FT : US warns Turkey of ‘consequences’ over military-linked exports to Russia

US warns Turkey of ‘consequences’ over military-linked exports to Russia
Washington seeks more action from Ankara in curbing trade pivotal to Moscow war machine

Washington has warned Turkey that there will be “consequences” if the country does not curtail its exports to Russia of US military-linked hardware that is vital to Moscow’s war machine. 

Matthew Axelrod, assistant commerce secretary leading US efforts to keep sensitive technology out of the hands of America’s adversaries, recently met Turkish officials and executives in Ankara and Istanbul as part of efforts to halt the illicit trade. His message, according to a senior commerce department official, was that Turkey must work harder to curb trade in American-origin chips and other parts that are pivotal for Moscow’s war in Ukraine. 

“We need Turkey to help us stop the illicit flow of US technology to Russia,” Axelrod said in a statement to the Financial Times. “We need to see progress, and quickly, by Turkish authorities and industry or we will have no choice but to impose consequences on those that evade our export controls,” he added.

Washington’s warning is the latest sign of how Turkey’s decision to retain strong trade ties with Russia has tarnished relations between the two Nato allies. The US, EU and other western partners have imposed sweeping sanctions on Russia since it launched its full-scale invasion of Ukraine in 2022, but Turkey has eschewed the curbs and increased trade with the country since the war broke out.

The US is particularly worried that Turkey has become a key hub through which western-made electronics, including processors, memory cards and amplifiers, are making their way to Russian missiles and drones in contravention of export controls. Machine tools are another significant area of concern.


US Treasury under-secretary for terrorism and financial intelligence Brian Nelson expressed frustration over Turkey’s trade in military-linked goods during a visit to the country late last year.

The US, EU, UK and Japan have joined together to target trade in about 50 categories of civilian products with military applications, which the allies view as a high priority for Russia’s war in Ukraine. Turkey is the world’s second-biggest source, behind China, of high-priority, US-origin goods sent to Russia, according to the commerce department official.

Axelrod told the Turkish government that this trade was an “urgent problem”, and called on Ankara to “adopt and enforce a ban on the transshipment of US controlled items to Russia”, the official said. He added that Moscow was “trying to exploit Turkey’s trade policy” to access US parts.

The commerce department has already added 18 Turkish companies to its “entities list” over this trade; this requires American companies to acquire rare licences to sell these groups sensitive parts. The commerce official said “you can expect to see more of that going forward unless and until there is progress”.

The Treasury department has separately sanctioned numerous Turkish companies for allegedly supplying Russia’s military-industrial complex.

Turkey’s trade ministry declined to comment on the US allegations.

Turkey’s exports of high-priority military-linked goods, sent to Russia or to suspected intermediaries for Moscow such as Azerbaijan and Kazakhstan, have boomed since the war began. It registered $85mn in the first six months of this year, well above the $27mn in the same period in 2022, according to FT calculations based on Turkish customs data. 


A large portion of these flows may be part of the “ghost trade” of goods that go missing and never enter the markets of the their purported destinations. The large rise in Turkish exports of sensitive goods to Azerbaijan, Kazakhstan and Kyrgyzstan has not led to a rise in imports of such goods reported in those countries.

Still, Turkey’s exports of military-linked goods appear to have eased somewhat from the highs set in 2023. The US Treasury has attributed this dip to an executive order by President Joe Biden’s administration which allows it to treat any foreign financial company transacting with a sanctioned Russian entity as though it is working directly with Russia’s military-industrial base.

The toughening stance has also sharply increased the costs Russia must pay to import US-origin goods from Turkey, according to the commerce official. He added: “There’s been some recent progress . . . but it’s not enough, because it’s still way too high.” 

>>> US After Hours Summary: LUMN +37.1%, INGN +22%, UPST +16.9%, FTNT +16.3%, CR

After Hours Summary: LUMN +37.1%, INGN +22%, UPST +16.9%, FTNT +16.3%, CRUS +10.1%, CART +8.2%, RPD +7.8% higher on earnings; ABNB -16.1%, VECO -14.6%, TREX -13.7%, SMCI -12.8% lower on earnings

After Hours Gainers:

