>>> Europe : Brokers Upgrades & Downgrades - 12th of June 2024

>>> Up
* Credit Agricole Raised to Buy at Jefferies; PT 21.60 euros
* Exel Composites Raised to Accumulate at Inderes
* Fnac Darty Raised to Neutral at Oddo BHF
* KGHM Raised to Neutral at JPMorgan; PT 140 zloty
* Saipem Raised to Add at AlphaValue/Baader

>>> Down
* Birkenstock Cut to Neutral at Goldman; PT $58
* Gofore Cut to Reduce at Inderes; PT 26 euros
* Greenvolt Cut to Neutral at Oddo BHF
* Paramount Global Cut to Underweight at Wells Fargo; PT $9

>>> Initiation
* AMD Rated New Buy at Edward Jones
* Arverne Group Rated New Outperform at Oddo BHF; PT 9 euros
* St James's Place Reinstated Buy at Peel Hunt; PT 750 pence

>>> Call
* Credit Agricole Raised at Jefferies on Pullback in French Banks

>>> What to look at today - 12th of June 2024

Asian stocks declined, shrugging off Wall Street’s gains, as the double-whammy of an upcoming US inflation report and the Federal Reserve decision kept traders on edge.   Hong Kong’s equity benchmark fell more than 1%, with auto shares leading the decline ahead of Europe’s tariff decision. Stocks also dropped in Japan while those in India climbed. Contracts for US shares were little changed after the S&P 500 closed at a new high, buoyed by a rally in Apple Inc.   Treasuries steadied after rising on a solid $39 billion sale, which reflected speculation that Wednesday’s inflation reading will help make the case for the Fed to cut rates this year. Demand in an auction of 10-year debt was strong, with the bid-to-cover ratio of 2.67 being the highest since February 2022. Australian bonds nudged higher.  In key Asian data, China’s consumer price gains held above zero in May while factory-gate prices remained stuck in deflation, fueling concerns over persistently weak demand. Separately, the Biden administration is said to be considering further restrictions on China’s access to chip technology used for artificial intelligence.  US monetary policy continues to be the single most critical input for traders in Asia even with India’s post-election volatility, central banks in Japan and Taiwan gearing up for their own rate decisions and various Southeast Asian currencies testing key support levels.  A Bloomberg index of dollar strength steadied near this year’s high. Asian currencies traded in tight ranges against the greenback.  The Fed is widely expected to hold borrowing costs at a two-decade high on Wednesday, but there’s less certainty on officials’ quarterly rate projections, known as the “dot plot.” 
The projections “could potentially be a major market moving event especially if the dots only show one rate cut in 2024 instead of two which seems to be the street consensus view,” said Nomura strategist Chetan Seth.  The new dot plot likely will indicate two 25-basis-point cuts this year, compared with three in the March version, according to Bloomberg Economics. The economists expect the May CPI print to give the Fed some additional reassurance that inflation is slowing.  In commodities, oil held a two-day gain after industry data pointed to shrinking US crude stockpiles ahead of a report from the IEA on the market outlook. Copper rose from its lowest close in seven weeks.  US After Hours ORCL +10.5% higher on earnings and partnerships; CASY +6.4% higher on earnings

Nikkei -0.52% Hang Seng -1.19% CSI +0.04% Shanghai +0.29% Shenzen +0.59%

Eur$ 1.0738 CNH 7.2693 CNY 7.2536 JPY 157.21 GBP 1.2740 CHF 0.8978 RUB 89.2472 TRY 32.3820 WTI$ 78.33 +0.55% Gold 2,314 -0.14% BTC 67,525 +0.36% ETH 3,523 +1.01%

