TheChek News Flow

Media and data group will develop its own technology and scoop up targets with AI capabilities

Thomson Reuters has an $8bn war chest to spend on acquisitions and investments in artificial intelligence, according to chief executive Steve Hasker, as it bets that the technology will transform rather than undermine its business of supplying information to lawyers, accountants and other professionals.

Talking to the Financial Times before this week’s investor day, its first for three years, Hasker said the group had “tremendous financial firepower” to expand across AI-driven professional services and information as it plans to sell the rest of its holding in the London Stock Exchange Group.

“We have dry powder of around $8bn as a result of the cash-generative ability of our existing business, a very lightly levered balance sheet and the sell down of [our stake in] LSEG,” he said.

Thomson Reuters also plans to spend more than $100mn on developing its own AI technology every year to serve customers in sectors such as legal, tax and accounting. 

Last year, the company completed a two-year programme designed to transform it from a content provider to a “content-driven” technology company. But Hasker said that, almost immediately after, “along came generative AI”, which he sees as again transformative for the group. 

The way in which AI would change its customers’ spending patterns remained “very unclear”, he said, but it was one of several “tailwinds” propelling the group.

Acquisitions would mainly be focused on companies with AI capabilities, he said. Over the past 18 months it has spent about $2bn on buying companies such as SurePrep, Casetext and Pagero, a global e-invoicing and tax solutions business.

Hasker said that about four-fifths of the group’s revenues came from the US, but it wanted to “rebalance” that over the next three to five years so was looking “fairly aggressively” at further growth in areas from Brazil and Mexico to south-east Asia and Japan.

He added that the company had struck “a number” of deals with AI groups seeking to use Reuters news to train their large language models. He declined to comment, however, about the commercial terms, saying that “there appears to be a market price evolving”.

“These models need to be fed. And they may as well be fed by the highest-quality, independent fact-based content. We have done a number of those deals, and we’re exploring the potential there.”

Hasker also declined to comment on a pending copyright lawsuit from Thomson Reuters against Ross Intelligence, an AI-driven legal research company, which is seen as a test case for other media content owners.

Thomson Reuters now employs about 26,000 people worldwide. The Thomson family own just under 70 per cent of the group, with the rest listed in Toronto and New York. The company’s chair David Thomson — Canada’s richest man with a wealth of tens of billions of dollars — heads the media empire founded by his grandfather Roy Thomson.

“[The family] are long-term holders. They’re happy with the performance of the business, both in terms of the dividends and the accretion in the stock price over the last number of years, so don’t intend to do anything but continue to support us in the long term,” said Hasker.

Thomson Reuters acquired its holding in LSEG when the financial services group bought its former financial data business Refinitiv for $27bn in 2019. It sold a 4 per cent stake worth £1.9bn last month in LSEG, and shares worth almost $5.5bn last year.

Hasker said Thomson Reuters would exit the stake entirely next year. “This was a financial stake for us, not a strategic position. The last part of the lock-up is in the first quarter of next year. So you’d expect us to be out of that position sometime around then.”

Last year, it launched new AI services — which allow customers to ask complex research questions and receive AI-assisted answers from authoritative legal sources — and Hasker said that it planned a further six to eight product launches in the next few months alone, “which is an unprecedented rate of innovation”.

Reuters news is now one of the group’s smallest divisions, generating about a tenth of revenues in 2023. Analysts have asked whether it makes sense for the news bureau to be part of a group now positioning itself more as a technology company for professional services.

Hasker was clear, however: “Reuters is not for sale. Reuters is an integral part of our portfolio.”

He said that its Reuters news bureaus also had access to its AI tech, and could already use an AI tool that helped create ideas for stories. “I’ve been here for four-and-a-bit years and we have worked really hard to make these parts of the business work together. It’s early days but the evidence is growing that there’s some really interesting benefits to be shared.”

Hasker said the group had looked at whether to create a paywall for the news service — with rivals such as Bloomberg charging high subscriptions for access to their data and journalism — but he added for now it was focused on serving LSEG, its largest customer, and agency customers.

He added, however, that the group was looking at whether there were linked news and AI products for professionals that could exist behind a paywall.

Sustained fall would raise questions over future ability of ambitious Chinese automaker to tap public markets

Two weeks after its shares began trading on the Nasdaq, Lotus Technology is down by two-thirds.

