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Corona Capital

27 May 2020 By Breakingviews columnists

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


– U.S. hockey

– HBO’s streaming service

– Minority businesses

The Icemen cometh. Putting hockey players back on the ice can help unthaw America’s professional sports business. On Tuesday, National Hockey League Commissioner Gary Bettman announced a multi-phase plan for a modified 24-team playoff. And pucks could drop at official training camps as early as July 1. This makes the NHL – with total league revenue of around $5 billion – the largest North American sports organization to offer a detailed comeback playbook.

The significance should extend beyond the rink. Timing is up in the air for all sports – but it’s likely the NHL and the National Basketball Association will hold games before the National Football League’s regular season is scheduled to kick into high gear. So both leagues’ experience with evolving government regulations, never-ending testing and fan expectations should influence how the NFL – with revenue more than the NHL and NBA’s combined total – rewrites its own game plan. (By Anna Szymanski)

HBO Go. AT&T is launching HBO Max, its highly anticipated streaming-video service, on Wednesday. It’s a cornerstone of Chief Executive Randall Stephenson’s $85 billion deal to buy Time Warner way back in 2016. Fast forward nearly four years and even more people are dumping pricey cable subscriptions. MoffettNathanson reckons the past quarter was the worst on record for pay-TV providers with a decline of almost 8%.

It’s a big opportunity for direct-to-consumer products including HBO Max. But at $15 per month, it’s one of the more expensive services on the block – two bucks more than Netflix’s standard offering and twice the sticker price on Disney+. The timing is off, too. Rivals saw big bumps in subscriber numbers thanks to Covid-19 stay-at-home rules. Now lockdowns are easing and summer is here. AT&T may find there are fewer couch potatoes than it hopes for. (By Jennifer Saba)

Small business, big difference. The effect on America’s small businesses from the Covid-19 pandemic is likely even more pronounced when those businesses are minority-owned, a survey from McKinsey showed on Wednesday. Firms helmed by a black owner were already twice as likely to be “at risk” as a white-owned company before the disease hit – and more likely to be in industries directly affected by the virus, like accommodation and food services.

But the survey also found that minority-owned businesses are more likely to be positive on the country’s recovery. Does that mean the disease will do something to close the prosperity gap? Not really. When it came to their own individual businesses, minority business owners were notably more pessimistic than their white counterparts. That suggests something less encouraging – that just as economic growth passed many of these businesses by before the virus, so too will the pickup that follows it. (By John Foley)

Derailed. Amtrak, America’s perennially beleaguered passenger-rail operator, is asking for an extra $1.5 billion of government support to get it through Covid-19. The provider of lucrative Washington-New York-Boston services also runs a network of often slow and money-sucking routes elsewhere. As recently as February, Amtrak was on course for its first-ever breakeven year, boss Bill Flynn told officials in a letter on Monday.

Even then, he was asking Congress for $2 billion based on the rail group’s annual assessment of its needs. Faced with empty trains in the short term and a projected 50% decline in ridership for the coming fiscal year, Amtrak now needs more. The administration of President Donald Trump has previously suggested breaking it up; on the other hand, given sufficient resources, trains might be better placed than planes to offer travel with social distancing. Amtrak’s always cloudy future is more uncertain than ever. (By Richard Beales)

Facing forward. It’s not just bartenders and shop assistants who are eager to get back to work. Swiss sex workers are lobbying the government to relax lockdown restrictions and allow the opening of brothels from June 8 – and proposed a series of additional safeguards to limit the spread of the coronavirus. Prokore, an association that advocates on behalf of sex workers, outlined its position in a letter to authorities on May 20, saying the “negative effects of the sex work ban that has been in force since March 17 are large and serious”.

The group proposed a series of measures, including the adoption of sexual positions that limit face-to-face contact between the client and service provider; the ventilation of rooms for at least 15 minutes and washing of bed linens after each session; and the recording of customer contact data for tracing purposes for four weeks. For now, the Swiss Federal Council remains schtum on the matter. (By Rob Cox)

No man’s Land. Office workers are proving dream tenants in the pandemic. Just look at British Land, which managed to collect 97% of its London office rents in March and April. Even more surprising is that companies are still happy to pay the 3.5 billion pound real estate group full price when most employees have not set foot inside those buildings since Britain’s lockdown started in March. Struggling retailers paid just 43% in the same period.

Valuations reflect the split. The value of British Land’s retail portfolio fell 26% while its office space was worth 2.3% more. Of British Land’s 7.1 million square foot office portfolio, some 220,000 square feet is currently under offer and CEO Chris Grigg is negotiating with big companies to lease out another 160,000 square feet of space. It’s a sign that, even with millions working from home, offices will retain their appeal when restrictions lift. (By Aimee Donnellan)

Turn of the MAC. Attempts by Italy’s UBI Banca to fend off a hostile bid from larger Intesa Sanpaolo are verging on the surreal. The mid-sized Italian lender’s board on Tuesday said the takeover, launched in February, should be declared void because of the ensuing pandemic. UBI argues that Covid-19 is a “material adverse change” which invalidates the offer. It has filed a lawsuit and a complaint with market regulator Consob.

The 3 billion euro lender’s rationale looks bizarre. So-called “MAC clauses” are designed to protect buyers by letting them walk away from a transaction if anything extraordinary happens. The pandemic is definitely one of those events. But it’s up to Intesa to decide whether or not to proceed. Given Italy’s complex legal system, however, the manoeuvre can buy UBI some precious time. (By Lisa Jucca)

Biotech fever. Hong Kong investors have caught the pharmaceutical bug. News that Shanghai Junshi Biosciences will start human trials for its experimental Covid-19 treatment pushed the stock up as much as 6% on Wednesday, extending a 60% rally since the start of the year. Shares of CanSino Biologics, an early stand out in the crowded race for a coronavirus vaccine, have nearly tripled over the same period.

The pandemic is injecting some much-needed excitement into the local bourse: The Hang Seng biotech index is up by more than a tenth this year, compared to a 13% slump for the benchmark. That bodes well for Hong Kong’s ambitions to become a biotech hub to rival the Nasdaq. Since it lowered listing barriers for startups two years ago, the Hong Kong exchange has attracted 28 such companies, with nearly a dozen more waiting to go public. The risk is that when the outbreak eases, so will the biotech boom. (By Robyn Mak)


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