S&P +0.06% Nasdaq +0.10% EuroStoxx +0.36% FTSE +0.44% Dax +0.33% SMI +0.32%

Macro :
- G7 Nations to Express Concerns on Chinese Overcapacity: Nikkei

Keep an eye on :
- Aero Mexico IPO : Aeromexico Investors Said to Seek Up to $500 Million in US IPO
- ATO FP : Atos in Exclusive Talks With Alten for Sale of Worldgrid
- GBF GY : Bilfinger Widens FY Ebita Margin Forecast
- BA US : Boeing Deliveries Falter as China Compounds 737 Max Woes
- COLR BB : Colruyt FY Gross Margin Beats Estimates
- EDPR PL : EDP Gets Contract to Sell Energy From Storage Facility in Canada
- EMBRACB SS : Embracer Closes Divestment of Gearbox Entertainment to Take-Two
- ENX FP : Euronext Says No Changes to AEX Index
- EVT GY : Evotec Gets $20M Research Payment From Bristol Myers Squibb
- GMAB DC : Genmab’s Gersel Pedersen Sells Shares for DKK3.8 Million
- ITM IM : Italmobiliare Holder Cemital Offers Shares: Terms
- KAR SS : Greenoaks, Long Path Have Got Regulator Go-Ahead on Karnov Offer
- LDO IM : Leonardo Says Talks With KNDS for Strategic Alliance Halted
- MITRA BB : Richter Agrees to Acquire Assets From Mithra Pharmaceuticals
- AERO SW : Montana Aerospace to Sell E-Mobility Unit to Mengtai Germany
- OMV AV : OMV’s Borealis Names Stefan Doboczky as CEO From July
- ORCL US : Oracle Jumps After Results, Deals Validate Cloud Effort --> +11%
- PRX NA : Prosus Sees Core HEPS From Total Ops Per N Shr Up 107.7%-115.4%
- PRU LN : Prudential Names Grace Park Chief Data, Analytics & AI Officer
- RUI FP : Rubis Minority Shareholder Loses Bid to Change Supervisory Board
- SPM IM : Eni Launches Sale of 10% of Saipem Worth €410 Million - Eni Completes Sale of 10% Saipem Stake at €1.970/Share
- STM GY : Stabilus FY Revenue Forecast Misses Estimates
- TRUEB SS : Truecaller Holders Peak XV, Kleiner Perkins Offer Shares: Terms
- UMI BB : Umicore Cuts FY Adjusted Ebitda Forecast, Misses Estimates
- VOW GY : Mexico Accepts Volkswagen Revision Under USMCA: Economy Min.
- VOW GY : Porsche, VW Deserve Full-Time Drivers at the Wheel: Chris Bryant

WSJ : Elon Musk’s Boundary-Blurring Relationships With Women at SpaceX

Elon Musk’s Boundary-Blurring Relationships With Women at SpaceX
The billionaire founder had sex with an employee and a former intern, and asked a woman at his company to have his babies

When Elon Musk personally contacted a former SpaceX engineering intern to discuss a role on his executive staff in 2017, the woman spoke with excitement to her friends about a high-profile problem-solving role at the rocket company, a dream for someone a few years out of college.

She and Musk had met years earlier during her internship, when she was still in college. She’d approached him with ideas for improving SpaceX. Her outreach had led to a date, which led to a kiss, and eventually sex, she told friends. The year after her internship, the billionaire had the fresh college graduate flown out to a resort in Sicily, before they ended things, according to documents reviewed by The Wall Street Journal.

Musk, who is more than 20 years her senior, attempted to restart their relationship but she rejected his advance. They remained close as she tried to establish herself in the new job.

He texted her often and invited her to come over to his Los Angeles mansion at night on multiple occasions. Sometimes she accepted his invitations, but friends said she told them at the time that his behavior made her job harder.

She eventually moved off Musk’s executive team, according to friends she told and to people familiar with her time at SpaceX. The woman left the company in 2019.

Her lawyers, who also represent Musk, provided the Journal with two affidavits signed by the woman. The affidavits disputed some aspects of the Journal’s reporting but confirmed many others, including that she had a romantic relationship with Musk in the past. She said she invited him to dinner near the end of her summer internship and broke things off the following year.

She said at no point during employment at SpaceX from 2017 to 2019 was there any “romantic relationship” with Musk.

“Nothing that Elon Musk did towards me during either of my periods of employment at SpaceX was predatory or wrongful in any way,” the woman said.

She is one of several female employees at SpaceX who have told friends, family, or the company itself, that Musk showed them an unusual amount of attention or pursued them.

One woman, a SpaceX flight attendant, alleged that in 2016 Musk exposed himself to her and offered to buy her a horse in exchange for sex acts.

Another woman who left the company in 2013 alleged in exit negotiations with SpaceX human resources and legal executives that Musk had asked her to have his babies.

A fourth woman had a month-long sexual relationship with Musk in 2014 while she directly reported to him. The relationship ended badly, leading to recriminations over text and email as she left the company and signed an agreement prohibiting her from discussing her work for Musk.

Former SpaceX executives, as well as fired SpaceX employees who complained to the National Labor Relations Board in 2022, say a high-level group around Musk fails to apply his company’s own rules to the CEO, contributing to a culture of sexism and harassment.

They say there’s an understanding that Musk, a charismatic leader with many fans who call him a genius, can act with impunity. “Elon is SpaceX, and SpaceX is Elon,” one former engineer recalled an executive saying during a June 2022 meeting after the firings of some of the SpaceX employees, who had criticized Musk and demanded greater accountability at the company.

Musk, who is one of the richest men in the world, leads companies including the publicly traded electric-vehicle maker Tesla, rocket-maker SpaceX and social-media platform X.

SpaceX has won billions in federal contracts, and is key to NASA and Pentagon space programs. Tesla, meanwhile, is holding a shareholder vote that closes on June 13 over Musk’s $46 billion pay package, which was struck down by a Delaware court in January because of concerns about the approval process.

Musk didn’t reply to requests for comment.

Gwynne Shotwell, SpaceX’s president and chief operating officer, said the Journal’s reporting doesn’t reflect SpaceX’s culture.