Yet far from being a surprise, the collapse has a familiar sensation for investors who bought into other businesses listed on global stock markets by China’s Geely. In recent years, the ambitious Chinese group has listed shares in Volvo Cars, Polestar and ECARX. All remain deeply under water.

The fall, if sustained, deals a hammer blow to one of China’s most ambitious auto groups, and raises questions over its future ability to tap public markets to raise funding as it pushes further into the expensive business of developing electric vehicles.

Shaun Rein, managing director of China Market Research Group, a Shanghai consultancy, said it was difficult to have a positive view of Geely’s outlook in the wake of the Lotus listing.  

“They don’t have a strong strategy internationally or in China, they have too many overlapping brands that just don’t make sense,” he said. 

The company burst on to the global stage with a 2010 deal to purchase Volvo Cars from Ford, kicking off a decade of expansion buying unloved international car brands including Lotus and taking stakes in Mercedes-Benz, Volvo trucks and Aston Martin.

Despite its dismal stock market record and increasing jitters about EV demand in western markets, the Chinese car group is doggedly pursuing public status for its other brands.

Geely has already filed documents for an IPO on Nasdaq for its new electric car brand Zeekr. At the same time it harbours stock market ambitions for a host of other businesses within its automotive portfolio, according to people familiar with its plans.

The share price performances of Volvo and EV brand Polestar already made it difficult to attract potential investors into Lotus, according to people familiar with the deal. Finding investors for Zeekr will be harder still if Lotus shares remain underwater for those who bought into the Spac.

The listings are more than just bragging rights for its ambitious founder Li Shufu, known internationally as Eric Li. As it grows outside of China, the company is having to jettison its historic reliance on domestic funding, and raise capital through western markets that are increasingly sceptical about Chinese businesses. 

“They will need a lot of money,” admits one current director within the wider business. 

This is particularly crucial as the business faces steep investment demands into electric cars, self-driving systems and software in the coming years.

Geely declined to comment for this article, but Daniel Li, chief executive of the Geely Holding Group, told the Future of the Car summit last May that “through the IPO of each individual brand, we can . . . get a good opportunity to provide a return to our investors”. However, he added the company did “not necessarily” need to list each entity it held.

That was all part of Geely’s long-term ambition, he said, to become a “top ten” global automotive participant and sell more than 4mn cars a year, something that would see it become larger than Nissan, Mercedes-Benz or Renault. Geely Holdings said it sold about 2.8mn vehicles across its brands last year. 

Bill Russo, the former head of Chrysler in China and founder of Automobility, a Shanghai consultancy, noted that choosing to fund businesses through public markets “means it doesn’t all have to come out of Li Shufu’s pockets”. 

Taking Chinese government or development agency money often requires building plants in the country. “When you go global you don’t get that same kind of support,” he added. 

Nevertheless, shares in auto businesses, especially EV start-ups, have cratered in the past two years as investors become less forgiving of unprofitable enthusiasm in an era of higher interest rates. 

“The over-exuberance . . . and listings of EV companies has [led to] capital destruction that is now catching up with companies which chose that route as the main source of funding,” said Russo. 

People familiar with Geely’s thinking say the company could easily raise needed finance through debt markets. “The reality is stock markets are more sophisticated and diverse outside of China, that’s why they’ve come to New York.” 

The company has also, they note, been a responsible custodian of struggling brands, especially Volvo and Lotus. Geely took a longer-term view of its businesses, something that short-term share prices did not reflect, they said.

Geely was “deliberately patient,” according to people with knowledge of its thinking. “These are not flip stocks,” said one person. 

Lotus came into the Geely fold in 2017, as part of a deal to invest in Malaysian owner Proton. After taking a 51 per cent stake, Geely poured £3bn into the once-sleepy business. 

Lotus chief financial officer Alexious Lee said the company’s target segment — buyers of electric vehicles costing more than $80,000 — was large and growing every year. “Lotus as an early mover will be able to capitalise,” he said. “We have a strong strategy, which we believe will deliver results and returns to shareholders and investors.”

Investors have awarded higher valuations to pure-play EV makers such as Tesla and the luxury-car maker Ferrari than to other traditional manufacturers. 

Lotus commercial head Mike Johnstone said investors were interested in the company’s “history and heritage”, which stemmed from motor racing. That, he believed, would help the brand stand out in a market increasingly saturated with electric SUVs all boasting sports car-like acceleration. 

