52 2GM Saturday May 28 2022 | the times
Business
5
tion that his takeover of Twitter was “on
hold” prompted speculation that he
was attempting to renegotiate a cheap-
er deal as tech shares continued to
decline. While he agreed to pay $54.20
a share for the social media group, in
recent days its stock has slipped as low
as $35.76, down 17 per cent on the year.
“The boom times of the past decade
are unambiguously over,” Lightspeed
Venture Partners, an investment firm,
wrote this month. Netflix has laid off
dozens of staff. Meta and Snap are slow-
ing recruitment. Twitter is even
rescinding some job offers.
While Lightspeed argued that the
businesses that acted decisively wouldemerge “stronger” when markets
normalise, it acknowledged that the
road ahead would be tough. “Many
CEOs will make painful decisions in or-
der to keep their companies afloat in
choppy waters,” it said. “Some will face
trade-offs that only a few months ago
would have seemed outlandish.”
Such messages are aimed as much at
Davids as they are Goliaths. In a pre-
sentation first reported by The Infor-
mation, a technology news site,
Sequoia urged dozens of start-ups that
it had backed to identify potential cuts
to save cash. “It doesn’t mean you have
to pull the trigger,” the firm said, “but
that you are ready to do it in the next 301
America’s senior financial
regulator has told Elon Musk it
believes he breached market
rules by failing to swiftly disclose
his $2.6 billion investment in
Twitter. Officials have asked the
world’s richest man to explain his
public challenges of the social
media group while quietly
amassing a vast stake earlier this
year. Page 512
Boohoo, the fast-fashion
online retailer, is working on a
pre-pack rescue deal to buy
Missguided, a financially stricken
rival. Sources said Boohoo had
entered exclusivity talks with
Missguided’s advisers at Teneo
and a deal could be struck by
Monday. Page 513
Billions were wiped off the
value of UK-focused energy
groups this week after the
government’s oil and gas
windfall tax plans threatened to
suck in other power providers.
Page 514
Analysts say that sentiment
surrounding the so-called
Faangs — Facebook (now
Meta), Amazon, Apple, Netflix and
Alphabet, owner of Google — and
the wider technology sector is at
its worst since the turn of the
century, when the dotcom boom
turned to bust.5
India’s Reliance Industries
and Apollo, the private equity
firm, have become the
frontrunners to buy Boots after
the Issa brothers indicated they
were not prepared to pay the
asking price.6
The debate over the future of
HSBC is set to be reignited
after the bank invited analysts
and investors to an event to detail
its strategy for its UK high-street
bank, which some in the City
believe could be spun-off. The
event was organised before it
emerged that Ping An, a Chinese
insurer, was agitating for a break-
up of the bank.7
Delegate numbers at the
World Economic Forum in
Davos were down a fifth from
the 2020 gathering, and Reuters
reported that Zurich airport
expected a third fewer take-offs
and landings than usual. Page 548
There is no “simple fix” to the
peeling paint problem
afflicting airliners sold to
Qatar Airways in advance of the
World Cup, Airbus has
acknowledged in the High Court.
The airline has alleged in a
£1.3 billion claim that issues with
the paint render its A350s unsafe.
Airbus says the cracking is simply
a maintenance issue. Page 559
After weeks of farewell
dinners and board meetings,
the Marks & Spencer boss
Steve Rowe followed up results
presentations with a town hall
gathering that included a dance
routine to Puff Daddy’s I’ll Be
Missing You by members of the
Romford branch. Page 5610
Toyota cut its global
production plan for June
for the second time this
week and indicated that its
estimated full-year output could
be lowered. Production by
carmakers has been hit by a
shortage of microchips. Page 56Need to know
It has been a torrid year
for the so-called Faangs,
but hopes are rising
that the worst is over.
Callum Jones reports
Investors’ love
affair with
tech darlings
turns sour
Investors switched off Netflix almost as
fast as its former subscribers. Twitter’s
wings have been clipped despite its
agreed $44 billion sale to the world’s
richest man. Even Apple is fighting to
retain its place at the top of the tree.
American technology companies are
battening down the hatches as their
shares tumble. Sequoia Capital, one of
Silicon Valley’s leading venture capital
firms, has described the current situa-
tion as a “crucible moment”.
This week, it was Snap’s turn to crack-
le and pop. Shares in the social media
group, which owns the Snapchat mes-
saging app, collapsed by 43 per cent on
Tuesday after an abrupt profit warning
blamed on wider economic conditions
that it said were worsening “further and
faster” than expected.
Analysts say that sentiment sur-
rounding the so-called Faangs — Face-
book (now Meta), Amazon, Apple, Net-
flix and Alphabet, owner of Google —
and the wider technology sector is at its
worst since the turn of the century,
when the dotcom boom turned to bust
and the tech-focused Nasdaq Compos-
ite index fell by 78 per cent between
March 2000 and October 2002.
A generation of high-flying entrepre-
neurs is experiencing such a downturn
for the first time. Evan Spiegel, co-
founder and chief executive of Snap,
was only ten years old when the dotcom
crash took hold two decades ago. His
personal fortune has declined by some
two thirds since last year to $3.6 billion,
according to Forbes.
