Financial Times Europe - 13.03.2020

Friday13 March 2020 ★ 11

The Financial Times Limited 2020© Week 11

The list of Silicon Valley complaints

about SoftBank — from its habit of

walking away from deals to exercising

a h eavy hand on portfolio companies

— is growing, suggesting a reluctance

that threatens the Japanese investor’s

plans for a second Vision fund.

AnalysisiPAGE 13

Silicon Valley confidence

in SoftBank hits trough

DAV E L E E— SAN FRANCISCO

IBM s takingi Airbnb o court over whatt

it claims is the illegal use of four patents

in a move that casts a shadow over the

short-term rental company’s road to a

proposed listing.

In the latest of a string of suits against

online companies involving historic,

and arguably broad, innovations, the

computing group has accused Airbnb of

“building its business” by using patents

relatingtofunctionssuchas“presenting

advertising in an interactive service”

and “improved navigation using book-

marks”.

“After almost six years of unsuccess-

ful discussions with Airbnb to reach a

fair and reasonable patent licence

agreement, we had no alternative but to

file legal action to protect our intellec-

tualpropertyrights,”IBMsaid.

Airbnb said: “We believe this case

does not have any merit and look for-

ward to an outcome which vindicates

thisposition.”

IBM has topped the list of US groups

awardedpatents every year for the past

27 years and has used its resulting port-

folio to launchsuits against a number of

tech groups. In several cases, including

the latest suit, IBM has cited a patent

developed in 1988that covers innova-

tions such as “presenting advertising

concurrently with service applications”.

IBM used the same patentin a dispute

with coupon siteGroupon, which in

2018 agreed to pay $57m to bring to an

end atwo-year court battle. It was also

part of a suit filed in 2013 againstTwit-

ter, w hich struck a deal, licensing dis-

puted patents from IBM and acquiring a

further900atatotalcostof$36m.

Twitter was readying itsIPO when

IBM sued, forcing the company to warn

prospective investors about the

impending litigation in its risk factors.

Airbnb is in a similar position; it has

stated that it plans to go public this year,

though fears over the coronavirus have

led to speculation its listing might be

delayed. Nevertheless, IBM’s timing is

unlikely to be a coincidence, says Robin

Feldman,lawprofessoratUCHastings.

“The moment of an IPO is a perfect

time for putting pressure on a company

tosettlequickly,”saidProfFeldman.

IBM puts pressure on Airbnb before

flotation by suing over use of patents

actually missed payments. Europe is

implementingasimilarrule.

Investors havedumpedbank shares

in the past two weeks, fuelled by fears

thatthe pandemic illw ltimately leadu

to loan defaults.Yesterday, the Stoxx

Europe600Banksindexfell14percent,

while in the US the KBW Bank Index fell

7.7percent.

Problems are aggravated by banks

having to manage the market disloca-

tion with an ever-increasing proportion

of their staff working from home. One

bankersaid:“We’reinacrisis.Lasttime,

atleastwecouldbeintheoffice.”

Additional reporting by Arash Massoudi

Lex age 10p

“We are examining where the stresses

might be, do we have enough liquidity

onstandbyifneeded?”

Banks are also facing upheaval from

new accounting standards introduced

in the US and Europe hat force earliert

recognitionofloanlosses.

“The biggest issue with oil and the

virus is the adoption of [Current

Expected Credit Loss],” said Marty

Mosby, banks analyst at Vining Sparks,

referring to a new US accounting stand-

ard t hat requires lenders to take heed of

likely future losses on a loan and set

aside provisions to deal with them up

front, rather than the previousmodel of

bookingprovisionsonlyoncecustomers

night”, said one US banking executive.

“This is like a cross between Septem-

ber 11 and the global financial crisis of

2008,” said Tim Coleman, restructuring

specialist at PJT Partners. “Every com-

pany is drawing down their credit lines

beforetheirbankerscanpullthem.”

Companies in the oil, airlines, hospi-

tality and healthcare sectors have been

most active in requesting drawdowns,

said several executives. Lenders’ treas-

ury departments are modelling what

happens if the liquidity concerns spread

tootherindustriesaswell.

“We know there is going to be hoard-

ing of liquidity, drawing down on credit

lines,” said one top European banker.

ST E P H E N M O R R I S— LONDON
L AU R A N O O N A N— NEW YORK
H E N N Y S E N D E R— HONG KONG

Banks have convened emergency meet-
ings to address a rush of companies
drawing on back-up credit lines, new
accounting rules that are exacerbating
loan losses, and disruption to their own
offices as lenders grapple with the
effectsofthecoronavirusoutbreak.
As corporate bond markets grind to a
halt,companies are tapping credit lines
to ensure they have enough cash o sur-t
vive a prolonged downturn in financial
markets. They are also asking about the
availability of short-term bridge financ-
ing so that their boards “can sleep at

Banks grapple with virus fallout

3 Clients demand fresh credit 3 New rules amplify loan losses 3 Staff working remotely

Alphabet’splanstousegiantballoonsto

beamhigh-speedinternettoremote

partsofKenyaremainsgrounded lmosta

twoyearsafteritwasannounced.

