TheChek News Flow

Messaging app’s CEO speaks out after being hit with preliminary charges related to the platform

Telegram chief executive Pavel Durov has spoken out for the first time since French authorities detained and charged him at the end of August over an alleged failure to address criminal content on the platform.

In a long post on the site on Thursday, Durov — who faces a litany of preliminary charges related to the company’s alleged lack of content moderation policies — said he was surprised by the decision to pursue him instead of starting legal proceedings against the company itself. If the French authorities needed assistance, he said, they “had numerous ways to reach me”.

Durov promised to ensure the platform moves to “significantly improve” its response to criminals using its service, blaming an “abrupt increase in user count” to 950mn for “growing pains”.

But he added the company is “prepared to leave markets that aren’t compatible with our principles”, and criticised the French authorities for their “misguided approach”.

Durov was detained at Paris-Le Bourget airport on August 24 when he arrived in France on his private jet from Azerbaijan, and interviewed by police over four days. He has been placed under formal investigation by a French judge and is required to remain in French territory.

Durov, a dual French-Emirati citizen, has pitched Telegram as an online safe haven insulated from government oversight. Yet the company’s hands-off approach to content moderation has led French prosecutors to accuse him of enabling money laundering, drug trafficking and the distribution of child sexual abuse.

In his post, Durov questioned the decision to hold him personally responsible for Telegram users, saying that “if a country is unhappy with an internet service, the established practice is to start a legal action against the service itself”.

“Using laws from the pre-smartphone era to charge a CEO with crimes committed by third parties on the platform he manages is a misguided approach,” he said, claiming he was a “frequent guest” at the French consulate in Dubai, where the company is headquartered.

Durov said he had previously responded to French authorities who wanted to establish a hotline with Telegram to deal with terrorist threats. He added that “claims in some media that Telegram is some sort of anarchic paradise are absolutely untrue. We take down millions of harmful posts and channels every day.”

Durov’s case has sparked a broader debate about the limits of free speech on online platforms, with Elon Musk, the owner of social media platform X, hitting out at French authorities over the move.

Brands hope air of exclusivity can convert high-spending clients to collectors

Luxury watch brands that, traditionally, relied on prime-property boutiques on high-end streets to attract clients are ramping up the creation of private spaces away from street level.

Independent watchmaker Audemars Piguet has led this shift; it introduced its first lounge-style AP House in Hong Kong in 2018, and has since set up another 19 around the world. Earlier in the summer, two Richemont-owned stablemates, Vacheron Constantin and A Lange & Söhne, joined this movement by opening their own private clubs in London.

Club 1755, a 200 sq metre lounge and bar five floors above the Vacheron boutique on Old Bond Street, could be mistaken as one of the city’s newest private members’ clubs. However, the presence of a watchmaker in the corner indicates it is something a little different.

While Club 1755 is part of Vacheron Constantin’s retail footprint in the UK, those invited in will most likely be existing customers whom the brand seeks to convert to collectors. It is the fourth such space to open, with others in Dubai, Los Angeles and Shanghai.

The sell may be cashmere-soft, but according to UK brand director Charlotte Tanneur Teissier, it is paying dividends. “Club 1755 is a sanctuary especially crafted for Vacheron Constantin’s collectors and a community of like-minded individuals,” she says. “Since its opening, we have seen an immediate success, with increased sales of exclusive pieces north of six digits, including Métiers d’Art and Cabinotiers [unique] pieces.”

Meanwhile, in June, A Lange & Söhne opened its own off-street presence, a salon in the charming surroundings of Bourdon House, in Mayfair, also the location of the Richemont-owned Dunhill menswear flagship store.

Lange opened its first such space in Geneva in 2021. “We had a good solid database, but we couldn’t find the street location and we thought we’d give it a try and see how it worked,” says chief executive Wilhelm Schmid. “Since the Bond Street boutique that was operated by [retailer] Wempe shut, in London, we have a very small location at Harrods, but we have a lot of customers in London that don’t want to go to Harrods, who want to have privacy,” he says.