The business has raised about $880mn from new investors, money that along with its $500mn cash will help the business until it becomes cash-generative next year, said Lee.

Lotus plans to produce electric SUVs at its new production line in Wuhan, in central China, that it believes will help it expand sales from just a few thousand to 150,000 by 2028. 

Despite the price performances of the listed shares, people close to Geely dismiss the price moves as short-term blips. “By the end of the decade, the direction of travel is pretty clear,” said one person. “The portfolio power of Chinese-controlled brands is going to strengthen.” 

If Geely wants to go global, it needs to press ahead with its flotation strategy. But the underperformance of its listed companies’ stock is hardly an incentive for international investors.

Tu Le, head of consultancy Sino Auto Insights noted that by listing its international brands Geely had gone from a fairly complicated portfolio to an extremely complicated one.

“The challenges are of their own making,” he said. “They have all of these brands now that they need to manage — many of them are foreign brands — this is new.”

Government is testing new trading market in drought-prone Cambridgeshire

Plans to cut radically household water usage in England are based on unrealistic projections that installing water meters will substantially drive down demand, former environment secretary George Eustice has warned.

Ministers have set legally binding targets to cut household water consumption per head by 20 per cent by 2038 in an effort to reduce shortages, which are holding up business and housing development.

However Eustice, who spent nearly a decade as a minister in the Department for Environment, Food and Rural Affairs, including two years as secretary of state, said a fundamentally different approach was needed to reach the targets.

“Current plans place far too much reliance on metering and behaviour change to meet that challenge,” Eustice told the Financial Times. “When you see some water companies suggesting that ‘gamification’ might help drive behaviour change, you know you have a problem,” he added. 

The comments came as the government unveiled plans to test a new water trading market, which would enable housebuilders to offset their water usage through the purchase and sale of “water credits” to ensure they have a neutral impact.

The scheme is being trialled in Cambridgeshire, where water shortages are holding up government plans to expand the city as a life sciences hub.

The Environment Agency watchdog has already blocked the construction of more than 9,000 homes and 300,000 square feet of lab space because of a lack of sustainable water supply.

The £9mn credit trading scheme, which was announced in the Budget, requires the establishment of a new market framework and operator, which would match buyers and sellers of water credits.

Water usage would be monitored by water companies through their meters, which are installed in properties, with the data checked by the Environment Agency and the new operator.

Eustice welcomed the Cambridge pilot scheme, which the government said had been primed with £4.5mn for retrofitting commercial and public buildings with water-saving devices, but said it reflected a wider failure of water companies to make good on their promises to deliver savings.

He added that a fundamentally different approach was needed to reach conservation targets in other regions or they too would face stricter controls on development, such as the “water neutrality” rules imposed on North Sussex where all planning applications must show they do not increase water consumption. 

“Unless other policy levers get used in a timely way, you end up with water neutrality and water credits as a last resort,” he said.

The implementation of the scheme follows years of political friction between water companies, local government planners and environmentalists over management of the region’s water resources.

Clara Todd, founder of Water Sensitive Cambridge, a pressure group, said there was a lot of “speculation and uncertainty” over the proposals and as “with other environmental markets it could be open to exploitation”.

Cambridge Water said in its latest five-year plan that it was aiming to cut household consumption to 110 litres per person, per day by 2050, through a programme of installing meters. It calculated that on average using meters reduced household consumption by 13 per cent.

However, in its response Cambridgeshire Council was sceptical. “We believe this cannot necessarily be achieved through ‘smart’ metering and educational work alone,” they wrote, adding there needed to be more investment to retrofit homes with water-saving devices.

In Cambridge, plans for a water transfer pipeline and a reservoir are not due for completion until 2032 and 2036, respectively, meaning water-saving measures are required to deliver additional capacity in the interim.

The National Infrastructure Commission, which advises the government on infrastructure, said in 2018 that the UK would need between 2.5bn and 4bn litres of additional water capacity in England per day by 2050 to maintain current levels of service. It supports the compulsory rollout of water meters.

Around 60 per cent of UK households have water meters, but only 3 per cent have smart meters that provide daily updates on usage. The rest are billed based on property values from the 1970s.

Water companies are planning to increase installations sharply over the next five years; they claim it helps them tackle leaks as well as raising consumer awareness on consumption.

In some water-stressed areas such as London, meters are already mandatory although social campaigners have raised concerns over the impact on large families on low incomes. 

