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Corona Capital

22 December 2020 By Breakingviews columnists

Corona Capital is a column updated throughout the day by Breakingviews columnists around the world with short, sharp pandemic-related insights.


– Peloton’s ride to nowhere

– BioNTech

All gain, no brain. One push-up won’t deliver Arnie-style pecs. But don’t tell investors in Peloton Interactive. They drove up the fitness company’s shares by almost 15% on Tuesday morning – adding more than $6 billion of market capitalization – as it agreed to buy exercise-equipment maker Precor in a deal worth just $420 million.

Peloton’s progress has been remarkable, even pre-pandemic. A combination of aspirationally-priced stationary bikes and treadmills with production-rich workout content has attracted 1.3 million “connected” subscribers. Fads, though, hit hard and fade fast. Adding Precor’s manufacturing and research facilities, and getting more installations in homes and hotels, should, in theory, make the business stickier.

But not this sticky. The notional market value created on Tuesday morning is akin to around 160 million months of Peloton’s $39 all-access subscription. Seen another way, it’s 4 million new users – three times their current amount – religiously maintaining their subscription for three years. It’s not Peloton’s fault that investors are getting carried away. But it ought to hope that the same illusion of miracle gains isn’t shared by its punters. (By John Foley)

Fingers crossed. BioNTech is hanging a large “Don’t Panic” sign around its vaccine. The German drugmaker used a press conference on Tuesday to assert confidence that its remedy, jointly developed with Pfizer, will work against a new Covid-19 variant spreading across the UK. Given that the new strain transmits 70% faster than the original virus, that’s just as well.

Ugur Sahin had another supporting source of comfort. The BioNTech chief executive reckons the group can use existing mRNA technology to produce a new vaccine within six weeks if the current one is found wanting. Even so, developing a remedy is often the fastest part of the process. The biggest delays come from trials and gaining regulatory approval from countries around the world. Everyone should be hoping that Sahin’s Plan A works. (By Aimee Donnellan)

Seasonal workers. China’s pandemic-fuelled export boom has run into a human resources problem. A rapidly rising currency, plus higher raw material and logistics costs, have shaved margins from overseas sales despite soaring orders. Now factories are struggling with a worker shortage that will get worse in coming weeks.

Skilled labour is at a premium in China as salaries steadily rise. Anecdotally, many of China’s roaming blue-collar workers have accumulated enough wealth to build multistorey bungalows in their home villages, and they appear disinclined to rush back to coastal manufacturing centres after having been laid off earlier this year. China’s annual lunar new year holiday, which falls in mid-February next year, will see many depart well in advance to enjoy quality family time, stressing January’s labour supply. Bosses may have to offer big raises, or hurry automation, to keep their production lines humming. (By Yawen Chen)

Pandemic rein. Jean Pierre Mustier’s exit from UniCredit is an exercise in restraint. The chief executive of Italy’s second-biggest bank will leave without any severance pay, and renounced any reward under his current incentive plan. That leaves him with nearly 500,000 UniCredit shares, worth some 3.6 million euros, earned during the first three years of his tenure. It’s rare in banking. Credit Suisse’s boss Tidjane Thiam, who left in February after a spying scandal, stood to collect pay, bonuses and options worth up to 30 million Swiss francs. Deutsche Bank Chief Executive John Cryan got 8.7 million euros plus 2.2 million euros for a non-compete agreement.

Mustier is honouring a promise made when he joined in 2016 to save UniCredit from collapse. He cut the CEO’s fixed salary by 40% to 1.2 million euros, and waived annual bonuses and any severance pay. His hair shirt now raises the bar for other CEOs. It also stands him in good stead for his next job. (By Lisa Jucca)


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