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Capital Calls

15 March 2021 By Breakingviews columnists

Concise insights on global finance in the Covid-19 era.


– Elon Musk’s new title

– AstraZeneca vaccine scare

Master of claptrap. There are two ways to react to Elon Musk becoming Technoking of Tesla, and his chief financial officer’s official reinvention as Master of Coin. One is to congratulate Musk for mocking corporate America’s obsession with job titles. The other is to fret that the $665 billion electric-vehicle maker’s chief executive is laughing at investors, as when he joked in 2018 about taking the company private for $420 a share.

Since both Musk and Zack Kirkhorn will keep their existing roles, the first response seems best. Besides, as far as shareholders are concerned names matter less than numbers. Tesla almost hit its 500,000-vehicle delivery target last year. And adding a whimsical title is less concerning than, say, a single person having the duties of both CEO and chair of the board, which happens in numerous big U.S. firms from JPMorgan to General Electric.

Granted, Tesla’s own independent chair, like some others with the same jobs, isn’t a big presence. Robyn Denholm, on the board since 2014, had her reappointment opposed by nearly one-fifth of voting shareholders last year. But at least those peeved by Musk’s antics have someone to complain to. (By John Foley)

Adverse reaction. The European Union’s way out of lockdown is getting more precarious. Ireland, Austria, Denmark and Norway have suspended the use of AstraZeneca’s Covid-19 vaccine amid fears the jab could cause blood clots. AstraZeneca says there is no evidence of safety risks, but the furore could delay Europe’s target of vaccinating 70% of its population by summer. So far, the EU has only inoculated 11%.

Many European citizens were already nervous about the UK group’s remedy. The risk now is that even if the latest fears prove unfounded, many people will not want to use it. To reach its goal, the EU needs to inoculate around 350 million citizens. But the bloc previously forecast that Pfizer and Moderna will only have delivered enough doses to immunise 250 million people by the end of September. That means Brussels will need to speedily approve and distribute other candidates, such as Johnson & Johnson’s jab, if it is to avoid lockdowns stretching into the winter months, when infections will pick up. (By Aimee Donnellan)

Cheque is in the mail. Shares in Japanese e-commerce giant Rakuten shot up over 20% on Monday, touching their highest level since 2015 after Friday’s news of a $2.2 billion stake sale to backers including Japan Post, China’s Tencent and Walmart. The new funds mean Rakuten can boost investment to help in its brawls with competitors from Amazon.com to incumbent telecommunications carriers. The transaction with Japan Post will dilute current shareholders by 8%. Nobody appears bothered.

Amazon is Japan’s most popular online shopping site, with Rakuten in second place. Japan Post brings more than cash to this fight. Its massive network, delivery capabilities, and its association with Japan Post Bank will allow Rakuten to sell mobile plans out of post offices – a plus for elderly customers – upgrade its logistics and integrate online payment services. Japan Post can also learn from Rakuten, which may be why its shares rallied too. Investors are excited for good reason. (By Pete Sweeney)

Duelling banjos. Flutter Entertainment Chief Executive Peter Jackson could capture some U.S. valuation magic. Shares in the London-listed bookie, owner of Paddy Power Betfair, rose 6% on Monday after the company said it may float a chunk of FanDuel, the U.S. sports-betting group in which it owns 95%.

Listed rival DraftKings trades on 19.3 times expected 2022 revenue. Apply that multiple to broker Davy’s estimate of FanDuel’s sales that year, and the division’s enterprise value would be $38 billion. Since Barclays analysts reckon the rest of Flutter is worth $22 billion including debt, the whole group’s enterprise value could be $58 billion – almost 40% higher than at Friday’s closing price.

The plan has a few kinks. Small minority stakes often incur a discount on public markets. And even after a listing, investors may not value Flutter at the sum of its parts. Still, the potential winnings make it worth a punt. (By Liam Proud)

Big hop. UBS will have to dust off its defensive playbook Down Under. A fresh round of resignations hit its equities and investment banking teams in Australia on Monday. Many, including top-ranked mining and banking analysts, are decamping for Barrenjoey Capital, a Barclays-backed startup led by UBS veterans.

Entrepreneurial spirit has cost the Swiss bank before. Alum Blair Effron opened Centerview with former colleagues in 2006 and Ken Moelis followed soon after with his eponymous boutique. The UBS advisory business has nevertheless withstood such consequential personnel losses, as well as scandals and missteps.

This exodus brings a fresh test as fallout continues from the departure of longtime Australian investment banking chief Matthew Grounds at the end of 2019. Its local equities business is a standout, ranked No. 1 by volume for nine of the last 10 years, per Refinitiv. Losing a swath of culture carriers hurts, but UBS history suggests the franchise will be hard to squash. (By Jeffrey Goldfarb)


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