Aerospace

Italy’s Leonardo risks missing defence bonanza

3 May 2023

The $7 bln Italian electronics and helicopter group, 30%-owned by the state, trades at a discount to peers. Leonardo is not fully capitalising on rising EU military budgets after the Ukraine war. Investor support to add external expertise to the board is sorely needed.

Richard Branson advances the science of SPAC holes

4 Apr 2023

Virgin Orbit, one of more than a dozen space-related outfits to go public since 2019, mostly by way of shell companies, has declared bankruptcy. On average, these stocks have lost 75% of their market value. Rapid incineration of capital means plenty of others will flame out too.

TCI’s Airbus fury may have collateral benefit

22 Feb 2023

Hedgie Chris Hohn says the plane maker’s plan to buy a 30% stake in Atos’s cyber arm will destroy value. He’s probably right, but private investors take a back seat in defence deals, where governments call the shots. His salvo might however help Airbus drive a harder bargain.

Feedback loops power Elon Musk’s SpaceX

16 Nov 2022

Even as tech valuations fall, including that of Tesla, the rocket maker’s may rise 20%, to $150 bln. Its growing Starlink service is more appealing than lunar expeditions. The bigger the satellite business gets, the worse the economics become for rivals such as Amazon.

Capital Calls: Stratospheric SPACs

16 Sep 2022

Concise views on global finance: A slew of space firms have gone public in deals with blank check firms, only quickly to fall back to Earth. Intuitive Machines has a better shot at staying aloft, thanks to government contracts.

Review: Pandering to Beijing has shrinking payback

1 Apr 2022

One difference between the Cold War and current Sino-U.S. tensions is the crowd of capitalists rooting for the communists. In “America Second,” Isaac Stone Fish lambasts the CEOs and lobbyists who take China’s side. Yet the return on sucking up, never high, is falling sharply.

Musk’s D.C. reset sets dubious precedent

7 Mar 2022

The SpaceX boss has irked lawmakers, battled watchdogs, and even insulted the U.S. president. Offering internet access to Ukraine may catapult him out of villain status. His help is welcome now. But allowing Musk’s finger on the diplomatic scale may have unintended consequences.

GE breakup is common sense, at least in theory

9 Nov 2021

Carving up the $120 bln conglomerate is no longer the drastic step it would have seemed under CEO Larry Culp’s predecessors. After Culp’s cleanup, three separate, more focused businesses could be worth more. But financial engineering often disappoints – especially at GE.

Drahi drags satellite M&A into near-earth orbit

4 Oct 2021

France’s Eutelsat rejected the telecom billionaire’s $3.2 bln bid. If a follow-up offer succeeds, Drahi could pursue a cost-saving merger with rival SES, whose TV-signal business is also succumbing to gravity. A chunky spectrum refund from the U.S. government makes a deal easier.

Capital Calls: UK interventions, Post-virus reset

7 Sep 2021

Concise views on global finance: U.S. bidder TransDigm’s withdrawal from the $8.7 bln race for Meggitt removes a tricky decision for the government; Boris Johnson’s new proposals will address social care but not generational wealth divides.

Meggitt arm-wrestle is test for UK interventionism

3 Sep 2021

TransDigm’s 7 bln pound approach for the aerospace engineer is higher than rival Parker Hannifin’s but uses way more debt. PM Boris Johnson has been active in probing M&A that could affect jobs or national security. But intervening on leverage grounds would be a new departure.

Branson’s second space SPAC draws awkward parallel

23 Aug 2021

Virgin Orbit, an offshoot of Galactic, inked a blank-cheque deal valuing it at $3.2 bln. With just three successful satellite launches, the projections are a leap of faith. But Orbit is using Galactic’s inflated multiples for validation. It underscores SPACs’ otherworldliness.

UK plc’s latest sale is far from on the cheap

2 Aug 2021

Ohio-based engineer Parker-Hannifin is buying British rival Meggitt for 7 bln pounds including debt. The 70% premium and promises to keep UK jobs point to measly long-term returns. UK investors’ complaints about opportunistic foreign raiders look less and less credible.

GE chief accepts the things he cannot change

27 Jul 2021

Larry Culp’s monomaniacal quest to make his $120 bln conglomerate “lean” is paying off. GE’s cash flows are improving. But Culp can’t do anything about shifting tides of customers’ behavior. Investing in GE also requires getting comfortable with the things Culp can’t control.

Shareholders exposed by British defence raid

23 Jul 2021

Some UK investors complain private equity buyers are stealing listed groups. A mooted 2.6 bln pound bid for Ultra Electronics by Advent-owned Cobham suggests otherwise. The buyer needs chunky cost savings to make it work. A 62% premium implies the market misjudged Ultra’s value.

Branson space caper may have airline economics

16 Jul 2021

The British tycoon has lined up punters paying $250,000 each for his sub-orbital joyride. To hit profit targets, though, his Virgin Galactic needs to hike prices as rivals lift off. If it can’t, the $8 bln firm’s financial trajectory may resemble loss-making Virgin Atlantic.

Airbus sprints past Boeing in two-horse race

3 Jun 2021

The European plane-maker’s short-haul jet is flying off the shelves, helping Airbus close the revenue gap as Boeing’s 737 MAX woes drag on. Yet the U.S. giant’s valuation premium is as big as it has been. Airbus’s recent surge could last. It’s about time the market catches on.

Capital Calls: Uber union

26 May 2021

Concise views on global finance: UK union’s success in representing drivers may hit potholes in the United States.

Capital Calls: Christine Lagarde, Bernie Madoff

14 Apr 2021

Concise views on global finance: The European Central Bank president’s quest for inflation will take a while to achieve its goal; investor gullibility will live on after the death of the Ponzi schemer in a U.S. federal prison.

Capital Calls: LVMH surges back to full health

13 Apr 2021

Concise views on global finance: The 300 billion euro luxury conglomerate’s first-quarter sales surpass pre-Covid-19 levels.