“The untruths, mischaracterizations, and revisionist history in your email paint a completely misleading narrative,” she said. “I continue to be amazed by what this extraordinary group of people are achieving every day even amidst all the forces acting against us. And Elon is one of the best humans I know.”

She said SpaceX fully investigates all complaints of harassment and takes appropriate actions.

Other behavior by Musk, including his use of illegal drugs, has raised concerns among some executives and board members of SpaceX and Tesla, according to previous Journal reporting. Musk has used drugs including LSD, cocaine, ecstasy, mushrooms and ketamine, at times with some board members, the Journal has reported.

An attorney for Musk, Alex Spiro, said at the time that Musk is “regularly and randomly drug tested at SpaceX and has never failed a test.” He said “there are other false facts” in the reporting about Musk’s drug use but didn’t detail them.

Encounters with Musk
This article is based on conversations with more than four dozen people, including former employees, people familiar with Musk’s interactions with female subordinates and friends and family of the women. The Journal also reviewed emails, text messages and other documents.

Since 2017, the era of MeToo has resulted in a pronounced cultural shift that has put more scrutiny on the conduct of executives in the workplace. Good-governance norms in the corporate world have shifted toward hard bans on supervisor-employee sexual relationships, out of concern for their potential to create power imbalances and conflicts of interest in the workplace.

Federal and state laws bar supervisors from sexually harassing employees. Some courts have recognized “sexual favoritism” as a form of harassment, blessing claims of a hostile work environment by employees who alleged that their bosses gave preferential treatment to colleagues with whom they were having consensual affairs.

A SpaceX policy discourages employees from directly overseeing romantic partners.

The women who described the encounters with Musk had jobs that meant they worked closely with him.

The college student studying engineering met Musk in the early 2010s during her summer internship at SpaceX. Musk and the woman went out for a meal after she sent him ideas about how to improve the company, she told friends. They bonded over “Star Wars” and kissed.

A year later, the chief executive arranged for the woman to meet him at a resort in Sicily, where he was attending an exclusive conference sponsored by Google, according to documents reviewed by the Journal.

The woman’s passport was in another city at the time so Musk had arrangements made for a friend of hers to bring it to the woman on an early morning domestic flight, documents show. The woman was then scheduled on a first-class flight to London and a private jet to Italy, the documents show.

The former intern told friends not to speak with Journal reporters and later said that she didn’t want to be part of an article, following outreach from the Journal.

Clare Locke, a Virginia-based law firm that also represents Musk and Tesla, sent the Journal legal letters on behalf of the woman that demanded her removal from the article. The affidavits signed by the woman were attached to the letters.

The woman said in one of the affidavits that after she broke off the relationship with Musk they remained friends.

‘Nothing out of the ordinary’
In 2017, Musk personally contacted the former intern about a fulltime job at SpaceX, which would be to find problems at the company and fix them. She moved from New York to the Los Angeles area to become a member of Musk’s executive staff. Former employees said that while she was a talented engineer, they found it odd that someone so junior was given such a high-profile role so close to the boss.

She said in one of the affidavits that she believes she was one of many candidates for the role.

After she arrived in California, Musk invited her for drinks and came on to her, touching her breast, friends said she told them at the time. One of them said the woman recalled Musk saying, “Oh, I’m so bad. I shouldn’t be doing this.”

In one of her affidavits, she said, without providing details, “Elon tried to rekindle our relationship prior to my employment, and I rejected the advance. While there was some initial awkwardness, it was nothing out of the ordinary after a rejection.”

She told friends that she was unhappy at SpaceX, had no authority and had trouble getting executives to take her ideas seriously. She told one friend that she sometimes hid in the bathroom at SpaceX.

She said in one of the affidavits that her feelings about her job at SpaceX “were completely unrelated to any romantic or personal interactions with Elon Musk.”

“I came into a very difficult role as a newcomer into an established company,” she said in the affidavit.

She visited Musk at his home multiple times, as she struggled at work to establish herself, according to people familiar with the matter and friends she confided in.

“He would text her, like a lot,” said one of the friends. When she didn’t respond to a nighttime invitation to come over to his house, Musk texted her name repeatedly, the friend recalled.

About half a year into her job, the woman received another invitation from Musk to come to his house, according to a text exchange reviewed by the Journal.

“Come by!” he wrote. When she didn’t respond, he peppered her with more texts:

“Look, it’s either me or 6am [exercise] :)”

“Just finished the Model 3 production call. It’s def going to be hell for several more months.”

“Are you coming over? If not, I will probably tranq out. Too stressed to sleep naturally.”

When she still hadn’t responded, he wrote, “Probably best if we don’t see each other.”

The woman texted him in the morning. “Oh man. I’m sorry, I’d already fallen asleep. I’ve been a late night person most of my life but have been trying to switch over because it seems responsible. Tbh. Sorry I crashed last night,” she wrote.

Later that day, she shared the text exchange with a friend.

