CITY 41
28 May 2022 THE WEEKShares in Britain’s biggest power
companies fell sharply on news that
Chancellor Rishi Sunak is drawing up
plans for a windfall tax, likely to take in
energy suppliers as well as North Sea
oil and gas producers. Drax, owner of
Britain’s biggest power station, fell 16%;
British Gas owner Centrica dropped 10%
and SSE fell almost 9%. BoE governor
Andrew Bailey hinted at a further
interest rate hike to combat runaway
inflation. ECB president Christine
Lagarde said the bank would probably
raise rates by September, ending eight
years of negative rates. China’s premier
said the country would struggle to
record positive growth this quarter.
Glencore, the giant miner and
commodities trader, agreed to pay
penalties of up to $1.5bn after pleading
guilty to multiple counts of bribery and
market manipulation, following probes
in the US, UK and Brazil. Prosecutors
claimed the company approved millions
of dollars in corrupt payments to get
access to oil in Africa.
Facebook founder Mark Zuckerberg is
being sued by the District of Columbia
for his alleged role in the data privacy
violations that led to the Cambridge
Analytica scandal. M&S reported annual
pre-tax profits of £392m for the year
to April, up from a loss of £209m the
previous year, but warned sales growth
would slow due to the consumer
squeeze. Starbucks said it would
permanently close all 130 of its coffee
shops in Russia, after 15 years there.Airbnb/Klarna: tech retrenchment
In a symbolic retreat, Airbnb is closing its domestic business in China indefinitely after
six years in the country, said Deirdre Bosa on CNBC. In recent years, stays in China have
accounted for just 1% of the home rental company’s revenue, in the face of mounting
competition from domestic players. But the pandemic has hastened the decision. With no
end to Chinese lockdowns and travel restrictions in sight, it decided to pull the plug. A
long-time member of the tech unicorn club, Airbnb floated in 2020 and, although “shares
have fallen more than 30% this year amid a broader sell-off in tech stocks”, it’s still
“trading well above” its IPO price. Many others have been less fortunate. The latest tech
segment to feel the heat, said Lex in the Financial Times, is fintech – where “start-ups are
in a funk” amid “cooling” venture capital interest. In its latest funding round, Sweden’s
Klarna, the biggest player in the once-booming “buy now pay later” space, is reportedly
“settling for a valuation roughly a third less” than the $45.6bn it received last year. A
victim of tumbling consumer confidence, Klarna is also laying off 10% of its staff.
Trillions of dollars have already been wiped off the value of tech companies, “and the
carnage has possibly only just begun”, said Danny Fortson in The Sunday Times.
“Welcome to ‘The Great Revaluation’.”
THG: Candy attraction
Once one of Britain’s great tech hopefuls, THG (the e-commerce company formerly
known as The Hut Group) has been “hit by a string of setbacks” since being brought to
market by founder Matt Moulding in 2020, said the FT. Shares in the group, which sells
nutrition and beauty products, and also “markets its technology and logistics expertise”
to other retailers, have tumbled from a peak of almost 800p to 116p last week. Nothing
like a bit of takeover talk to give them a fillip. THG says it has rebuffed a “highly
preliminary” 170p a share (or £2.1bn) bid from a consortium led by Belerion Capital.
But that seems to have flushed out another possible offer from Candy Ventures, the
vehicle run by the Knightsbridge property tycoon Nick Candy. What’s next, now that
Moulding’s hut is suddenly “in vogue”, asked Alistair Osborne in The Times. “A bid from
David Cameron?” The more pertinent question, said Nils Pratley in The Guardian, is
what Moulding would do if “a serious bid” of, say, 250p a share appeared. “The working
assumption” – given his view that listing in London has “sucked from start to finish” –
is that he’d be tempted to go private. Still, the grass isn’t always greener. “The private
option might just load another layer of uncertainty onto the company.”
M&C Saatchi: adland battle
The lengthy battle for control of the veteran ad agency M&C Saatchi has concluded.
And the winner is... not software tycoon Vin Murria, said Jamie Nimmo in The Sunday
Times. M&C’s board has rejected a “hostile bid” by Murria’s listed cash-shell, Advanced
AdvT, in favour of a £310m bid from the Aim-listed digital marketing company Next
Fifteen. “The deal underlines” the changing fortunes in the industry – a decade ago, when
Next Fifteen was just a minnow, it was M&C eyeing a takeover. Murria, who currently
controls 22% of M&C, could yet “frustrate the deal”. Still, given she “stands to bank
a £50m profit” on her shares from the rival offer, the snub may be easier to stomach.
On the railways: jubilation in London, and crippling strike threats
There was, of course, a hiccup: Paddington’s
Elizabeth Line platforms were temporarily
evacuated following a fire alarm. But nothing
could dampen the enthusiasm of the crowds
who marked the opening of the delayed and
over-budget project formerly known as
Crossrail, reported the London Evening
Standard. “There were extraordinary scenes
and a party atmosphere as hundreds of
passengers” converged to board the first
06:33am train out of Paddington. Many had
been waiting in the rain since midnight.
“Do you know what sound that is?” asked
London Mayor Sadiq Khan, cupping his ear,
as the train set off on time. “Success.”The £18.9bn east-west link, running between Essex and
Berkshire, “will bring an additional 1.5 million people within
a 45-minute commute of central London” and dramatically
“streamline” journeys, noted Bloomberg. There’s “another lesstangible asset” – “something to be optimistic
about”. The completion of one of Europe’s
largest engineering projects, even if late,
“shows that London still has the ability to
think big”. The timing couldn’t be better, said
Lucy Burton in The Daily Telegraph. If Crossrail
doesn’t get foot-dragging homeworkers back
to their city desks, “nothing will”.A shame about the threat of a full Tube strike
over the jubilee bank holiday, though, said the
FT. And that’s probably just the start. The RMT
union is threatening the biggest strike action
since it was formed in 1990 this summer,
prompting rail chiefs to cut the network to a 12-hour service. The
biggest fears surround the freight industry, which currently relies
on rail for “a 24-hour service”. Business leaders warn that the
impact of strikes on already fragile supply-chains could be
“catastrophic”, said Lucy Burton in The Sunday Telegraph. The
prospect of “a summer of chaos” looms.Her Majesty opening the Elizabeth LineSeven days in the
Square Mile