Companies trading higher in after hours in reaction to earnings/guidance: LUMN +37.1%, INGN +22%, UPST +16.9%, FTNT +16.3%, VCYT +16.3%, ALTM +13.2%, CRUS +10.1%, AZPN +9.6% (also to reduce workforce by 5%; authorizes up to $100 mln for repurchases), RVLV +9.6%, GO +8.7%, CART +8.2%, SMWB +8.1%, RPD +7.8%, RUN +7.1% (also announces partnership with Tesla Electric), INSP +6.9% (also authorizes new $150 mln share repurchase program), EXEL +6.6% (also authorizes new $500 mln share repurchase program), VFC +6.6%, COOK +6.5%, OSUR +6.2%, AAOI +6%, HALO +5.9%, GCT +5.8%, AGL +5.6%, ANDE +4.8%, ARKO +4.8%, TMCI +4.5%, IFF +3.5%, AXON +3.4%, TEM +2.8%, WYNN +2.7%, ATGE +2.4%, WTI +2.4%, GMED +2.2%, DVN +2.1%, ZLAB +2.1%, AIN +1.9%, PR +1.8%, MTTR +1.7%, NHI +1.5%, IAC +1.4%, RLAY +1.4%, VTEX +1.2%, FSK +1%, GPRO +0.8%, LGND +0.8%, AWR +0.5% (also increases dividend), DVAX +0.5%, LOPE +0.4%, MOS +0.3%, ILMN +0.1%, OUT +0.1%,

Companies trading higher in after hours in reaction to news: SWIM +28% (acquires Coverstar Central), AGIO +13.9% (to receive $1.1 bln in milestone payments following FDA Approval of Vorasidenib), SWI +8.6% (to join S&P SmallCap 600), CRVS +8.3% (files $200 mln mixed shelf securities offering), RLAY +1.4% (files mixed shelf securities offering), NOG +1.3% (increases dividend), RXRX +0.9% (Genentech exercises option for the first Neuroscience Phenomap), BLNK +0.4% (announces strategic agreement with EVSTAR), CHMI +0.4% (files $300 mln mixed shelf securities offering), AUB +0.2% (files mixed shelf securities offering), LOGI +0.1% (names new CFO)

After Hours Losers:

Companies trading lower in after hours in reaction to earnings/guidance: STEM -44% (also names new CFO), EBS -35.5%, NVRO -19.7%, CYRX -16.8% (also announces $200 mln repurchase program and repurchase of $160 mln of convertible notes), ABNB -16.1%, VECO -14.6%, TREX -13.7%, SMCI -12.8% (also announces 10-for-1 stock split), ACAD -12.6%, TRIP -12.1%, AMSC -11.4%, PGNY -10.6%, FLYW -10% (also acquires Invoiced), HDSN -9.6%, ABCL -7%, TOST -6.3%, ASH -6.2%, CPNG -6.2%, MBC -6.1%, RDDT -5.1%, IRBT -5% (also names new COO), TDW -5%, RIVN -4.9%, RDFN -4.7%, ESTA -4.3%, JACK -3.8%, DVA -3.6%, ENLC -3.2%, QLYS -3.1%, ALAB -2.7%, AMGN -2.2%, BGS -1.9%, LAZR -1.8%, SHLS -1.8%, MASI -1.1%, MEG -1%, CRC -0.2% (also increases dividend), GPOR -0.1%, HL -0.1%, MRC -0.1%, NVEI -0.1%, PARR -0.1%

Companies trading lower in after hours in reaction to news: PRCH -15% (files new application to form and license a Texas reciprocal insurance exchange), PGEN -13.3% (commences $30 mln stock offering), EXPE -5.2% (in sympathy with weak ABNB earnings), MYO -3.7% (files $100 mln mixed shelf securities offering), BKNG -2.7% (in sympathy with weak ABNB earnings), RPTX -2.2% (files $350 mln mixed shelf securities offering), EHTH -2.1% (CEO to retire), PNTG -2% (files mixed shelf securities offering), ADCT -1.5% (files $300 mln mixed shelf securities offering), EHAB -1% (CFO to step down), NVO -1% (Wegovy no longer on FDA list for shortages), AGS -0.4% (stockholders approve acquisition by Brightstar), RKLB -0.3% (partners with Kongsberg Satellite Services), WEC -0.2% (enters into equity distribution agreement)

FT : Warner Bros Discovery looks to avoid break-up with smaller asset sales

Warner Bros Discovery looks to avoid break-up with smaller asset sales
Executives fear ‘years of legal challenges’ if TV and movie studio businesses are split

Warner Bros Discovery’s senior management is looking to avoid a break-up of the company as executives race to reverse the Hollywood group’s plunging share price, according to people familiar with the matter. 