The Consumer Council for Water, a public body representing consumers, said that while it supported the installation of smart meters, it agreed they “wouldn’t deliver the demand reduction required”.

“Companies’ plans are light on how they will actually help customers change their behaviour to reduce their water use,” it said.

Lucy Nethsingha, Liberal Democrat leader of Cambridgeshire county council, said that water companies had a poor record of delivering on their promises. 

“Most companies do the minimum government regulation allows, that is how they are set up. The problem is that regulation has been far too lax ever since privatisation, and that privatisation itself has failed,” she added.

Water UK, which represents the water companies, said: “Metering is only part of the solution. Most importantly, with rising temperatures and population, we should never again see the government block a reservoir because there is supposedly ‘no immediate need’.

“We are already having to play catch-up, with vital housing and economic development now being held back,” a spokesperson said.

Cambridge Water did not respond to requests for comment.

Chief executive says firm also looking at London listing, but adds US could connect it to more potential investors

Retail trading platform eToro is seeking a valuation of more than $3.5bn as it considers the US as a potential destination for a listing, despite the UK being its biggest market.

The Israel-based brokerage is weighing an initial public offering in either New York or London, its chief executive told the Financial Times, as retail trading activity on the platform surges to highs last seen during the “meme stock” frenzy of 2021.

Yoni Assia, founder and chief executive of eToro, said a US listing would give the company access to a broader range of investors than a presence on the UK market.

“Retail investors in the UK and Germany want to trade US stocks,” he said. “We see that UK clients might trade also UK shares, but very few of our global clients would trade UK shares. Something in the US market creates a pool of both deep liquidity and deep awareness for those assets that are trading in the US.”

However, Assia added that the European — and particularly UK — focus of its business might nevertheless push the company to plump for London. Roughly 70 per cent of eToro’s revenues come from Europe. Such a move would mark a boost for London, which is struggling to attract IPOs.

Even so, the possibility of a New York IPO underscores how Europe’s tech companies are being lured by the perceived higher valuations and deeper pool of capital available in the US.

Insurer Aspen, commodity broker Marex and gambling group Flutter are among the companies that have chosen to either IPO in New York or move their listings there away from London in recent months. The exodus has added to alarm among UK and EU policymakers, who are reforming their capital markets in an effort to keep more companies listed domestically.

Assia said he was “exploring the right timing” for eToro’s stock market debut and was expecting an increased valuation relative to the $3.5bn from its last funding round a year ago, when the platform raised $250mn from investors including SoftBank and market data company Ion Group.

eToro manages $11.3bn of customer assets across 3mn accounts, according to figures seen by the Financial Times.

The brokerage is benefiting from a surge in retail trading activity as US and European stock markets, and the price of bitcoin, have soared to record highs in recent weeks. Armchair investors can trade cryptocurrencies, stocks, currencies and commodities on eToro.

“We’re seeing levels of activity that we haven’t seen since 2021,” Assia said, referring to the retail trading mania that overtook stock markets during the coronavirus pandemic, as traders poured money into companies such as video game retailer GameStop and cinema chain AMC. 

“So far 2024 starts to feel a bit like 2021,” Assia said. “Markets are at all-time highs, we’ve seen a significant increase in engagement in stock trading.”

The company’s valuation has plunged since its first attempt to go public in 2021 when it agreed a $10.4bn deal with a blank cheque company. Assia said the broker terminated the deal in 2022 after realising “the markets aren’t there”, as the boom in blank cheque vehicles known as Spacs imploded.

He added that eToro was unsure whether to follow rivals by allowing its customers to invest directly in its IPO. Robinhood rode the trading frenzy in 2021 by listing in New York and providing retail investors access to its IPO. Social media platform Reddit is also allowing some users to invest in its listing, which is expected later this month.

“Unlike Robinhood, all their customers are US-based [and] they did a US IPO, our customers are mostly European, UK, Asian,” Assia said. “To give access to US IPOs in European markets is a very different infrastructure.”

Surging prices for ore and concerns over Russian imports lead to mothballed mines being restarted

Over a 40-year career, Scott Melbye watched the US uranium industry fall from its position as the world’s leading producer of the radioactive ore that powers nuclear reactors to an also-ran with negligible production.

Now, the president of the Uranium Producers of America is leading an industry charge to revive mothballed mines and invest in new production to capitalise on soaring prices and policies aimed at reducing the US’s dependence on Russian imports.