Privacy and safety were also very much front of mind when Lange opened a space in San Francisco in April this year. “We wanted good presentation, but we didn’t want street level, because to operate a boutique on the street in San Francisco nowadays is not without challenges and our customers simply said to us, ‘We prefer to have it more discreet’.”

Schmid listened and opened a 414 sq metre space above fellow Richemont brand Van Cleef & Arpels. “From a capital expenditure point of view, these showrooms are really as expensive as a street project, but, of course, the lease is a lot less expensive upstairs than on the ground floor.” As a concept it suits the more developed client who in Schmid’s experience “understands more about the brand and wants more privacy than is available in almost all boutiques.”

Besides privacy, this type of environment also helps brands understand their top-spending customers better. “We don’t need 35 or 40 stores around the world, we could probably sell at least half the production from one store in Geneva,” says Peter Harrison, chief executive of Richard Mille Emea. “But if you do that, you’re not engaging. You’re not cultivating clients. You’re not getting to understand who your customers are, unless you get to spend some time with them and see what their likes and dislikes are.”

To that end, last October, the independent watchmaker opened Richard Mille St Martin, a 700 sq m site in Singapore. That the location was formerly a restaurant indicates that hospitality is as central to the concept as horology, and features a spacious library, sports bar, and patio. The brand has since identified a location in Dallas where it wants to open a similar operation.

But Harrison is at pains to stress that this hospitality-enriched retail model is not a replacement for traditional boutiques which benefit from huge footfall during certain times of the year. He believes landmark stores are crucial to the success of what is still a relatively new brand in a very long-established industry. “We still need to be in the right places to meet the right clients.”

“We’ve got an average price of just over SFr300,000. So, when someone comes in to buy a couple of watches, it’s a significant outlay, and you can’t be serving them from a kiosk.”

The highest profile player in off-street club retail remains Audemars Piguet. For chief executive Ilaria Resta, AP Houses are more expensive than boutiques in terms of cost, as they are typically much larger. “We do not to enter into the logic of productivity per square metre, which normally informs any retail choice.” Instead, she talks of different criteria, such as whether there is room for a piano — music is central to AP’s marketing — or enough space for a kitchen where popular local chefs can cook client dinners.

“l never look at the logic of retail when I look at the houses,” she says. “If we wanted to optimise the capital expenditure investment, then of course we would use one key architect doing all the houses in similar ways. Instead, each house is done by a different architect with different taste. Each project has its own identity and that is what I love about the houses.”

The majority of transactions still take place in boutiques, but Resta believes that “the depth of knowledge and understanding of watchmaking at AP Houses — and the privacy of the setting — allows for sale of the more complicated pieces”. She says that typically AP House sales start at around SFr100,000 and can include sonneries and grand complications watches. “There are definitely more high-end pieces purchased in a House.”

All of which is good news for Brian Duffy, chief executive of Watches of Switzerland. In 2018, AP started pulling out of all multibrand retailers in order to focus on its own stores, but WoS is partnering with the brand in the latest AP House in Manchester. “It is a joint venture — we each own a considerable percentage,” says Duffy of the project that is expected to be completed in March next year. AP has the larger share of this project, and while Duffy declines to reveal the exact percentages, he says that WoS has “what you could call a marginal minority”.

He is very optimistic about this, not least because “AP has no distribution outside London”. More important, he believes, it offers “a very reliable return on investment, because of the nature of the demand for the product. AP remains super hot. Everything is on allocation or registry of interest, so it is a very easy business to predict.”

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Some predict a 15% tax cut will boost American jobs and wages, but others worry about administrative burdens and gamesmanship

On Thursday, Donald Trump pledged to New York’s business elite that he would “once again turn America into the manufacturing superpower of the world.”

To do so, he said, he would cut the corporate tax rate to 15% from 21% for companies that make their products in the U.S., and expand tariffs on foreign-made goods.

The proposal raised immediate questions from economists, corporate leaders and others. Among them: What counts as American-made? And would his plan spur manufacturing, or launch a costly trade war?