Following a fall of almost 70 per cent in its stock price since WBD was formed in 2022, chief executive David Zaslav and chief financial officer Gunnar Wiedenfels have recently evaluated “all options” to arrest the decline, said two people familiar with the matter. 

However, senior executives who carried out a detailed analysis of the consequences of a split have determined that fencing off the group’s declining television channels from its streaming and studio business was not the best option at this time, according to people familiar with the discussions. 

The Financial Times reported last month that WBD — which owns HBO, the Warner Bros studio and CNN — was drafting a break-up plan. 

But while such a split initially looked “compelling on paper, it would create very significant operational challenges: doing sports rights deals, determining what goes on linear [television] or what goes on [direct to consumer streaming] and when”, said a person who was involved in the deliberations.

“In the best-case scenario, you’d be dealing with years of legal challenges”, the person added. 

A company spokesperson declined to comment.

Breaking up the storied Hollywood group would be likely to trigger lawsuits from debt investors, while also complicating the use of Warner’s content across various platforms and networks, said the people familiar with management’s thinking. 

A corporate break-up was viewed as the “nuclear option”, said another person close to WBD’s management, but they cautioned that the situation was fluid and circumstances could change. 

Zaslav and Wiedenfels are instead looking to offload smaller assets. They are considering offers to sell Polish broadcaster TVN or a stake in Warner’s video games business, which holds valuable intellectual property to Harry Potter games, said people familiar with the matter.

WBD’s management hopes investors will remain patient as they work to turn around the company, they said, believing its true market capitalisation should be about $60bn, or $25 a share, well above the $7.88 at which it closed on Monday. WBD’s stock was down another 5 per cent in late-morning trading on Tuesday.

The group was formed in April 2022 out of a merger that was meant to help two legacy media companies, Discovery and WarnerMedia, compete in a brutal streaming battle with Netflix and Disney. 

However, it has struggled to convince Wall Street, which has sliced its valuation and put pressure on WBD’s management, to take action. The company is set to report its quarterly earnings on Wednesday. 

Since the merger, the group has focused on cutting costs and paying off debt, introducing several rounds of lay-offs and selling assets such as All3Media, the UK production company behind Fleabag. 

Its news channel, CNN, last month laid off about 100 employees, or 3 per cent of its staff, as part of a digital turnaround strategy. While WBD’s management has been keen to sell assets, the bar for divesting CNN would be “very, very high” because of its strategic importance as well as the tax implications of a deal, said one person familiar with the matter. 

This person added that WBD considered it unlikely that there would be an offer compelling enough to offset these concerns.

“[Zaslav] has also been very clear that he views CNN as a strategic and reputational asset. It is one of the flagship networks that helps us on the affiliate side,” they said, referring to the payments cable companies make to television networks to run their programming. 

Overall, WBD “should be worth significantly more. It shouldn’t take another two to three years to get there,” the person said. “But the market is tough right now and a lot of things have to go well”. 

FT : China Evergrande liquidators launch legal action against PwC

China Evergrande liquidators launch legal action against PwC
Filings to Hong Kong court accuse Big Four auditor of ‘negligence’ in its work for collapsed Chinese property group

China Evergrande’s liquidators have launched court proceedings against PwC, accusing the Big Four auditing firm of “negligence” and “misrepresentation” in its work for the collapsed property group.

Lawyers for the liquidators started the legal process against PwC Hong Kong and PwC Zhong Tian, the firm’s mainland China arm, in March, court documents obtained by the Financial Times on Tuesday showed. The documents — which do not say how much money the liquidators might sue for — had not previously been made public.

The March filing with Hong Kong’s High Court, known as a writ of summons, lays the ground for a legal case that would add to PwC’s woes just as it braces for penalties from Chinese authorities over its work for Evergrande. PwC, which resigned as the property group’s auditor last year, had given it a clean bill of health for more than a decade before it collapsed.

The liquidators have also started court proceedings against international commercial real estate services company CBRE and advisory group Avista Valuation Advisory over valuation reports they produced about Evergrande and its subsidiaries in 2018, a separate court document seen by the FT showed.

China Evergrande was the world’s most indebted property developer when it defaulted on its international debts in 2021 with more than $300bn in liabilities. That precipitated a broader property sector cash crunch that sent shockwaves through China’s financial system.

The court filings on behalf of Evergrande’s liquidators, the Alvarez & Marsal restructuring specialists Eddie Middleton and Tiffany Wong, are a sign of how the developer’s collapse could have big consequences for the global professional services firms that helped enable its rapid rise.