“Dude not gonna lie the fact that I have mild society[sic] anxiety resulting from imposter syndrome definitely makes this job harder,” the woman wrote in a text. “And that’s definitely exacerbated by Elon’s behavior.”

“I was wondering about that,” her friend responded.

“So badly,” she said.

“I mean if hanging out with him stresses you out about work maybe you might want to let things chill? I dunno.”

“Well I mean I think he broke up with me this morning. If I interpreted that last text 😆,” she wrote.

She then sent her friend a copy of Musk’s string of messages asking her to come over.

“Why are so many of the men in my life so weiiiiirrddddd,” she wrote.

The woman said in an email provided by her lawyers that her comment about Musk breaking up with her was a joke. His text message to her, she said, “was not referring to a romantic relationship.”

She said Musk’s lack of interest in roles such as hers is what made her job more difficult, and that her background expertise “made an already difficult role even more difficult.”

She said in one of the affidavits that she and Musk texted frequently as she supported him through difficulties, including issues at Tesla and his divorce from actress Talulah Riley. He was married to Riley when the woman and Musk were in a romantic relationship years earlier. They divorced in 2016.

On the few occasions that she went to Musk’s house, the woman said in one of the affidavits, they watched TV and talked. In the email, she said they watched anime and talked about the Tesla Model 3 production ramp up and the “technical future of humanity.”

Friends said she told them at the time that the job wasn’t going well because it had gotten awkward with Musk. Eventually she moved off the executive staff to a role reporting to another engineer.

The woman said in one of the affidavits that she requested the move and “worked out an arrangement that would give me better support for my daily responsibilities at the company.”

She exited SpaceX in 2019 after an executive she reported to was included in a mass layoff, she said in one of the affidavits.

Defended by leadership
One incident of alleged sexual harassment of workers by Musk has surfaced publicly, in a 2022 report by Business Insider about the flight attendant who told SpaceX that Musk exposed himself to her and asked her for sex.

The woman, who worked on contract for SpaceX, alleged in a 2018 mediation with the company that Musk showed her his erect penis and offered her a horse in return for sex acts as she gave him a massage during a flight, according to people familiar with the allegations. SpaceX cut her shifts back after she rejected his advances, she alleged. The company agreed to pay her $250,000.

Musk called the flight attendant’s allegations “utterly untrue.” In social-media posts, he joked that the scandal should be called “Elongate” and denied that he used a flight attendant on his plane.

But he had used flight attendants in the past, including in 2016, when the woman alleged Musk’s proposition had taken place, according to former SpaceX employees as well as LinkedIn profiles of former SpaceX flight attendants.

Shotwell, Musk’s No. 2 at SpaceX, defended him against the flight attendant’s allegations in a companywide email after the news report. “Personally, I believe the allegations to be false; not because I work for Elon, but because I have worked closely with him for 20 years and never seen nor heard anything resembling these allegations,” she wrote.

Musk’s denials and Shotwell’s email prompted SpaceX employees to post an internal letter protesting what they viewed as the company’s failure to take harassment allegations seriously.

Eight of them who were fired after the letter subsequently filed complaints with the NLRB, alleging they were terminated for speaking up. SpaceX denies the allegations in that ongoing case and is seeking a court ruling that the agency’s process is unconstitutional.

‘Civilization is going to crumble’
In the summer of 2013, a woman who reported directly to Musk left the company and later returned with a lawyer. She alleged that Musk had asked her on multiple occasions to have his babies, according to people familiar with the allegations.

Musk, who has at least 10 children, has said that the world faces an underpopulation crisis and that people with high IQs should procreate. He has encouraged some of his employees to have children. He has spoken of the need to colonize Mars to protect the human species in the event of a cataclysm on Earth. Sending people to the red planet is a long-held ambition that animates his work at SpaceX.

“If people don’t have more children, civilization is going to crumble. Mark my words,” Musk said in a 2021 interview with the Journal.

Musk had children with an employee in 2021. He and Shivon Zilis, an executive at Musk’s Neuralink brain-implant company, share twins. Zilis has said Musk encouraged her to have children and later offered to be the sperm donor. “I can’t possibly think of genes I would prefer for my children,” Zilis is quoted as saying in “Elon Musk,” a biography by author Walter Isaacson.

But the woman at SpaceX declined Musk’s offer. She had continued working for Musk after he asked her to have his children, but their relationship deteriorated. Besides the baby allegations, Musk had denied the woman a raise and complained about her performance, according to people familiar with the matter.

The woman received an exit package of cash and stock valued at more than $1 million, according to a person familiar with the agreement.

Planning a party
The same year that woman left SpaceX, 2013, Shotwell made allegations of her own: The executive accused one of her employees of having an affair with her husband, and then allegedly retaliated against the woman, according to the employee’s account to friends and family and emails she showed them at the time.