The benefit would be “solely for companies that make their product in America,” Trump told a lunchtime audience at the Economic Club of New York. “If you outsource, offshore or replace American workers, you are not eligible for any of these benefits. In fact, you will pay a very substantial tariff when a product comes in from another country.”

The proposed tax cut would revive a type of perk that Trump’s 2017 Tax Cuts and Jobs Act eliminated. Before that law, the U.S. had a tax break that amounted to a special lower rate for domestic manufacturers. Companies could deduct 9% of their domestic-production income, effectively reducing their tax rates to as low as 31.85% from 35%. At the margins, targeted tax breaks can encourage companies to engage in preferred activities, but they can also reward companies for doing what they were doing anyway.

The old provision led to disputes over what, exactly, counts as domestic production. Congress repealed the domestic-production deduction in the 2017 law, choosing instead to lower the corporate tax rate across the board.

Some economists said Trump’s new proposal would likely spark a similar debate, though they added it was hard to judge the idea without more detail.

“Part of the problem is policing the definition of what constitutes manufacturing,” said Rebecca Kysar, a tax-law expert and professor at Fordham School of Law and a former Treasury Department official in the Biden administration. Under the provision repealed by the 2017 law, companies that wouldn’t normally be thought of as manufacturers were able to take advantage of the break, including Starbucks, because roasting beans qualified as manufacturing, Kysar said.

In one court case, a company that assembled chocolate and cheese for gift baskets was able to argue successfully that this counted as a manufacturing activity and therefore qualified for the break, Kysar added. “There is potentially lots of gamesmanship that companies can take advantage of,” she said.

While Trump didn’t say what share of a product would need to be U.S.-made to qualify for the tax break, he suggested it would be high. “My message is simple: Make your product here in America and only in America,” he said. “We are not going to be taken advantage of anymore.”

Vice President Kamala Harris, the Democratic nominee, has proposed increasing the corporate tax rate to 28%.

Trump’s proposal could add an additional administrative burden by requiring companies to prove where their underlying components come from, said Stephen Brown, deputy chief North America economist for Capital Economics, an analysis and consulting firm. This would be trickier for manufacturers of complex equipment, such as machinery, and for small companies, he said.

“The key beneficiaries could be companies making either simple products or products that would be unlikely to be imported in the first place,” he said, such as packaged food already using domestic agricultural ingredients.

A variety of U.S. laws and regulations on the books already provide benefits to companies that manufacture domestically or in North America. Under the United States-Mexico-Canada Agreement, the successor trade pact to the North American Free Trade Agreement, auto companies can qualify for tariff-free trade if a certain share of their components are originally manufactured in the U.S., Canada or Mexico. The Bipartisan Infrastructure Law, signed by President Biden in 2021, requires U.S.-produced iron, steel and construction materials in projects receiving funding.

Trump on Thursday proposed additional measures to boost domestic manufacturing and corporate research, including immediate writeoffs for capital expenses and an expanded tax credit for research and development.

Trump’s proposals drew support from some of the investors and business executives who attended Thursday’s lunch.

“I think if you combine tariffs to make it more attractive for manufacturers to build in America versus abroad, and combine that with a modest tax incentive, I think that will bring more manufacturing back to the U.S. and have a positive impact on jobs and wages,” said John Paulson, the billionaire hedge-fund manager and Trump fundraiser. Trump and his allies have considered Paulson for the post of Treasury secretary.

Another attendee, Joe Brusuelas, chief economist at RSM, a consulting firm, said the proposal was too vague to be judged.

“We are in the part of the campaign where we are getting competitive political messaging rather than compelling policy proposals,” he said. When Trump described the proposal, “The first thing I thought was, does that mean they only produce in the U.S.? What does this mean for Boeing?” Brusuelas said. Some of the company’s parts are manufactured overseas.

Some U.S. manufacturers said they welcomed the policy, but still had questions about how the tax cut would be structured, and which companies might qualify for it.

Lisa Winton, chief executive of Winton Machine, a 40-person machine manufacturer based outside of Atlanta, said some of the company’s competitors produce most of their components overseas and do only the final assembly of products in the U.S. “Could those companies still take advantage of the tax cut?” she wondered. “There are so many questions around it,” she said.