In the filing against the PwC entities, lawyers representing the liquidators said the claims were for “losses and damages” in relation to “breach of contract, breach of duty . . . misrepresentation, negligence by, and/or unjust enrichment”.

The claim relates to a March 2018 PwC auditor’s report on Evergrande covering the year to December 2017, among other work for the developer and its subsidiaries, according to the filing. Such claims are typically time-barred if not started within six years of the events in question, said two lawyers with knowledge of the Hong Kong process.

Separately, PwC is facing a possible fine from Chinese authorities over its audit of Evergrande’s mainland businesses. China’s securities regulator said in March that its mainland property unit inflated revenues by $78bn in 2019 and 2020. Partners at PwC fear they could face some of the biggest penalties ever imposed on a Big Four firm in China.

The FT reported in February that Middleton and Wong were preparing to bring a claim against PwC over potential negligence.

A Hong Kong judge in January appointed the pair as Hong Kong-listed Evergrande’s liquidators after its plans for offshore restructuring failed. But restructuring specialists have said it is unclear how much the liquidators will be able to recover as most of Evergrande’s assets are in mainland China, which operates under a different legal system.

On Monday, Evergrande’s liquidators said in a filing to Hong Kong’s stock exchange that they had commenced court proceedings to “recover” funds including “dividends and remuneration” worth a total of about $6bn from its founder Hui Ka Yan and other top company executives.

Another court document obtained on Tuesday gave details of Hui’s global assets, whose worth it put at up to $7.7bn. Hui’s assets included two Rolls-Royce Phantom cars, three jets and two yachts as well as properties in London and Los Angeles, it said.

Hong Kong’s High Court last week lifted a confidentiality order it had imposed on court proceedings by Evergrande’s liquidators in the territory, the liquidators said in a stock exchange filing on Monday.

PwC and CBRE declined to comment. Avista did not immediately respond to a request for comment.

FT : KKR nears $800mn deal to acquire corporate PR firm from WPP

KKR nears $800mn deal to acquire corporate PR firm from WPP
Private equity group’s offer values FGS Global at about $1.6bn

Advertising group WPP is nearing a deal to sell its controlling stake in financial communications company FGS Global to private equity group KKR for about $800mn.

WPP could announce the deal as early as Wednesday when the group is due to report its next financial results, according to three people close to the talks.

Under the terms of the deal being discussed, WPP will sell its 50.5 per cent stake in FGS for about $800mn, giving the communications business an overall valuation of about $1.6bn. KKR will take its stake from about 30 per cent to about 80 per cent, with the company’s hundreds of partners and management holding the remainder.

Those close to the deal said it was important for partners to continue to own some of the equity as an incentive to stay. However, they cautioned that the deal had not yet been signed-off on Tuesday. WPP declined to comment. KKR did not immediately respond to requests for comment.

FGS — which was formed through the merger of London-based Finsbury, Frankfurt-based Hering Schuppener and Washington DC-based Glover Park Group — has close to 30 offices around the world serving more than 1,600 clients. The group generated about $450mn last year in revenue, making about $95mn in earnings before interest, tax, depreciation and amortisation.

By purchasing FGS, KKR is betting that it can continue to expand the business and find an exit opportunity in the coming years either to a buyer or to the public markets.

The financial communications industry has been undergoing a wave of consolidation as once domestic-focused businesses look to pool together services and provide comprehensive coverage to their roster of top business executives, corporations and financial groups.

However, not all deals have proven smooth with investments complicated by their reliance on star communications advisers who can bring in big accounts.

For example, private equity group CVC has faced difficulties with its 2019 investment in FGS rival Teneo after a series of scandals led to two of its three founders departing abruptly within months of each other during the pandemic.

The sale of FGS will be the first struck since the WPP chose Philip Jansen as its new chair last week. The move, which was first reported by the Financial Times, is expected to lead to fresh analysis of the future strategy of the company by Jansen, who has a long record of corporate activity at BT and Worldpay.

The deal will be a boost to the financial position of the advertising network, which has come under scrutiny in recent months given its relative underperformance compared with rivals such as France’s Publicis. 

But the deal will also revive talk about whether WPP’s share price is trading at a level that reflects the full sum of its various businesses, which span media, marketing, PR and advertising around the world. 

Increasingly, WPP is also positioning itself as a tech-focused company, employing artificial intelligence tools and data-led services for its clients to target specific groups of customers and to create campaigns faster and with greater effectiveness.