On her own time, the woman had helped Shotwell’s husband, Robert, plan a surprise Western-themed 50th birthday party for Shotwell, her boss. Robert sent boxes containing bull horns and other Western decor to the employee’s house for the party. Before leaving town to visit her family for Thanksgiving, the woman called Robert to arrange for him to pick up the boxes while she was away.

“So, your call last night was not good,” Robert wrote to the woman in a November 2013 email, with the subject line “Trouble.” “She accused us of having an affair…Be prepared when she gets in.”

The employee was on a plane with her brother when she got the email, which she later shared with her family. The accusation shocked and mortified her, her brother said.

“I hope you realize that this puts me in a very awkward position with my boss and makes me super uncomfortable,” she replied to Robert.

He emailed her after the party to thank her for her help and to tell her that “everything is cleared up now.”

When the woman told a human resources executive about the affair accusation, it got back to Shotwell, the woman told a friend.

The woman said in a text message that she understood the conversation to have been confidential. “He told Gwynne everything. She told me,” the woman texted the friend, referring to the human resources executive to whom she’d reported Shotwell. “I should be able to go to HR for such things. She f— thought I was having an affair with her husband for God’s sake.”

Gwynne and Robert Shotwell didn’t respond to requests for comment on the matter.

Musk’s lawyers sent a sworn declaration from Brian Bjelde, SpaceX’s current vice president of human resources, that said he could not locate any records of an HR complaint from the woman.

By the time of Shotwell’s party, the woman was working for both Shotwell and Musk. Shotwell told the HR department at SpaceX that she wanted the woman removed from the office of the chief executive.

While Shotwell was trying to push her out, Musk was pulling her in, she told people close to her.

17-hour days
In the fall of 2014, Musk initiated a sexual relationship with the woman, who by that time was working directly for him alone, she told the people. Musk was still married to but separated from Riley.

A couple of months earlier, Musk and a human resources officer had met with the employee and said that a coming restructuring in Musk’s office meant that the woman would have to move to another part of the company, into a less visible role, if she wanted to stay, she later told friends.

She had declined but agreed to stay on as long as needed to get Musk’s new chief of staff, Sam Teller, up to speed.

“[Shotwell] has 100% sabotaged my future at a company I love, and I am not safe in any position,” she wrote in an email to another friend in September 2014. “This position is killing me and it has [affected] my mental and now physical health.”

But she was still at SpaceX in the late fall of 2014, at Musk’s request, when he approached the woman at her desk and asked her if she wanted to have a drink and talk at his Bel-Air mansion, his primary Los Angeles residence at the time, situated on a knoll overlooking a country club.

Leading up to the invitation, Musk and the woman had become close professionally. They sat within view of each other in the office and were in frequent contact on work matters. She often put in 17-hour days to keep pace with Musk, helping out with matters at Tesla and in Musk’s personal life, in addition to her primary duties at SpaceX.

Her friends and family noticed she’d lost an unhealthy amount of weight, and her hair was falling out as she worked long hours and friction with Shotwell continued.

Musk’s invitation came as such a surprise to the woman that she told Teller about it at the office, according to people familiar with the matter.

When she arrived at Musk’s house that night, with her computer and work bag, they went into his living room.

She gave this account to friends in the following days: She and Musk drank and chatted. Musk told the woman she had both beauty and brains and continued to compliment her. They had sex and spent much of the rest of the night talking.

They saw each other again at his house in mid-December 2014, after Musk’s children were put to bed, according to text messages the woman shared with a friend at the time.

“I’ll see you at 11 or so,” the woman wrote in a text to Musk.

“Ok :) If you get tired or don’t feel like it for any reason, no problem to cancel,” he replied.

She said she didn’t want to cancel. “I might send a note to your house security only, to let them know I’m coming to drop something off….or something. So they’re prepared?”

In bed the next morning, Musk promised the woman Tesla stock for unpaid work she’d done for him at the carmaker and in his personal life, she told a person close to her.

Musk told the woman that if the relationship ever became public, they’d have to say it started after she left the company, the woman later told that person and another friend.

Later that December, the woman asked Musk if she could enlist SpaceX information-security employees to check her email account, after they discussed the possibility of her email getting hacked. Musk granted her request but urged her in an email to delete “anything you don’t want them to see ahead of time, incl from sent folders and trash.”

Missed ‘bootie call’
The woman initially confided in people close to her that she believed she and Musk were starting a serious relationship and that they had a connection.

By late December, she was telling her friends that she felt used. Early on, she had wanted to keep their relationship private, but as it progressed, she sought more than drinks at his house and sex.

When she suggested dinner out, Musk said he couldn’t be seen with her in public, citing ongoing negotiations over a possible divorce from Riley.

As tensions mounted, Musk assigned Teller, his chief of staff, to handle the woman’s exit, according to people familiar with the matter and emails the woman shared with others. Musk had shared some of the woman’s texts with Teller, according to the people.

Musk declined to pay the woman directly in Tesla stock. In a Dec. 29, 2014, email, Teller offered her $35,400 in cash for her unpaid work, saying she could use it to buy the stock instead. She negotiated the offer up to $85,000, citing taxes and her broad brief for the billionaire.