Kip Eideberg, senior vice president of government and industry relations at the Association of Equipment Manufacturers, a trade group, said many companies were still parsing Trump’s proposal, and looking for clarity on which businesses might qualify for it.

The top concern among his organization’s members hasn’t been the overall corporate tax rate, but the tax treatment for research and development spending, which got less generous starting in 2022 because of a provision in the 2017 tax law. Manufacturers also worry about the prospect of a wider tariff war.

“We would take the current rates over that any day of the week,” Eideberg said.

How Miners Regained Their Appetite for Deals

Over the first eight months of 2024, mining companies announced more than $48 billion in pending and completed deals

When Jakob Stausholm became chief executive of global miner Rio Tinto almost four years ago, big M&A wasn’t on his mind.

“I didn’t feel we were ready for it,” recalls Stausholm. Today, “I think we are in a different place and so we could do it.”

Over the first eight months of 2024, mining companies announced more than $48 billion in pending and completed deals, roughly 8% more than a year earlier, according to data provider Dealogic.

It’s only been bettered once since 2012 when the transfer of a $15 billion stake in China’s Jiangxi Copper from one state-owned entity to another boosted the value of deals in the same period of 2022 to $58 billion.

Mining companies are flush with cash after the Covid-19 pandemic prompted a wave of stimulus spending on infrastructure, which requires commodities such as steel. Investment in the energy transition, spurred by programs such as the Inflation Reduction Act in the U.S., has fed demand for copper and other critical minerals. Gold has also proved to be a popular bet, as investors seeking a hedge against geopolitical turbulence pushed prices of the precious metal to a record high.

This has created an opportunity for miners to get a sugar hit from buying mines, rather than run the gauntlet of securing permits from authorities to build their own. In countries including the U.S., many projects are advancing slowly due to environmental and community concerns.

But M&A comes with its own challenges. Big deals often require big premiums as BHP Group encountered when it unsuccessfully pursued a $50 billion bid for Anglo American this year.

Two months later, BHP agreed with Lundin Mining to jointly acquire Canadian copper explorer Filo for roughly $3 billion.

“Obviously it’s an order of magnitude different in terms of the scale of the opportunity,” said BHP Chief Executive Mike Henry, insisting that M&A isn’t being prioritized at the world’s biggest miner.

The list of companies doing deals reads like a who’s who of global mining.

Last month, Arch Resources and Consol Energy, two of the biggest U.S. coal companies by production, agreed to combine to create a new $5.2 billion entity called Core Natural Resources. The companies said the deal would result in a stronger, more diverse coal giant to navigate evolving world energy markets.

Also in August, South32 completed the sale of an Australian coal operation for up to $1.65 billion, while Whitehaven Coal struck deals to sell a 30% share in an Australian coal mine it recently acquired to a pair of Japanese steelmakers for $1.08 billion.

That same month, South Africa’s Gold Fields inked a deal for Canada’s Osisko Mining worth about $1.6 billion, and lithium miner Pilbara Minerals agreed to buy Latin Resources in a deal that values the Australia-listed explorer at roughly $378 million.

The industry appears to be spending much more time discussing deals than in years prior, said Owen Hegarty, executive chairman of EMR Capital, a specialist mining private equity firm. “And plenty more to come,” he said.

Still, deal activity in the sector remains off its peak. The value of pending and completed mining deals announced this year is half what it was in 2012 when a China-led mining boom led to a flurry of acquisitions.

That spending spree ended with big write-downs that upset investors and made executives reluctant to pursue meaningful acquisitions for the better part of a decade. Miners say they are taking a more measured approach to dealmaking this time around.

After fending off BHP, Anglo American is pushing forward with sales of several assets, including some Australian coal operations.

“We expect further consolidation in coal, with a sale of Anglo’s coal business possible in or before 4Q,” Jefferies analyst Christopher LaFemina said in an Aug. 24 note. “More M&A in copper is likely as well.”

