The Week UK 01Feb2020

CITY 45

1February2020 THE WEEK

Globalmarketscontinuedtoberattled

bythecoronavirusoutbreakinChina,

withexchangesinKoreaandSingapore

takingheavyhitsamidfearsthat

regionalcompaniescouldbethefirst

tosuffer.Thevalueoftraditionalsafe

havenassetssuchasthedollar,theyen

andgoldallrose.Bondyieldsfell,asdid

oil,andthepricesofcommoditiessuch

ascopperandironorealldippedon

concernoverChinesegrowth.Theprice

ofcrudefellmorethan2%tobelow$60/

barrel–itslowestlevelinthreemonths.

JPMorgananalystspredictedafurther

hitofupto$5abarreliftheoutbreak

developedintoafull-blownepidemic.

Both theUS Federal Reserveand the

Bank of Englandwere set to make key

calls on interest rates. The Fed was

expected to hold rates steady after three

cuts last year; the Bank’s decision was

more finely balanced. Many economists,

citing falling inflation, expected the first

UK base-rate cut since 2016, from 0.75%

to 0.5%. Others pointed toamore

positive outlook for the economy and

forecast the Bank would stay its hand.

Shares inFinablr,the foreign exchange

group behindTravelex,slumpedtot heir

lowestlevel since listing after its founder

pledged more than half the company as

security foraloan. Boeingposted its first

annual loss in two decades; it expects

the bill for the grounding of the 737 Max

jet to reach $18.6bn. The Government

said it would strip the troubled Northern

rail franchise fromArrivafive years

early. The line will be renationalised.

Tesla: racing to$100bn
Asexpected,Tesla’smarketvaluebrokethroughakeybarrierlastweek,saidThe
Economist.TheCalifornia-basedelectriccarmaker“acceleratedpast$ 100 bn”–making
ittheworld’ssecond-mostvaluablecarmakerafterToyota,eventhough“itstillaccounts
foronlyatinyfractionofglobalcarsales”.Lastyear,Tesladelivered 367 ,500vehicles
“comparedwith 11 millionfromVWalone”.Themilestonecaps“adramaticrallythat
hasseenthecarmaker’ssharepricerise1 25 %inthreemonths”,saidtheFT.Italso
marks “amomentofvindication”forfounderElonMusk,“afteracontroversialperiod
inwhichtheTeslachiefhasattimesbeenalmostatwarwithWallStreet”.ButisTeslaa
carmakerora“platform”techcompany,askedJasperJollyinTheObserver.Itssoaring
sharepricesuggeststhatinvestorsthinkitcanachievethesame“unassailablescale”as
thelikesofAmazonandApple.Thelatter’sshareshavemorethandoubledinthepast
year,boostingitsmarketcapitalisationby$692bn.GoogleparentAlphabet,meanwhile,
hasjustbecomethelatestmemberofthe$1trnvaluationclub.AnalystAlexDeGroote
reckonsthiscohortoftechgiantsisnow“basicallyunstoppable”.Investorsarecertainly
bettingon“theplatformcapitalistscontinuingtoaddzeroestotheirbankbalances–at
leastuntilpoliticianscomegoodwiththeirthreatsofseriousregulation”.

Amigo: adios toan“unlovelycompany”?
Twomonthsago,thecolourfulfinancialentrepreneurJamesBenamorreturnedtoAmigo

• thesubprimelenderhefoundedandinwhich hisfamilyretainsa61%stake, saidKate
  Burgessin theFT. Itseemsthat “themoreyousee,thelessthere istolike”:sevenweeks
  intheboardroom havepersuadedBenamorthat“hecannotgetshotofAmigofast
  enough”. Thisweek,heeffectivelyputthefirmup forsale;ade-listingfromthestock
  exchange mayfollow.Amigo’salreadybattered shares dived29% onthenews.Will
  Benamorfind abuyerforhis“unlovely company”, askedNilsPratleyinTheGuardian.
  Theventure –whichmakesits moneylendingto troubledborrowers(at anannualrate
  of 49.9%),provided they findawealthier“friendor relation” toguaranteeinterestand
  principal–iscertainlyunderpressure.“Asyou’d expect,regulatorshavetakenasceptical
  lookat thisbusinessmodel”,questioningwhether“guarantorstrulyunderstandthey
  couldbeon thehook”. Unsurprisingly,therehavebeencomplaints aplenty. Amigo
  somehowgotitself floatedat a£1.3bnvaluationin2018, butit’sbeendownhillever
  since:shares listedat275parenowworthjust 48p. “Thebitter 2018 vintage”ofLondon
  flotations“is souringwithage”, saidChris Hughes onBloomberg. After AstonMartin
  andFundingCircle, “London’sWorst IPOAward”nowhasanewcont ender–Amigo.

UKbanks: over draft overkill
Arehigh-streetlenderscolludingover overdraft rates? TheFinancialConduct Authority
suspectsso, saidHarryRobertsoninCityAM.TheCity watchdoghasdemandedbanks
explainwhytheyappearto have “alignedtheirnew overdraftratesat around40%”.The
newratesfollow acontroversial“rulechange”:fromApril,the FCA“willbanbanks
chargingmoreforunarrangedoverdrafts”in responseto complaintsthatfeescan be“ten
timesasmuch asapay dayloan”.Itappearsthebanks havedecidedto imposeuniformly
higherchargeson arranged overdraftstocompensate.Nowondercustomersarefurious.

Just Eat/Takeaway.com: another serving of trouble

“Just when you thought the most tortuous

meal in history was finally over”, along comes

the Competition and Markets Authority with

“an extra course”, said Alistair Osborne in The

Times. The UK watchdog has intervened to

postpone the £6bn merger between Just Eat

and its Dutch-listed counterpart Takeaway.com

just aday before the deal was due to be

completed. The “CMA foodies”–who are

already investigatinga$500m investment by

Amazon in Just Eat’s rival, Deliveroo–want to

gauge whether the tie-up would preventanew

entrant breaking into Britain’s increasingly

lucrative food-delivery market.

The CMA’s intervention “has prompted

predictable outrage” from interested parties,

said Ben Marlow in The Daily Telegraph. But come on–the

watchdog “couldn’t simply wave throughadeal of this size”.

Just Eat is already Britain’s No.1food-delivery service and this

combo would create “a titan” processing 360

million ordersayear. Central to the CMA’s

investigation is whether Takeaway.com, which

exited the UK market in 2016 “after racking up

big losses”, would have re-entered off its own

bat were it not for the Just Eat deal–the Dutch

firm having since grown into “one of Europe’s

largest names”. The CMA has hitherto “been

all too happy to wave through deals that have

gone on to be detrimental to the consumer

landscape”. Quite right to examine this one.

Still, whatasaga, said Jennifer Marston on

The Spoon. It all underscores how fiercely

competitive the food-delivery market is, “with

demand for off-premises orders set to drive

restaurant sales for the next decade”.

Takeaway.com remains confident that clearance on the merger

“will be obtained”. We’ll have to wait and see if there’s “a longer,

more complicated battle on the horizon”.

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