Loon,whichwascreatedintheGoogle

parent’sXresearchunitbeforebeing

spunout,iswaitingforregulatory

approvalforacommercialtrialwith

TelkomKenya,thecountry’sthird-

biggesttelecomsoperator.Theplanisto

usesolar-poweredballoonstobroadcast

a4Ginternetsignalinareaswherethere

arenotraditionalmobilemasts.

Thetwocompaniesneed

authorisationfromKenyanauthorities

toflytheballoons. elkomKenyasaidT

that“strategicallylocatedground

stations”hadbeenestablishedinNyeri,

60milesnorthofthecapitalNairobi,but

itcouldnotconfirmwhenitwould

receivetherequiredapprovals.

JosephMucheru,aKenyagovernment

minister,said.“ Weare100percent

behindit,wearejustabitslowinour

bureaucracy.”Loonsaid texpectedthei

approvalstobe“finalisedsoon,atwhich

pointwewillbeginflyingballoonsin

Kenya”.

Thecompanyisbackedbyinvestors

includingSoftBank ndhasannouncedaa

tie-uptolaunchsimilarballoonsinPeru.

Tom Wilson

No-fly zone

Google’s 4G plan for

Kenya still grounded

‘This is like

a cross

between

Sept 11 and

the 2008

global

financial

crisis’

Companies / Sectors / People

Companies
AMC................................................................. 14
Air France................................................... 20
Air France-KLM...........................2,3,10,
Airbnb............................................................. 11
Airbus............................................................ 20
Allen & Overy............................................ 14
Allianz............................................................ 10
Alphabet........................................................ 11
Alphadyne.................................................... 19
American Airlines................................... 20
Anadarko...................................................... 19
Arsenal........................................................... 12
Atlantia......................................................... 20
Atradius........................................................ 10
Autogrill....................................................... 20
BBC.................................................................... 7
Blackstone.............................................10,
Boeing............................................................ 10
British Airways................................1,2,3,
CME Group................................................... 11
Capri............................................................... 20
Capula............................................................ 19
Carnival.........................................................
Catalana Occidente................................ 10