To get the money, she had to sign an agreement that required her to release Musk from potential legal claims “known and unknown,” and to keep information about him “in strictest confidence,” including the document itself, which Teller had received from Tesla’s then-general counsel Todd Maron, who had also been a divorce lawyer for Musk. She shared the agreement with people close to her before signing.

Both Teller and Maron left their roles in 2019.

On Jan. 10, 2015, two days before she left the company, she received a late-night text from Musk: “Drinks?”

The woman didn’t see the invitation until the following morning.

“11:25 pm bootie call. Glad I was sleeping,” she wrote in a text to a friend.

After the woman left SpaceX, Musk told her in texts and emails that she shared with others that she had had thrown herself at him while he was in a fragile state over his separation from his then-wife, and they had been intimate only after she had resigned.

“You insisted on coming to my house to sleep with me when I was just sad and tired and wanted to be alone,” he said in a text, the day after her exit from the company.

She and Musk never saw each other again.

WSJ : Shares of Evergrande’s EV Unit Slide After Order to Repay Subsidies

Shares of Evergrande’s EV Unit Slide After Order to Repay Subsidies
Evergrande Auto said that a local Chinese authority had asked it to repay subsidies and incentives it previously received from local governments

China Evergrande EGRNF 0.00%increase; green up pointing triangle New Energy Vehicle’s shares fell sharply after Chinese authorities ordered the company to repay government subsidies due to its failure to meet contractual obligations, adding to its woes.

Shares of the electric-vehicle unit of property developer China Evergrande Group slid 21% to 34 Hong Kong cents (4 U.S. cents) on Wednesday morning, on track for their largest one-day loss in almost a year.

The selloff came after the company, also known as Evergrande Auto, said late Tuesday that a local Chinese authority asked it to repay about 1.9 billion yuan (US$262.2 million) of subsidies and incentives it previously received from local governments, within 15 days after the company received the official notice.

The Guangzhou-based company said it intends to apply for an administrative review of the decision.

If implemented, the company may face compulsory repossession of the land of some plants, buildings and equipment, which could put further pressure on the company’s finances, Evergrande Auto said.

Evergrande Auto had entered into a series of investment partnerships with local Chinese authorities since April 2019, which helped the company to obtain a few billion yuan worth of incentives and subsidies between 2019 and 2021.

Further, the company said in the filing on Tuesday that another Chinese authority asked its Tianjin unit to stop producing and selling electric vehicles and related products.

The company’s Tianjin factory ceased production at the beginning of the year, and has yet to resume production.

In late May, Evergrande Auto said a potential unnamed buyer could buy a 29% stake in the company. The buyer would also have the option to purchase an additional 29.5% stake.

Evergrande Auto, which once had ambitions of surpassing Tesla and becoming the world’s top EV maker, boasted a market capitalization of more than $80 billion at its peak in April 2021. Evergrande Auto reported a net loss of CNY12.24 billion for 2023.

Parent company Evergrande Group was ordered to liquidate in late January by a Hong Kong court after the property developer failed to reach a restructuring plan with creditors.

Reuters : Segantii hedge fund insider trading case moved to higher court in Hong

Segantii hedge fund insider trading case moved to higher court in Hong Kong

HONG KONG, June 12 (Reuters) - An insider trading case against Asian hedge fund Segantii Capital Management, its high-profile British founder Simon Sadler and a former trader has been moved to a higher court in Hong Kong, a local court ruled on Wednesday.

The Eastern Magistrates' Court approved the prosecution’s request to transfer the case to a district court. The next hearing is scheduled to take place at the district court on July 2, the court ruled without providing reasons.

The maximum prison term a district court judge can impose is seven years, versus two to three years for the magistrate's court.

The case marks a turning point for one of Asia's biggest and oldest hedge funds, which has said it will refund investors, and a step toward heightened scrutiny of trading activities in the region.

The Hong Kong Securities and Futures Commission said last month it had started criminal proceedings against Segantii, its founder and chief investment officer Sadler and former trader Daniel La Rocca on suspicion of insider dealing in the shares of a Hong Kong-listed company before a block trade in June 2017.

Sadler, dubbed Asia's "block trade king", is also the owner of his hometown soccer team, Blackpool Football Club.

Sadler, La Rocca and Segantii CEO Kurt Ersoy declined to comment on the charges on Wednesday outside a court hearing room. The company said last month it planned to "defend itself vigorously against the charges".

Segantii was established in 2007. Its flagship Asia-Pacific Equity Multi-Strategy Fund was up 2.5% in the first quarter, after a 1.6% decline in 2023, according to a source who received data on the fund's performance.

The fund managed about $4.8 billion at the end of March, according to a monthly letter from the fund seen by Reuters.