Not all deal talks have been successful. In February, miner Lynas Rare Earths said it had held—and ended—discussions with MP Materials, which operates the Mountain Pass rare-earths mine in California.

The quality of a mining company’s reserves is a critical part of its success, and consolidating the two rare-earths miners’ assets was strategically appealing, said Lynas Chief Executive Amanda Lacaze.

“What you should never do is just sit there and say, ‘We’re the best, forget the rest,’ right? That’s just stupid,” she said.

Rio Tinto needed more than just a strong balance sheet to return to the deal table. Stausholm took the top job in 2021 seeking to repair the miner’s reputation with investors, lawmakers and indigenous groups following the destruction of two ancient rock shelters in Australia.

Jefferies’s LaFemina said Rio Tinto would be smart to consider large-scale M&A in copper, especially if metal prices remain under pressure for an extended period of time.

Stausholm, however, said he is treading carefully.

“There are good deals and there are bad deals and, unfortunately, all statistics are telling you that there are more bad deals than there are good deals,” he said. “So you just have to be very, very cautious.”

Seven & i Holdings says price is too low, and markets watch for possible raised bid

TOKYO—The Japanese company that operates 7-Eleven convenience stores worldwide has rejected a $39 billion takeover offer by the Canadian owner of Circle K stores, saying the bid is too low.

Tokyo-based Seven & i Holdings SVNDY -3.90%decrease; red down pointing triangle said Friday the offer by Canada’s Alimentation Couche-Tard ATD 1.32%increase; green up pointing triangle significantly underestimated the value of the company and its potential. Seven & i also said the proposal didn’t sufficiently address regulatory issues including a possible antitrust challenge in the U.S., where both companies have large store networks.

Alimentation Couche-Tard offered to acquire all shares outstanding of Seven & i at $14.86 a share in cash, according to Seven & i. That would put the value of the deal at about $38.7 billion.

The approach by Couche-Tard proposed bringing together two of the world’s biggest convenience retailers. The 7-Eleven chain is a fixture of everyday life in Japan and other Asian countries, as well as a household name and cultural touchpoint in the U.S.

Couche-Tard, or “night owl” in French, has been snapping up competitors around the world and now runs thousands of stores in North America, Europe and Asia. Its best-known brand in the U.S. is Circle K.

The bid is a rare attempt by a foreign company to gain control of one of Japan’s biggest and best-known companies. Japanese officials have told companies that they need to take acquisition proposals seriously, rather than quash them without a response as was the custom for many years.

In line with the government’s guidance, Seven & i set up a special committee of outside directors headed by veteran retail executive Stephen Hayes Dacus to examine the offer, and it said it was open to any proposal that would benefit Seven & i shareholders and other stakeholders.

However, the Japanese company said in a letter to Couche-Tard, “we will resist any proposal that deprives our shareholders of the company’s intrinsic value or that fails to specifically address very real regulatory concerns.”

A representative of the Canadian company didn’t respond to a request for comment.

Seven & i shares swung after Friday’s announcement, rising early in the trading session before falling back. The shares were trading at 2,127 yen, equivalent to $14.88, in the afternoon. The stock price closed at ¥1,761 on the last trading day before the offer’s existence was made public.

Masayuki Kubota, a strategist at Rakuten Securities, said he believed the Seven & i board had a strong argument that an acquisition would be a “shackle on Seven & i’s ability to grow.”

Although both companies operate convenience stores, Couche-Tard’s revenue largely comes from gas stations in North America, while Seven & i has expertise in food products and logistics, Kubota said. Because of the different business models, Couche-Tard’s management wouldn’t necessarily be able to improve Seven & i’s results, he said.

Seven & i has faced pressure from some foreign shareholders in recent years to raise profitability and focus on its core convenience-store business. In response, the company has shed some other businesses. It sold department store operator Sogo & Seibu last year and is considering listing its supermarket business.

Masahiro Ichikawa, a strategist at Sumitomo Mitsui DS Asset Management, predicted Couche-Tard would return with a higher offer. “The ball is now in the hands of the acquirer,” he said.