The Sunday Times - UK (2022-06-05)

2

BUSINESS

Investors bet against JD Sports

after departure of Cowgill

Short-sellers have piled into

JD Sports after the sudden

ousting of executive chairman

Peter Cowgill last month, in a

sign that some investors have

grown more sceptical about

the retailer’s prospects.

Short positions — where

traders bet a company’s share

price will decline — have risen

to 1.29 per cent of JD’s shares

outstanding, equivalent to

£81.3 million, according to

S&P Global Market

Intelligence.

JD has rarely been a

target for short-sellers in

the past. Since

taking over in

2004, Cowgill

has leveraged JD’s

relationships with Nike and

Adidas to transform the

retailer from a struggling

sportswear chain into a

powerhouse trading from

3,300 stores in 29 countries.

Cowgill was ousted amid

disagreements with the board

over succession planning and

the perception of a lax

approach to corporate

governance. His exit led to

speculation that the

Competition & Markets

Authority — which is

investigating JD over

possible breaches of

competition law in

relation to the sale of

football merchandise

— would hand the

retailer further

penalties after a

near £5 million

fine in

February.

JD’s shares

closed at

Sam Chambers

and Jamie Nimmo

122.1p last week, slightly

above the level they traded at

before Cowgill’s departure

was announced.

Last month, the retailer

said that like-for-like sales

had risen by more than 5 per

cent in the 14 weeks to May 7

and that it expected pre-tax

profits this year to meet or

surpass the £940 million

achieved last year.

Meanwhile, private equity

firm Bridgepoint is also

facing pressure from short-

sellers for the first time since

its £2.8 billion float. US hedge

fund Millennium has taken

out a 0.8 per cent short

position in Bridgepoint worth

£20 million.

The firm, which owns

Burger King UK and the arts

and crafts chain Hobbycraft,

floated at 350p a share last

July. After rising to 570p a few

months later, the shares have

gone into reverse, closing last

week at 317p.

Peter

Cowgill was

ousted after

boardroom

disputes

F

our years after starting Face-

book, Mark Zuckerberg took

his first proper holiday: a

month-long solo backpacking

trip through Europe and Asia.

Among the stops, a remote

Indian ashram that, not coinci-

dentally, had been visited years

before by Steve Jobs.

The 24-year-old felt that he

could finally take a breath because he had

just hired a rock star executive, Sheryl

Sandberg, to help turn his fledgling social

network into a proper company. It may

be difficult to conceptualise now, but

back in 2008, Facebook was growing like

a weed yet was still in search of a business

model. So while Zuck communed with

the spirit of the Apple founder, Sandberg

got to work, thousands of miles away in

Palo Alto, California, turning Facebook

into an advertising behemoth.

It was an early proof point of what

Steven Levy, author of Facebook: The

Inside Story, referred to as “The Deal”, a

work-sharing agreement that young Zuck

struck with Sandberg, then 38, to con-

vince her to leave her perch as a vice-

president of Google. Zuckerberg would

focus on the product, which at the time

consisted of the Facebook website, while

“anything else with a low geek-quotient”,

including policy, communications, sales,

lobbying and legal, would fall into

“Sheryl world”, Levy wrote.

The deal, in effect, split the company

into two domains and will go down as one

of the most consequential in business his-

tory. When Sandberg arrived in 2008,

Facebook was bringing in only $500 mil-

lion in sales from a ragbag of money-mak-

ing experiments, none of which showed

staying power. Last year, Meta, as it has

been renamed, brought in $117 billion,

virtually all of it from the advertising

machine that Sandberg built. Over the

period, its monthly user base has risen

from 100 million to 3 billion — more than

a third of the planet.

“She’s the reason why, like, a small

island in Indonesia knows what Facebook

is,” said Dan Ives, an analyst at Wedbush

Securities. “She was key to the strategy,

she was a core port of the DNA and she

was the consigliere to Zuckerberg.”

Indeed, she was many things her

young counterpart was not. Ezra Calla-

han, an early employee, told Levy: “She

was diplomatic, she was eloquent, she

was relatable. [Her arrival] took us from

feeling like this was a billion-dollar com-

pany that’s going to shoot itself in the foot

one too many times to, ‘OK, this is going

to happen now.’”

Sandberg officially called time on her

unusual arrangement with Zuckerberg

last week, announcing that after 14 years

she was stepping down as Meta’s (nee

Facebook) chief operating officer this

autumn. According to The Wall Street

Journal, Sandberg told confidants she

was feeling burnt out and had tired of

being the public “punching bag” for Face-

book’s shortcomings. The company had

also reportedly opened a review into

whether she had inappropriately used

company resources to plan her upcom-

ing wedding to Tom Bernthal, a consult-

ant, though this had no bearing on her

“personal decision” to leave, it said.

While the suddenness of her depar-

ture sent shockwaves through the corpo-

rate world, the fact that she was leaving

did not. Zuckerberg called it the “end of

an era”. It was a long time coming, and

marked an ignominious end for an execu-

tive long lionised as the most powerful

Big shareholders in Palace

Capital are pushing for a

shake-up of the £130 million

property firm’s strategy after

growing impatient at its

pedestrian returns.

Palace Capital, run by

veteran Neil Sinclair, markets

itself as a play on levelling up.