Channel 4....................................................... 7

Cineplex........................................................ 10

Cineworld...........................................1,10,

Coface............................................................ 10

Delta..................................................2,3,10,

Deutsche Börse......................................... 11

Devon Energy............................................ 19

Dufry.........................................................12,

ESPN............................................................... 12

EasyJet......................................................... 20

Elliott Management................................ 12

Enel................................................................. 20

Equiniti.......................................................... 20

Euler Hermes............................................. 10

ExodusPoint............................................... 19

Expedia......................................................... 20

Facebook........................................................ 7

Fiat Chrysler................................................. 4

Finablr...............................................10,14,

Ford...........................................................10,

Fortress......................................................... 12

Founders Fund.......................................... 13

General Motors........................................ 10

Google............................................................. 11

Groupon......................................................... 11

H2O Asset Management.................... 19

Hertz............................................................... 14

Hess Corporation.................................... 19

IAG..........................................................1,2,3,

IBM.................................................................... 11

ITV...................................................................... 7

Iberia..............................................................2,

JPMorgan..................................................... 10

K+S.................................................................. 20

Kohl’s.............................................................. 14

L Brands...................................................... 20

Leonardo..................................................... 20

London Stock Exchange...................... 11

Lone Star...................................................... 12

Lufthansa.................................2,3,10,12,

MSCI................................................................. 11

Macy’s............................................................ 20

Manchester City....................................... 12

Manchester United................................. 12

McClatchy.................................................... 14

Millennium Management.................... 19

Moelis............................................................. 14

Muddy Waters.......................................... 14

NBA.................................................................. 12

NMC Health...................................10,14,

National Amusements.......................... 14

Natixis............................................................ 19

Netflix............................................................... 7

Nordstrom.................................................. 20

Norwegian Air Shuttle......2,3,10,12,

Norwegian Cruise Line....................... 20

Ocado............................................................ 20

Occidental Petroleum..............14,19,

Opendoor..................................................... 13

Pier 1 Imports............................................ 14

Premier League........................................ 12

PwC.................................................................. 14

Ratti Spa......................................................... 4

Real Madrid................................................. 12

Rio Tinto....................................................... 12

Rosneft............................................................ 4

Royal Caribbean...................................... 14

Royal Caribbean Cruises.................... 20

Ryman Hospitality Properties......... 14

S&P Global................................................... 11

Safran............................................................ 20

SoftBank.............................................11,12,

TNT.................................................................. 12

Telkom Kenya............................................ 11

Thyssenkrupp........................................... 14

Tortoise........................................................... 7

Tradeweb...................................................... 11

Travelex........................................................ 10

Tui................................................................... 20

Twitter............................................................ 11

United Airlines.........................1,2,3,10,

Unizo............................................................... 12

WHSmith...................................................1,

WeWork...................................................13,

YouTube......................................................... 7

Sectors

Airlines...................................2,3,8,10,12,

Banks...................................................10,11,

Energy............................................................ 19

Financial Services.................10,13,19,

Financials..............................12,13,14,19,

Food & Beverage..................................... 13

Health............................................................. 13

Healthcare.............................2,3,8,10,13,

Industrial Goods....................................... 13

Media.....................................................7,10,

Mining............................................................. 12

Oil & Gas................................................19,

Pharmaceuticals....................................... 13

Property...................................................12,

Retail........................................................13,

Retail & Consumer.................................. 13

Technology..................................11,11,12,

Telecoms....................................................... 11

Travel & Leisure..............10,12,13,14,

People

Abraham, David.......................................... 7

Davies, Gavyn.............................................. 7

Dyke, Greg..................................................... 7

Fairbairn, Carolyn...................................... 7

Fairhead, Rona............................................ 7

Grade, Michael............................................ 7

Graham, Paul.............................................. 13

Hall, Tony....................................................... 7

Harding, James........................................... 7

Hunt, Jay........................................................ 7

Mahon, Alex.................................................. 7

McCall, Carolyn........................................... 7

Rabois, Keith.............................................. 13

Reed, Colin.................................................. 14

Shetty, BR..............................................10,

Tamborini, Sergio..................................... 4

Thompson, Simon................................... 12

Thompson, Mark........................................ 7

3 Why Treasuries’ haven status

is under attack— ANALYSIS, PAGE 19

Philip

Stafford

Tail

Risk

It is not hard to find evidence that stock markets are in

trouble; the fact that key indices have snapped a decade-

long bull run is proof enough. But the recent performance

of shares in stock exchange groups and other trading

housesisanotherdiscomfitingsign.

While most of the market has been in a tailspin for more

than two weeks, key trading venues had held up relatively

well, buoyed byhuge amounts trading on their plat-of

forms.Allthatvolatilityisgoodforsomeone,afterall.

Although the sector had faced selling pressure in recent

weeks, what had been striking was that investors had

mostly treated them as defensive stocks. Untilyesterday

CME Group, the futures exchange,Tradeweb nd indexa

compilerMSCI ad shown gains for the year as investorsh

bet thatmarket turmoil ould boost trading volumes, andw

thustheUScompanies’earnings.

No longer. Top performersin recent years, such asLon-

don Stock Exchange roup andG Deutsche Börse, registered

heavy fallsyesterday, whilethe US groupswiped out their

year-to-dategains.

The industry that spans

trading exchanges and data

services has enjoyedhigh

growth ince 2010, thanks ins

no small part to a favourable

regulatory environment that

has handed the exchanges,

rather than banks, the great-

est responsibilities to man-

agetherisksoftrading.

The difficulty faced by new entrants trying to break into

thisworldhashelpedCMEanddataproviderS&PGlobal ot

more than treble over that period, giving them market

valuesof$75bnand$63bnrespectively.

The S&P 500 Financial Exchanges & Data Index, which

covers some of the biggest players in US markets, has not

been unscathed, down about 14 per cent from the start of

theyear.ButcomparethattotheKBWBanksindex,theUS

sector benchmark, which is down more than one-third

over the same period to leave it trading on a forward price-

to-earnings ratio of just 8, about half its average level. The

forward p/e ratio of the exchanges and data sector has

fallenfrom31to24,inlinewithitslong-termaverage.

Regulators have judged banks to be more resilient than

they were during the last big crisis in 2008, thanks to

tougher standards on capital and liquidity. But they

remain at the mercy of fast-falling interest rates and credit

risks—andeventhebigdrop ncrude.i

Berenberg analyst Chris Turner said such forces were

largely irrelevant for exchange and data groups. Nor are

they much affected by other scenarios that regulators

buildintostresstestsforthebanks,suchasbigfallsinasset

pricesorconsumerconfidence.

Which is why the slump in share prices is noteworthy.

Further rapid, heavy declines would suggest the moment

ofmaximumfear—andafloorforthemarket—isnear.

[email protected]

Exchange and

data groups had

been treated as

defensive and

shown gains —

until yesterday

3 NBA stops clock as football

enters injury time— ANALYSIS, PAGE 12

3 Disease brings record bull

run to its knees— MARKETS INSIGHT, PAGE 20

Alphabet’s project using giant balloons to beam high-speed internet was tested in New Zealand. Bureaucracy is holding it down in Kenya

MARCH 13 2020 Section:2Front Time: 3/202012/ - 19:05 User: karen.crawcour Page Name:2FRONT USA, Part,Page,Edition:EUR , 11, 1