Those close to the talks said that FGS had become increasingly seen as non-core to the agency network, which already owns Burson, one of the world’s largest PR firms that comprises BCW and Hill & Knowlton under Corey duBrowa, former communications chief at Google. Other agencies within the network such as Ogilvy also offer PR services to their clients.

The FT revealed earlier this year that KKR had made an approach to take majority control of FGS. The private equity group acquired about 30 per cent of the business in a deal that valued Finsbury at close to $1.5bn in 2023. WPP remained the company’s majority owner under the deal, with about 50.5 per cent of the equity, with FGS employees owning the remainder. 

The deal might also delay plans to float the business in the next two years. Goldman Sachs has been advising WPP on the situation.

The Information : Klarna Weighs Secondary Share Sale Ahead of IPO

Klarna Weighs Secondary Share Sale Ahead of IPO

The Takeaway
• Goldman Sachs is advising Klarna on the potential share sale
• A sale would set a new valuation ahead of an expected IPO
• Rippling, Figma and Canva have also held secondary sales

Klarna, the Swedish “buy now, pay later” firm, has been preparing what would be one of next year’s first big tech initial public offerings. First it wants to see if investors think it’s worth more than the roughly $7 billion valuation awarded during its last fundraising.

The Sequoia Capital–backed startup has been in preliminary discussions with investment firms about their interest in buying shares held by existing shareholders, said a person approached by the company’s representatives and a person who has talked to the company’s leaders. Goldman Sachs is advising the 15-year-old company on the potential share sale, said a third person. Such a deal would likely value the company at $10 billion or higher, based on recent trades in the secondary market for private stock, as well as on where mutual funds have priced their shares.

A Klarna spokesperson didn’t respond to a request for comment.

A sale arranged by Klarna would add to a growing trend among mature startups. With the IPO market still largely dormant, startups including Figma, Rippling and Canva have arranged secondary sales that allow investors and employees to sell some of their stakes. A secondary sale arranged by Stripe early this year valued the fintech leader 30% higher than its prior fundraising.

The specific terms of the potential Klarna secondary sale haven’t been set, and the deal may not go forward, one of the people said.

If it does, the sale would allow Klarna to set a new price ahead of an expected IPO. Klarna neared a $46 billion valuation in 2021, during the peak of investors’ excitement over digital bank alternatives. After interest rates spiked, pummeling its business, the company slashed its valuation 85% in a new funding round the next year. Klarna’s board chair, former Sequoia leader Michael Moritz, argued that the valuation was at odds with the strength of the company’s business.

Klarna, which offers short-term credit to shoppers for relatively small online orders, mostly makes money charging fees to merchants such as H&M and Adidas. It has said revenue rose 29% in the first quarter to 6.4 billion krona, or about $600 million, as the company expanded from Europe further into the U.S.. It has saved money on marketing and customer service by using new artificial intelligence tools and has cut staff, bringing it closer to profitability.

The improved financial performance has emboldened some investors. Asset management giant BlackRock, which owns shares in Klarna, has marked up the value of its shares 59% since March last year, according to public filings. It valued its shares at a price that implies a valuation of $9.5 billion, according to Caplight. Javier Avalos, CEO of Caplight, said investors bought shares in Klarna at that valuation earlier this year, too.

The share sale would also potentially relieve some pressure from existing shareholders to sell soon after the typical six-month IPO lock-up period. Klarna CEO Sebastian Siemiatkowski has said the company is ready for an IPO.

Several other tech firms eyeing IPOs next year have already given shareholders a chance to cash out some of their holdings. They include British fintech Revolut, which told staff last week it would sell $500 million worth of shares at a $45 billion valuation, working with Morgan Stanley, the Financial Times reported. That would be an increase from the $33 billion valuation at Revolut’s last fundraising. Goldman Sachs has arranged similar sales for software firms Figma and Canva this year.

A higher valuation would burnish Klarna’s image after a drama-filled start to the year.

Matt Miller, a partner at Sequoia Capital, moved to oust longtime board member Moritz from the Klarna board of directors earlier this year after the two disagreed over efforts to change the company’s shareholder agreements in Sweden as it began preparations to go public. The move backfired, leading to Miller stepping down in favor of Sequoia partner and Moritz ally Andrew Reed.

Sequoia is Klarna’s largest outside shareholder and owns 20% of the company, according to the company’s annual report. Sequoia first invested in 2010.