FT : Ukrainian agricultural group boss warns Kyiv against export feud with EU

Ukrainian agricultural group boss warns Kyiv against export feud with EU
Country risks losing bloc’s support for Russian war effort by prolonging dispute, says founder of Kernel

The owner of one of Ukraine’s largest agricultural companies has warned Kyiv against prolonging its dispute with the EU over food exports, saying it risks losing the bloc’s support in the war with Russia.

Andriy Verevskyi, the Switzerland-based founder of Kernel, the world’s biggest exporter of sunflower oil, said feuding with EU member states at such a critical time was unwise.

“I think Ukraine should not fight with Poland or other European countries over import duties and the protection of the European market,” he told the Financial Times in his first face-to-face interview with a media group.

“We have enough [other export] markets for Ukraine: I’m talking about India, Africa, Asia, China et cetera and I don’t think we should fight and escalate the relationship between Europe and Ukraine because of agricultural supply.”

He added: “If part of eastern Europe wants to protect their market from Ukrainian production, I would say let it go . . . let’s co-operate on more important things for Ukraine. Many people will disagree with me but that’s what I believe.”

The trade dispute started in April last year when Poland led a handful of EU countries to impose unilateral bans on imports of Ukrainian cereals in response to protests from their farmers about unfair competition.

This followed the EU lifting restrictions on Ukraine’s exports in 2022 to help its war-ravaged economy stay afloat. Poland, Slovakia and Hungary kept bans in place despite violating EU common trade policy.

The EU is levying new tariffs on foodstuffs ranging from poultry to maize if quantities exceed the annual average imported between July 2021 and December last year.

Ukraine has also introduced licences to avoid exports of sugar and other crops hitting levels that would trigger an EU “emergency brake” on imports.

Although Polish Prime Minister Donald Tusk has pledged full support for Ukraine’s war effort, he has promised to protect his farmers.

Verevskyi, 49, who controls Kernel through a Cyprus holding company Namsen, is entangled in a bitter courtroom fight with minority shareholders after he launched a tender offer to delist the group from the Warsaw Stock Exchange because of what he says was a lack of liquidity.

The businessman, who said he had 94 per cent of Kernel’s equity, is being sued by some investors for reclaiming ownership of the company without their consent. They accuse him of buying the group on the cheap after taking advantage of a sharp drop in its valuation following Moscow’s full-scale invasion of Ukraine in February 2022.

Verevskyi had sold shares in a float on the Warsaw exchange in 2007, which after further transactions had reduced his holding to 37 per cent before the Russian invasion.

Last month a judge in Luxembourg, where Kernel is registered, opened court hearings into the shareholders’ complaints.

Verevskyi said he was sympathetic to investors who complained that the delisting was approved by Kernel’s board instead of a general assembly of shareholders. But he insisted it was compliant with Luxembourg’s laws.

“I’ve been made to look like a big, bad aggressive guy who is selfish and doesn’t care about anything. Perhaps partially it’s true, but it’s not that simple and there are many things that I’m doing for the company and for its people and for our position in Ukraine,” he said.

Verevskyi also stressed the plaintiffs were mostly small retail shareholders, with big institutions that still hold the stock including Vanguard, Artemis, Raiffeisen, Morgan Stanley and UBS staying on the sidelines in the court battle.

On President Volodymyr Zelenskyy, the businessman said his government needed to strengthen the rule of law and reduce corruption in order to get foreign investors involved in the country’s postwar reconstruction. “I am a supporter of the president because I believe he has done a pretty good job and he was at the right place when the war started. But if you ask if Zelenskyy did economic and legal reforms in the country: No, he didn’t.”

Zelenskyy only had two years in office before Russia’s invasion, “so I don’t know if he had the chance to change anything dramatically, but I’m totally sure that more things could have been done”, he added.

Verevskyi was a member of Ukraine’s parliament from 2002 until 2013, when a court stripped him of his seat for simultaneously holding public office and running a commercial business.

FT : Golden Goose is stretching the limits of luxury

Golden Goose is stretching the limits of luxury
Growth runway for ‘distressed’ trainer firm strewn with obstacles

The line between fad and fixture is so fine as to be almost invisible to the naked eye. Yet isolating those trends which have staying power from those that don’t is precisely the task facing luxury investors as they attempt to evaluate the sector’s brands. 

See, for instance, the debate around Golden Goose, seller of used-looking trainers (‘distressed’, in fashion parlance) at €500 a pop to well-heeled customers including Taylor Swift and Selena Gomez.

Owner Permira is targeting an IPO at an enterprise value of around €2.2bn — or about 10 times this year’s expected ebitda. That is below expectations but still a luxury-like multiple: factoring in a typical IPO discount that puts Golden Goose within reach of Moncler, Prada and even LVMH. Yet its growth runway is strewn with potential obstacles. 

The group’s main issue is that it is a one trick farmyard animal. Over 90 per cent of its revenues come from selling trainers. It does this well, of course, managing net sales growth of 18 per cent last year at a plush 25 per cent ebit margin. And it can point to “casualisation” — the long-standing trend towards less formal clothing — as a tailwind.

