Companies in the news ... and how they were assessed
Wonga: reversal of fortunes
Once a “poster child” for the excesses of the payday loan industry, the pendulum has swung all the way for Wonga, said Richard Partington in The Guardian. The company, which recently got a £10m emergency cash injection from investors, is on the verge of collapse following a deluge of compensation claims: it has reportedly lined up accountants Grant Thornton to handle a potential administration. The claims relate to loans taken out before 2014, when public outrage at what MPS called “legal loan-sharking” prompted regulators to cap the cost of credit, pushing smaller firms out of the market. Wonga, which charged annualised interest of 1,509%, was first in the firing line. Campaigners claimed it was targeting “vulnerable customers with slick marketing”; the Archbishop of Canterbury accused it of destroying lives. The cap didn’t put Britain’s biggest payday lender out of business, but it sent it “spiralling into the red”, said Chris Johnston on BBC Business online: “a huge reversal” given Wonga had a profit of £84m in 2012. The privately-held company has tried to turn things around under new management led by Tara Kneafsey, said Harry Wilson in The Times. Can she hang on? Many doubt it.
J. Sainsbury/asda: dismal merger? Saudi Aramco: on-off mega-float
When Sainsbury’s boss Mike Coupe was asked in 2015 whether the big four supermarkets “could go down to three”, he dismissed the idea as “unlikely”, saying competition authorities would never allow it. Three years on, said Oliver Shah in The Sunday Times, and Coupe is lobbying for the £12bn merger of Sainsbury’s (Britain’s secondbiggest supermarket) with Asda (its third). Last week, the Competition and Markets Authority launched a formal investigation. The crucial factor is likely to be whether the watchdog deems Aldi and Lidl – the German discounters that have doubled their market share since 2010 – to be viable competition. Sainsbury’s and Asda have produced all sorts of “specious maths” to disguise the fact that this deal would mean “Sainsda” and Tesco sharing 58% of the UK groceries market, said Neil Collins in the FT. “The scope for this duopoly to beat up suppliers while gouging customers” was illustrated by the jump in Sainsbury’s shares when news of the deal broke. But even if the grocers manage to “bulldoze” it through, the “enthusiasm” may be misplaced given the dismal record of “defensive mergers”. Sainsbury’s and Asda have yet to find an answer to the “Lidldi” threat, let alone Amazon’s arrival in food retailing. Sheer size alone is unlikely to cut it.
It was billed as “the biggest ever stock market launch” – and London “has bent over backwards” to welcome it, even watering down listing regulations to win the business, said Mark Shapland in the London Evening Standard. But will the $2trn float of Saudi Arabia’s national oil company, Aramco, ever actually take place? Last week, the Saudis dismissed reports that they had shelved a plan to sell 5% of the oil giant and had dismissed advisers because “they’d run out of things to do”. The float, they said, would take place at a time of their choosing “when conditions are optimum”. Yet investors, who had been expecting an IPO this year, are beginning to lose faith in that commitment, said The Economist. The Saudis say they need more time for Aramco to complete its planned purchase of the petrochemicals company Sabic before they can concentrate on the float, which had been the “cornerstone” of Crown Prince Mohammed bin Salman’s “Vision 2030” initiative to move the Saudi economy beyond oil. But suspending the IPO will make potential investors – their confidence already dented by a high-profile crackdown on dissent – even “more cautious about the kingdom’s transformation”.
Goldman Sachs: squids in
“We’ve seen the future of banking” and, in Britain, it seems to be centred on a handful of fintech firms clustered around “Silicon Roundabout” in London, said Patrick Collinson in The Guardian. But while upstart digital banks such as Monzo and Revolut are busy seducing millennials, a new rival has quietly stolen in. The arrival in Britain of Marcus – an offshoot of Goldman Sachs – “turns the conventional fintech story upside down”. Marcus’s savings accounts have already “garnered $20bn in deposits” in America and, if reports of a 1.5% easy-access interest rate are true, it will jump straight to the top of the UK’S best-buy tables. Marcus is clearly “hoping to mix the muscle of Goldman Sachs with the fleet-footedness of a branch-free start-up”. But it will have to tread carefully: UK regulators don’t tend to like “big beasts” elbowing out minnows.