At least five US-listed producers are reopening uranium mines in Texas, Wyoming, Arizona and Utah that were idled following a market crash caused by the Fukushima nuclear accident in Japan in 2011. A handful of exploration companies are searching for new deposits of uranium, which has tripled in price since the start of 2021 because of a resurgence in interest in nuclear energy.  

“We’ve been on sleep mode for too long and now our membership is energised again,” said Melbye, who is also a senior executive at Uranium Energy Corp, a Texas-based company reopening mines in Wyoming and Texas.

“There is the broad bipartisan support for nuclear energy, the role it plays in the green transition and of course Ukraine-Russia has highlighted the need to secure our energy independence,” he said.  

The restart of US production comes amid a global revival in the uranium industry with producers in Australia, Canada and other nations seeking to increase production.

They are responding to a blistering rally in uranium prices, which reached a 16-year high above $100 a pound in January and remains elevated at $92 a pound. This is being driven by governments’ renewed interest in nuclear energy, an emissions-free power source that advocates say will play a key role in the energy transition.

About 60 nuclear plants are under construction and a further 110 are planned, according to the World Nuclear Association, which forecasts demand for uranium will double to 130,000 tonnes by 2040. A more immediate boost to demand has come from extensions to the lifetime of reactors currently producing. Last year uranium demand was 65,650 tonnes. It is forecast to rise to 83,840 tonnes by 2030.

Prices have also been raised by tight supply, after a drought of investment in new projects in the 2010s.

Global uranium production dropped by a quarter to 47,731 tonnes from 2016 to 2020 following the market crash after Fukushima. Expansion plans by the world’s largest producer Kazatomprom — which accounts for 23 per cent of global output — have stalled because of shortages of sulphuric acid, which is used in their leach mining operations in Kazakhstan.

“They’ve run into some ramp up issues,” said Ur-Energy Inc chief executive John Cash, which is restarting production at two mines in Wyoming.

He said geopolitics is driving prices higher over concerns that the main export route for Kazakh and Uzbek uranium bound for the US runs across Russia and out of St Petersburg port. In 2022 Kazakhstan, Uzbekistan and Russia supplied just under half of all uranium purchased by US nuclear plants, according to US government data.

“No one really knows how Vladimir Putin will attempt to put his thumb on those countries going forward. So, diversification now is the name of the game,” said Cash, adding that US and European utilities are signing more contracts with Ur-Energy following Russia’s invasion of Ukraine.

The US Congress is considering banning Russian uranium imports in a move that would further shake up the sector.  

Most analysts forecast Kazakhstan’s output will flow increasingly to Russia and China in the future because of high logistics costs to ship uranium via alternative routes that avoid Russia, such as the Caspian Sea, and an increase in long-term deals to supply China.

Melbye said the growth in the nuclear sector and western nations’ increased focus on energy security had opened an opportunity for US producers. If conditions remain supportive, the domestic industry could increase annual production to more than 20mn pounds, he said.

UEC has spent almost $600mn acquiring uranium assets over the past three years in the US and Canada, including a Wyoming mine formerly owned by Russian energy giant Rosatom. It plans to restart the operation in August and has applied for a licence to increase the annual capacity of a related processing plant to 4mn pounds, up from 2.5mn pounds.  

“We’ve got a pretty significant structural deficit that needs to be closed in the coming years,” said Melbye, who acknowledged US producers would face competition from overseas rivals such as Canada and Australia.

Cameco, the world’s second-biggest producer, said it would produce at full capacity this year at its McArthur River and Cigar Lake operations in Saskatchewan. Its three suspended mines in the US are a lower priority than the expansion of McArthur River but “don’t rule those out either as they are on our batting line-up further down the list”, said chief executive Timothy Gitzel during full-year results last month.

Many experts are sceptical about the long-term prospects for US production because of its smaller scale operations and higher cost basis than rival producers. A recent analysis of projected cost estimates of several proposed uranium projects in the US, Canada and Namibia by TradeTech and uranium.info found the cost of mining was highest at US operations.

Liberum head of commodities strategy Tom Price said the fact that Washington was keen to add domestic sources of uranium would probably underpin some of the new US mining operations. But US buyers would seek to access cheaper sources of uranium in countries such as Canada and Australia.

“As global production increases and prices get down to levels of around $70 per pound, then I think a lot of the bravado in the US industry will tone done and less projects will come into the trade.”