The Week - UK (2021-07-17)

44 CITY

THE WEEK 17 July 2021

Talking points

VirginGalactic’ssuccessfultestflight

lastweekendenabledRichardBranson

“toclaimthecrownofthefirst

billionairetomakeitintospace”,said

JamesPhillippsonCitywire–beating

AmazonsupremoJeffBezos’sBlue

Originventurebyamatterofdays.

“Thebattleofegos”betweenthepair,

andElonMusk’sSpaceX,hascreated

“afreshwaveofinterestinthe

commercialopportunitiesbeyond

Earth”.AndtheBransoncoteriehas

beenquicktocapitaliseonit.Anew

investmenttrust,SeraphimSpace–

chairedbyformerVirginGalactic

presidentWillWhitehorn–floatedin

Londonthisweek,providing“thefirst

activelymanagedway”fortheaverage

investortogainexposuretopotentially“stellar”returns.Punters

seemedverywilling“toexploreanewfrontier”,saidNaomi

AckermanintheLondonEveningStandard.SharesinSeraphim,

whichisbackedbyAirbus,climbedby 5 .5%inearlytrading.

Let’s not getcarried away,saidMatthewFieldin TheDaily

Telegraph.Branson mighthave achieved“weightlessness”ashe

skirtedthe edge ofspace,butshares inNewYork-listed Virgin

Galactic felltoEarthwithabumpthisweek onnews thatthe

companyneedstoraise another $500mof equitytofundits

commerciallaunchnextyear.The14%plungewasthelatest

shockforshareholders.Bransonand

Bezosseetheirflights“asthebeginning

ofanewstageincommercialspace

travel”,saidSarahMcBrideon

BloombergBusinessweek.ButVirgin

Galactichasbeenapioneerforthespace

industryinotherwaystoo.In2 01 9,it

wentpublicaftermergingwithaspecial

purposeacquisitionvehicle(Spac)–“a

then-obscurefinancialtool”thathas

sincebeenadoptedbyahostof“risky

companies”.Branson’smaidenflight

mayhavevalidatedSpaceSpacs,butit

hasalsohelpedlaunchadiceytrend.

Virginaimstotaketouriststotheedge

ofspace“atarateofmorethanone

flightaday”,saidRichardWatersinthe

FT.Morethan 600 peoplehavesofarputdownanaverageof

$130,000tofly.“However,withroomforonlyfourpassengers

oneachflight”,there’s“aseriousshortageofseatsintheshort

term”,andnofirmtimetableforwhenitwillscaleupcommercial

operations. Galactic’s $8.3bnvaluationmay behardtojustify,

saidAlexBrummerintheDailyMail.But fairplaytoBranson:

his “spaceescapade”isthe culminationofalongobsession.A

pitythatitcoincideswithsuchaparlous situationinthe terrestrial

airindustryon whichour economies depend.Branson’sVirgin

Atlantic,like allthe others,isfoundering.Arguably,“hismost

importantmission isn’tinouterspace butover theAtlantic”.

Issue of the week: the new space race

Branson with his team: the first billionaire in space

Fintech: what the pundits say

●Wise up

“Blink andyou missedit,”

saidNilsPratleyin The

Guardian.TheUK’s

“biggest techflotation”ever

happenedlast week,“to

aboutahundredth ofthe

pre-publicitygenerated

by the overhypedand

undercooked Deliveroo”.

Wise–the profitable cross-

borderpaymentscompany

formerlyknownas

TransferWise –finishedits

firstdayin public form

valued ata“punchy” £8.75bn,“more

than twiceits valuationati ts last private

funding round last year”.The company

isn’teligible for the FTSE 100 becauseits

Estonian CEO andco-founder,Kristo

Käärmann, “insistedongivinghimself

enhancedvoting rights”,thusearning

“a boo” from governance purists.“He

gets acheer, though, for demonstrating

that appetitefor high-growth, highly

prized tech businesses is aliveandwell

in London.”

●Robin Hood ridesagain

Consumers shouldalso be cheering, said

Forbes. Käärmann andhis partnerTaavet

Hinrikusstarted Wiseafter becoming, in

theirwords, “sickof losin gmoney ”to

banksinfees. Thecompany,whichhas

been dubbed “theRobin Hood of currency

exchange”, chargesless than 1% onmany

transferscompared with an

average cream-off ofmore

than5%bymainstream

banks.It’s certainlyan

impressiveoperation, said

ZavenBoyrazianon The

MotleyFool.It cleared

£54bnacrossborders last

year.And, unlikemany

young fintechcompanies,

it’sactually profitable:it

made£49.9mbetween

March202 0 and 2021.But

shareshave alreadysoared.

By the start ofthisweek

Wise’s valuehad shot up to

nearly£13.5bn, whichshouldgive would-

be inve stors pause for thought.

●Acomingofage

Even allowing forthe hype,“something

astonishingis go ingoninfintech”, said

The Economist. According toCB Insights,

“one in every five dollarsinvestedby

venture capital this year” hasgoneintothe

sector, withdeals and listingsproceeding

“at afrenetic pace”.Once the“insurgents

of fina nce”, fintech firms “are becoming

part of th eestablishment”–inexorably

gainingcritical mass.Theircollective value

hasrisento$1.1tr n–equivalent to10%

of thevalue of the global banking and

payments industry. “Pricesmay be

stretchedtoday andsomefirms may flop,

but in the long runit seems likely thatthis

share will only rise.”

Themes with legs

Covid has changed some of our

behaviours profoundly, said Danielle

Levy on Citywire. Which investment

themes will outlast the pandemic?

Pet ownership According to Statista,

household pet ownership in the UK has

risen from 40% in 2019 to 59% in 2021.

Giles Money of JSS Sustainable Equity

Global Thematic Fund, reckons

“millennials and younger cohorts have

ahigher propensity to spend money on

pets and are having fewer children”.

Digital shift Lockdowns have

accelerated growth of online banking,

particularly among the over-50s. Daniel

Lockyer of Hawksmoor notes that “12%

of the UK population downloaded an

online banking app for the first time last

year”. He currently has exposure via

Augmentum–afintec hfundwith

stakes in companies like the mobile-

only current account provider, Monese.

He is also tapping the growth of

e-commerce via real estate investment

trusts (Reits) specialising in “last-mile

hubs”, such as Urban Logistics.

WFH The shift to homeworking is

tipped to survive Covid, but Lockyer

suggests that two of lockdown’s main

beneficiaries–Zoom and the home-

fitness company Peloton–have come

off their peaks. By contrast, he reckons

that Microsoft is still poised to benefit.

Microsoft Teams currently has 100

million users accessing the app free of

charge. If it charged just £1 per user, it

would add £1bn to the bottom line.

RichardBransonhasdeclaredspaceopenforbusiness.Isthatstillapieinthesky?

Käärman:takingonthebanks