It is also attempting to harness the luxury trend towards increasing personalisation by letting customers co-create their shoes in store. But footwear lovers are a fickle bunch. Dr Martens — another Permira IPO — can testify to what happens when trends change. 


Meanwhile, pricey trainers likely have a capped addressable market. Half of Golden Goose’s sales go to repeat buyers. While customer satisfaction and loyalty are positives, that does suggest it may be bumping up against the limits of its fan base.

For the group to grow sales from last year’s €587mn to €1bn by 2029, as it is targeting, it will probably need to expand into clothes and handbags. That is a difficult proposition at any time, let alone in the context of luxury spending that is returning to earth following the pandemic. Gucci’s and Burberry’s turnaround travails suggest that customers concentrate tighter budgets on tried and tested luxury staples. 

Golden Goose reckons it has the wherewithal to step out of its niche, helped by its presence on three continents, a network of almost 200 stores, and a strong following among younger consumers. That is not impossible, of course. Moncler, for instance, has managed to escape its down jacket straitjacket. But Golden Goose’s reliance on trainers — as distressed, personalised and on trend as they may be — means it is stretching the definition of a credible luxury brand.

FT : US regulators have vertical integration in their sights

US regulators have vertical integration in their sights
For years, enforcers focused mainly on horizontal deals, but now that is changing

Vertical integration is all the rage as companies scramble to compete in artificial intelligence and decarbonisation. They believe that exerting more sway over suppliers and sales channels will help them speed innovation and cope with geopolitical disruption. But is it better to buy the necessary supplies and smarts, develop them in-house or find some way to strike a partnership?

Last year, General Motors purchased a lithium mine to secure crucial minerals for its electric vehicles. Chinese rival BYD already controls most of its supply chain, down to the ships that transport its cars and it is reportedly on the hunt for acquisitions as it looks to expand.

Apple this week announced a partnership with OpenAI to integrate ChatGPT into its devices. It is seeking to catch up with rival Microsoft, which got in early with the AI start-up and has now put in $13bn and incorporated its technology into multiple products. Meanwhile, Google owner Alphabet, an early AI leader because of its 2014 purchase of DeepMind, is building its own large language models and recently bumped up development of proprietary chips to power its offerings.

Many companies have very good reasons for vertical combinations beyond seeking to command and profit from cutting-edge technology. Tight connections often increase efficiency and the ability to recover from supply chain disruptions. Direct ownership also makes it easier to monitor for labour abuses, overseas bribery and other regulatory violations, while simplifying the calculation of carbon emissions.

But competition watchdogs are growing concerned that vertical integration can also further less laudable goals. In areas where technology is still developing, powerful companies may try to steal a march on rivals — and independent entrepreneurs — by using their power over key inputs or sales channels to foreclose competition.

For years, US enforcers primarily focused on horizontal deals, where harm to competition is easier to prove because they involve combinations of direct rivals. To the extent that they expressed concern when big companies moved up or down the value chain, these were largely allayed by promises not to abuse market power, as with concert promoter Live Nation’s 2010 purchase of Ticketmaster.

But that has begun to change. Under chair Lina Khan, the Federal Trade Commission tried to stop Microsoft, which makes gaming consoles, from buying game group Activision, and block Meta from taking over Within, a virtual reality company. Those challenges failed, but the FTC had more success when it sought to block biotech group Illumina from buying Grail, which makes cancer screening tests.

A federal appeals court agreed the FTC was right to worry that Illumina’s dominance in DNA sequencing tests gave it too much power over potential competitors to Grail in the still nascent screening market. EU enforcers were even tougher, hitting Illumina with a €432mn fine for completing the merger without Brussels’ OK. Illumina’s chief executive lost his job and the company plans to spin Grail back out again in an initial public offering this month.

More cases are in the works, including some that reconsider earlier leniency. The justice department last month sued to break up Live Nation, saying it now suffocates competition because it manages musical acts and controls arenas while also dominating concert ticketing.

Corporate executives should be wary of seeing this as a brief Biden administration blip that will go away if Donald Trump retakes the presidency in November. His justice department started this trend when it brought the first vertical merger court case in more than 40 years, seeking to block AT&T’s purchase of Time Warner.

Although that lawsuit failed, Republican-appointed judges have proved to be sympathetic to some of the other claims. The Illumina decision author was appointed by George HW Bush. “Courts are a lot more receptive . . . than people think they are. This is not only a right-left issue,” says Rebecca Allensworth, a Vanderbilt law professor. “I don’t see this all going away.”

Chief executives hoping to stay out of the regulatory crosshairs would do well to remember a simple rule: not all vertical integration is the same. Companies that innovate generally avoid criticism unless they abuse existing power by illegally tying two products together. And buying an already successful business to deny access to competitors is quite different than licensing the technology.

Total control has its advantages. Freedom from antitrust scrutiny is not one of them.