Companies in the news ... and how they were assessed
Gkn/melrose: gruesome meddling
What frightens the biggest company bosses, asked Sean Farrell in The Observer. Parliamentary committees. This week there was further evidence of the willingness of MPS to get stuck in to blue-chip companies, as they hauled in big cheeses from GKN and Melrose for a grilling about a highly politically charged takeover battle. Melrose, a turnaround expert, “admits its £7bn bid for GKN is hostile”, said Matthew Vincent in the Financial Times, “but some politicians now deem it positively gruesome”. In a cross-party letter to the Business Secretary, Greg Clark, 16 MPS have called for the deal to be blocked to prevent the aerospace and automotive engineer from being “dismembered”. Never mind that under CEO Anne Stevens’s (pictured) defensive plan (“Project Boost”) GKN “has already promised to cut itself in two even sooner than Melrose might”. The credit rating agencies don’t like the sound of that: Moody’s has downgraded GKN to “negative”. On the other hand, the Pensions Regulator has expressed concerns that GKN’S pension scheme could be weakened by a Melrose takeover. This saga will probably “end in a break-up, whoever wins”, said Jim Armitage in the London Evening Standard. Meanwhile, shareholders can “sit back and enjoy the ride”. GKN shares are up 31% since it got started, “and there’s a good chance Melrose will put a bigger offer on the table yet”.
Spotify: float on
The Swedish digital jukebox “has already won over the music industry and listeners worldwide”, said Ben Sisario in The New York Times. “Now it is ready to test its business model on Wall Street.” Spotify has confirmed it is preparing for one of the most hotly “anticipated” tech flotations in years. It’s also one of the most punchy. The outfit, co-founded by Daniel Ek and Martin Lorentzon in 2006, has been valued as highly as $23bn in the private market – even though losses have been mounting in tandem with its growth, drifting up to $1.5bn last year. Spotify is also taking a risk on how it goes public. The decision to go for a rare “direct listing” (in which no new stock is issued) instead of a traditional IPO cuts out Wall Street banks, meaning “the listing could face a rockier reception in markets”. Spotify has 71 million paying subscribers (up 46% year over year) said Josh Constine on Techcrunch. It faces an “unbelievably crowded field of competition” from Apple, Google, Youtube and Soundcloud, but a “key” differentiator is its Echo Nest music recommendation technology, which acts like “a personalised mixtape” for devoted users. Spotify may be an underdog “surrounded by tech’s titans”, but it has made itself indispensable to the music biz. “This jukebox sounds worth your dime.”
Beaufort Securities: Mcmafia-esque?
The collapse of the failed City broker Beaufort Securities, amid fraud and moneylaundering allegations, threatens some 14,000 retail investors, said the Daily Mail. But could the collapse have been avoided? According to The Times, the Financial Conduct Authority was warned last summer that Beaufort was not acting in the best interests of clients. Last week, it finally called time on the “insolvent” brokerage, freezing some £800m in assets – even as prosecutors in New York charged two individuals at the firm, and four alleged co-conspirators, with running a “pump and dump” share manipulation scheme and attempting to launder the proceeds. According to US prosecutors, the defendants tried to launder £6.7m through the purchase of a Picasso painting, on behalf a “client” who turned out to be an “undercover agent”, said Iain Dey in The Sunday Times. It’s a colourful tale, but doesn’t do much for the City’s reputation abroad. “Rightly or wrongly, our capital is seen as a haven for money laundering” – a perception doubtless heightened by the success of the BBC TV drama Mcmafia. If we are to succeed in “the post-brexit universe”, the City needs to clean up its act.
WPP: fugly figures
“2017 for us was not a pretty year,” noted Sir Martin Sorrell, as he delivered advertising giant WPP’S results last week. Too right, said Daniel Grote on Citywire. Shares in the group slumped 14% as it dished up its “worst annual performance since the financial crisis” and warned of “flat growth” this year. “The intriguing part, however, was Sorrell’s explanation,” said Nils Pratley in The Guardian. He blamed cost-cutting by big multinational clients, rather than attempts by Google and Facebook “to cut out agencies by luring advertisers directly to their doors”. Belt-tightening is certainly part of the story, but Sir Martin looks in denial. He seems to think the tech titans regard advertising agencies as partners. “Good luck” with that.