Reuters’ value. That strategy could work again, say on its tax and accounting business.
Mubarak’s downfall taught Egypt’s Sisi key lessons 25 Feb 2020 During his three decades in charge, the former strongman, who has died aged 91, valued political stability above all else. Bolder currency reform might have defused some Arab Spring anger. Current leader Sisi took note, but has also so far been better at keeping the army on side.
Univision telenovela episode ends on low note 25 Feb 2020 Five buyout firms are selling out of the Spanish-language broadcaster at a sub-$10 bln valuation, including debt. TPG, Providence and others will exit their precrisis stakes at a hefty loss. Leverage amplified other problems. Univision’s new owners are aiming for a happier plot.
Ireland has more pressing needs than unification 25 Feb 2020 Sinn Fein, which wants to form a coalition government, aspires to unify the island. Even if Irish voters were willing to take on the costs this would entail, their Northern Ireland peers are more ambivalent. Healthcare is higher up the agenda on both sides of the border.
Intuit shows how to tame a fintech unicorn 25 Feb 2020 The $75 bln owner of TurboTax will pay over $7 bln for finance portal Credit Karma. As personal finance gets disrupted, established firms are realizing they can either join in or stand aside. But the large sums at stake mean there’s no free lunch for consumers.
Super-app M&A would be sign of more rational times 25 Feb 2020 A mooted merger of Gojek and Grab could create a $23 bln Southeast Asian food-delivery-to-ride-hailing giant. Strategic investors are still keen to write cheques, but easy money from SoftBank and others is drying up fast. Consolidation is the best path to continued rapid growth.
Animal spirits temper gold miners’ virus appeal 25 Feb 2020 An outbreak of the coronavirus in Italy boosted the price of bullion. While producers of the yellow metal stand to gain from higher prices, a global pandemic could hit some production. The bigger risk is CEOs squandering the windfall on unprofitable ventures or expensive M&A.
Revolut speeds towards a valuation paradox 25 Feb 2020 Nik Storonsky’s digi-bank is now worth $5.5 bln. To justify the price tag, he’ll need multiples of the $76 mln revenue it generated in 2018. Subscriptions for services like stock-trading help. But a lending push may eventually prompt investors to judge Revolut like a normal bank.
Unizo check-in borders on being inhospitable 25 Feb 2020 Bids for the Japanese hotelier have reached $1.9 bln, and could go even higher. The company is already loaded with debt, meaning that any buyout will require some serious housekeeping to generate a solid return. Blackstone, Lone Star or Fortress may be sweating their equity.
HP defense makes Xerox deal more likely 24 Feb 2020 The printer maker’s comeback to Xerox’s $35 bln hostile bid hangs mainly on a planned $16 bln of payouts to shareholders. Printing sales are still falling, though, and the case for a merger with further savings remains strong. At least HP can now negotiate from a better position.
IMF’s $44 bln error in Argentina calls for haircut 24 Feb 2020 The international lender now says the serial defaulter’s debt burden – near 90% of GDP – is unsustainable and that private creditors will have to take a hit. It’s right on both counts. But it also fumbled this bailout badly. In such an exceptional case, it should share the pain.
Virus hits markets the way trade war didn’t 24 Feb 2020 Monday’s selloff was overdue, in that the spread of coronavirus outside China poses a bigger risk to global goods and capital flows than protectionism. Tariff spats impact demand and prices. A runaway virus can stop trade and throw a wrench in finely tuned manufacturing chains.
The Exchange: Jeffrey Ubben 24 Feb 2020 ValueAct Capital has shaken up some of the biggest companies, from Microsoft to Rolls-Royce. But its founder, who sat down for a Predictions event in New York, is focused on a new form of activism with the Spring Fund. Firms that neglect the E and S of ESG should take heed.
Dan Loeb kicks on open door with Pru breakup plan 24 Feb 2020 The outspoken investor has called for $47 bln UK insurer Prudential to carve itself up. There’s plenty of value to be unlocked by separating the fast-growing Asian business from the sleepier U.S. retirement unit. An open-minded board means Loeb won’t have to shout too loudly.
Besieged boards like HP’s must pick their poison 24 Feb 2020 Aggressive takeover defenses give boards breathing space, but don’t always help investors. Even poster child Airgas doesn’t provide a knockout case. HP’s defense against Xerox is neither the first or the worst. But most poison pills let boards ignore problems until it’s too late.
Wells Fargo fines are only one step for investors 24 Feb 2020 New boss Charlie Scharf's $3 bln settlement with U.S. regulators over the $200 bln bank's fake accounts removes a big headache. Getting the Fed to allow asset growth is next. Even then, Scharf needs cost cuts, not just higher revenue, to close the valuation gap with rivals.
Cox: Anyone on Wall Street want a Swiss bank? 24 Feb 2020 UBS and Credit Suisse have attractive wealth and asset management businesses, but their investment banks suck up capital and weigh on valuations. Goldman Sachs, Morgan Stanley and others could unpick some of that value. They’ll be closely watching the Zurich pair’s new bosses.