Rampant inflation, escalating inter-
est rates and looming fears of recession
have conspired to form what Dan Ives,
managing director at Wedbush Securi-ties, likens to a category 5 hurricane. “A
lot of the technology darlings have
been absolutely annihilated as inves-
tors all head for the exit at the same
time,” he said.
The Nasdaq is down 23 per cent this
year. “I believe we’ve seen a bursting of
the tech bubble,” Ives said, although he
emphasised that the fundamentals of
many of the companies caught up in
the storm remain strong. “The froth is
getting thrown out, but the baby’s get-
ting thrown out with [it].”
For the biggest of the heavyweights,
this has been a painful process. Meta
Platforms might be spending billions
on the construction of virtual worlds,
but in the real one shares in the group
behind Facebook and Instagram have
declined by 42 per cent this year.
Netflix’s stock has slumped 67 per
cent this year to levels not seen since
2017, unravelling its extraordinary rally
at the onset of the Covid-19 crisis as the
streaming service lost millions of users.
Amazon, which surged as consumers
spent their money hand over fist online
two years ago, has fallen 35 per cent this
year as they start to tighten their belts
and return to the high street.
Only in January, Apple’s market
value swelled to an unprecedented
scale when it became the world’s first
$3 trillion company. Four months down
the line, the iPhone maker’s valuation
has contracted to $2.4 trillion. It even
fleetingly lost its crown as the world’s
largest public company to Aramco, the
state-controlled Saudi oil giant, before
reclaiming it last night.
The remarkable bull market rally
drove Tesla — long regarded by ardent
believers as a technology rather than an
automotive stock — higher than any
car manufacturer had gone before, as
its valuation accelerated above $1 tril-
lion. Its chief executive, Elon Musk, be-
came the world’s richest man. However,
shares in the electric carmaker have
dropped by as much as 49 per cent since
their peak last November, knocking
tens of billions of dollars off Musk’s per-
sonal fortune. Musk’s recent declara-Issa brothers on verge of walking away from Boots
India’s Reliance Industries and Apollo,
the private equity firm, have become
the frontrunners to buy Boots after the
Issa brothers indicated that they were
not prepared to pay the asking price.
The British health and beauty chain
has been put up for sale by Walgreens
Boots Alliance after the US parent indi-
cated that it wanted to focus on the
American market. The sale process has
been complicated by market volatility
caused by Russia’s invasion of Ukraine,
which has made buyers nervous about
raising expensive debt.
Boots has 2,200 shops and 550 opti-
cians, the majority of which require
some refurbishment, and employs51,000 people. Reliance and Apollo are
bidding together.
The Issa brothers and TDR Capital,
who together own EG Group and Asda,
had been considering buying Boots as
part of a strategy to improve Asda’s
pharmacy service. They have added
numerous partnerships to Asda, such
as with fashion brand In The Style, in
response to intense competition in Brit-
ain’s supermarket sector.
Bloomberg reported that the Issas
were considering pulling out of the
process after being asked to raise their
offer for Boots.
It is understood that Walgreens is
looking for between £6 billion and
£7 billion but that the Issas tabled an
offer of about £5 billion. It is not clearhow much the gap between the prices is
linked to the size of the stake that
Walgreens has offered to keep in the
business. Lord Rose of Monewden,
chairman of Asda and EG Group, told
The Times that the process for Boots
was “a bit like with a house — some-
times you want to have a look inside but
it doesn’t mean you are going to buy it”.
Industry sources said the Issas had
been very keen on the chain in earlier
rounds. One said that they were deter-
mined not to overpay in a difficult
market and that Boots’s pension deficit
would require substantial financial
support. Another said that the brothers’
interest was “hanging by a thread”, but
agreed that their wavering could also be
a negotiating tactic.Sources suggested that Walgreens
had a preference for the Apollo and Re-
liance consortium. It plans to expand
the chain into India, which could have
a future upside should Walgreens
maintain a stake. Sycamore Partners
continues to be named as an interested
suitor but it is not clear whether it has
secured financing for a deal.
6 LetterOne, the investment vehicle
backed by Russian oligarch Mikhail
Fridman, has appointed advisers at
Moelis to explore options on the future
of Holland & Barratt, the health foods
retailer, according to Sky News. Frid-
man, who is the subject of western
sanctions linked to Russia’s invasion of
Ukraine, bought the retailer for £1.8 bil-
lion in 2017.Ashley Armstrong Retail EditorTech stocks
Jul
2021Oct Jan
2022Apr-60-70-50-40-30-20-100102030%Source: RefinitvSource: Refinitv0100200300400500600700$800Netflix
Seven-day average of percentage change in the share price when
compared with its value in May 26 2021
Netflix
GoogleSnapTwitter
MetaAmazon2020 2021 2022Stranger things have happened
Covid-19
pandemic2020 2021 2022010203040506070$80Covid-19
pandemicTech stocks
Jul
2021Oct Jan
2022Apr-60- 70
-50- 40
-30- 20
- 10
0102030%Source: RefinitvSource: Refinitv0100200300400500600700$ 800Netflix
Seven-day average of percentage change in the share price when
compared with its value in May 26 202 1
Netflix
GoogleSnapTwitter
MetaAmazon2020 2021 2022Stranger things have happened
Covid-1 9
pandemic2020 2021 2022010203040506070$ 80Covid- 19
pandemic