It owns offices, warehouses

and leisure facilities in

regional cities around the UK.

Over the past five years its

shares have declined 26 per

cent to 271.8p, leaving it

trading at a 25 per cent

discount to the value of its

assets.

“There isn’t a convincing

strategy and I don’t see how

Palace is going to deliver

anything other than a very

average performance.

Something needs to change,”

said one of the firm’s largest

shareholders. The unrest

piles pressure on Sinclair, 79,

No jubilee spirit at

‘average’ Palace

who co-founded Palace

Capital in 2010.

A source close to the

company dismissed the

criticism as “institutional

short-termism”, arguing the

firm’s development by York

train station would catalyse a

step up in performance.

Some 84 of the 127 flats there

have now been sold with

another seven under offer.

Palace Capital received an

all-stock takeover approach

from office owner Regional

REIT, which operates

predominantly outside of

London, earlier this year. City

sources said that while it was

Regional REIT which broke

off the talks, the board of

Palace Capital did not deem

the offer attractive.

In April, Palace Capital said

profits for the year would be

ahead of market expectations

and it was considering a

return of capital to

shareholders.

buying. Instead, Carzam

promised to deliver cars to

customers across the country

within 24 hours, and gave

buyers two weeks to decide

whether to keep the vehicle.

In December, Carzam

hired Andy McCue, the

former boss of Paddy Power,

as its executive chairman.

However, McCue stepped

down in March.

A string of other directors

have also quit, including

Waddell and chief executive

Jamie Nimmo Kirk O’Callaghan. Davidson

Kempner’s Daniel Boehm was

also removed as a director on

Companies House.

Last year, Zoopla founder

Alex Chesterman floated

Cazoo on the New York Stock

Exchange at a $7 billion

(£5.6 billion) valuation

through a special-purpose

acquisition company (Spac).

But Cazoo’s valuation has

since fallen to below $1 billion

as investors switch off from

high-growth companies.

Cinch was launched by

TDR-backed Constellation

Automotive Group in 2020

and raised £1 billion in

funding last year for the

venture.

Carzam’s external public

relations agency was unable

to contact executives at the

company.

The joint administrators at

Smith & Williamson did not

respond to a request for

comment.

Sam Chambers

Used-car firm Carzam

lasted only 18 months

Used-car dealer Carzam has

collapsed just 18 months after

its launch, in a sign that the

online car boom has crashed.

The Peterborough firm, co-

founded by Big Motoring

World boss Peter Waddell,

has appointed administrators

at Smith & Williamson after it

entered voluntary

receivership on Tuesday.

It comes just six months

after Carzam said it had

raised £112 million from a

New York fund. That is

understood to have been

Davidson Kempner, the

hedge fund, and with the

money taking the form of

debt rather than equity.

Carzam was set up with a

similar plan to its other newly

established rivals, Cazoo and

Cinch. They claimed to be

shaking up a market where

customers visit showrooms

and test-drive cars before

Carzam crashes as brakes are hit

on boom in online motor sales

Sidelining

Sandberg

When the most important woman in tech

announced her departure from Meta, it

sent shockwaves through the industry,

but those in Facebook could see the signs

DANNY

FORTSON

TECH TALK

woman in tech. Sandberg was the foil to

the younger, robotic Zuckerberg. She

tamped down its tech bro culture, known

for all-night coding sessions and in-office

beer kegs, and then wrote a book, Lean

In, about how women can get ahead in

the workplace. The best-seller turned

Sandberg, for some, into a feminist icon.

Yet as Meta grew into an empire, and the

scandals piled up, her deal with Zuck

began to fray. The 2016 election of

Donald Trump, and the Cambridge Ana-

lytica data harvesting scandal with which

it was linked, was a turning point.

It was long speculated that Sandberg, a

lifelong Democrat and prolific fundraiser

for the party, had her eye on public

office. She was fiercely protective of her

own public image. When company

researchers uncovered evidence of Rus-

sian tampering in the election, she, like

Zuckerberg, ignored then minimised the

notion that Facebook’s apps played a sig-

nificant role in spreading disinformation.

Her efforts, including a sharp-elbowed

opposition research campaign that

planted negative stories of Facebook crit-

ics, made the problem worse.

T

he worsening image of Facebook

rankled Zuckerberg. His product

may have been the cause, but it was

Sandberg’s job to clean up the mess,

and it wasn’t working. The conflict

laid bare the messiness of their power-

sharing agreement.

Starting in 2018, he began to methodi-

cally dismantle Sandberg’s empire. He

handed platform integrity and ads to Jav-

ier Olivan, a rising star in the organisa-

tion. Marne Levine, a former Clinton

administration official who Sandberg had

hired more than a decade earlier, was last

year appointed chief business officer. In

February, Sir Nick Clegg was elevated to

president of global affairs reporting

directly, like Sandberg, to Zuckerberg.

In Silicon Valley, start-up founders

often speak longingly about finding “a

Sheryl”; code for a razor-sharp operator

who could turn a good idea into a world-

beating company, but would not out-

shine the boss.

In an odd twist, it would appear that

Zuckerberg might now be the only execu-

tive who doesn’t want one. In a post after

her announcement, he made it clear that

ILLUSTRATION: TONY BELL