TheChek News Flow

Frasers is placing London retailer Matches into administration in another blow for online luxury retail.

LONDON — Frasers Group is putting luxury online retailer Matches into administration two months after buying it at a knockdown price from Apax Partners.

In a statement released to the London Stock Exchange late Thursday, Frasers said Matches “has consistently missed its business plan targets and … has continued to make material losses. While Matches’ management team has tried to try to find a way to stabilize the business, it has become clear that too much change would be required to restructure it, and the continued funding requirements would be far in excess of amounts that the group considers to be viable.”

Frasers added that in light of the situation, Matches has been put into administration. “Frasers remains committed to the luxury market and its brand partners,” the company added.

The decision to shut Matches is an about-face for Frasers, which paid 52 million pounds for the retailer shortly before Christmas and touted its turnaround plans.

At the time, Michael Murray, chief executive officer of Frasers, said that “while the global luxury environment is softer, we are confident that, by leveraging our industry-leading ecosystem, we will unlock synergies and drive profitable growth for Matches.”

Murray described Matches as “a leader in online luxury retail which has incredible relationships with its brand partners. This acquisition will strengthen Frasers’ luxury offering, further deepening our relationships and accelerating our mission to provide consumers with access to the world’s best brands.”

Nick Beighton, Matches’ CEO, was equally upbeat at the time of the sale.

“Being part of Frasers, with their utter commitment to luxury, will give this business access to greater scale, best-in-class retail expertise, and the financial stability it needs to more effectively deliver for our brand partners and our customers,” Beighton said.

The turnaround job was always going to be a big one. In the fiscal year ended on Jan. 31, 2023, Matches’ sales dipped 1.7 percent to 380.1 million pounds, while losses widened to 70.9 million pounds from 39.8 million pounds.

However, Frasers’ decision should come as no surprise. The company’s ultimate owner, Mike Ashley, is known in the U.K. as the Grim Reaper of the high street.

He specializes in buying stakes in distressed companies, or in brands that sell (or can potentially sell) through his retail chains, often at a steep discount.

The purchase price of Matches was a fraction of the $1 billion price that private equity firm Apax was reported to have paid for it in 2017. It is likely some of the brands currently supplying Matches will now sell their wares at Frasers Group retailers.

Frasers owns retail brands including Sports Direct, Flannels, Agent Provocateur, Jack Wills and the House of Fraser stores.

The collapse of Matches is the latest chapter in a sorry tale of online fashion retailers both in the U.K. and abroad. Companies that were once riding high and viewed as go-to destinations for fashion, luxury, and creative, immersive retail, have watched their valuations evaporate amid slowing demand for luxury, and spiking interest rates and inflation.

As reported, Farfetch was purchased out of administration by Coupang late last year, while Compagnie Financière Richemont continues to look for a buyer for Yoox Net-a-porter after writing down the value of the pioneering online fashion retailer.

Richemont was on the brink of selling YNAP to Farfetch before it collapsed and called off the deal after Coupang purchased the company.

The fate of Browns, which was part of the Farfetch portfolio, remains unclear. According to Italian press reports, Coupang has hired Rothschild to find a buyer for the retailer.

Social media platform’s public debut will be closely watched as a gauge of the appetite for tech listings

The roadshow for Reddit’s closely watched public debut on the New York Stock Exchange will start on Monday, as it prepares to begin trading the following week in a tech listing that will set the tone for the market in 2024.

The social media platform is trying to secure an anchor investor as it pitches its fast-growing advertising business and the promise of revenues from selling its data. Reddit plans to price its initial public offering on March 20 and start trading the following day, according to two people familiar with the matter.

The company is targeting between $31 and $34 a share, translating to a valuation of as much as $6.5bn. Reddit and the NYSE declined to comment.

If Reddit prices as planned, the listing will give it a significantly smaller value than the $10bn it reached in its last private valuation in 2021. US IPO activity has been depressed for more than two years, and even those that have managed to go public recently have had to offer investors substantial valuation discounts compared with listed rivals.

One IPO banker, who is not involved in the deal, said that the listing would “not define the entire IPO market — but a bad performance certainly wouldn’t help as we think about tech IPOs in general”.

Reddit would be looking to entice an “anchor” or “cornerstone” investor who will agree to have their names published in the prospectus in exchange for being guaranteed a large allocation of shares, two people said. Such investors have become increasingly common in the tricky fundraising environment.

Some of Reddit’s largest existing shareholders include Fidelity, the $4.5tn asset management group, and China’s Tencent. 

For the NYSE, Reddit marks its most high-profile tech listing since the height of the 2020-21 IPO boom. Owned by Intercontinental Exchange, NYSE is expected to pull out all the stops and encourage more companies to follow suit.

Reddit’s choice to list on NYSE surprised some observers as rival Nasdaq has long had a reputation as the default venue for high-profile tech groups. But NYSE has quietly carved out a niche hosting social media groups.

Its pitch to encourage Reddit to choose the so-called big board included a substantial marketing package. Both traders and the historic trading floor will be decked out in Reddit’s white and orange colour scheme, according to people familiar with the plans.

Listings on NYSE are less automated than those on Nasdaq, with a dedicated human market maker helping to manage liquidity and reduce volatility. Trading firm GTS will be the designated market maker for Reddit, having performed the same role with Twitter, Pinterest and Snap. Morgan Stanley and Goldman Sachs are the lead bankers on the deal.

Patrick Murphy, a partner at GTS, said: “Twitter, Snap and Pinterest all had successful prints, all closed above the pricing, all traded 100 per cent of their float on the first day and all traded on the NYSE. If you do a real in-depth case study on mitigating volatility, it makes sense to pick the DMM model.”

As the birthplace of “meme stocks” and the notorious WallStreetBets trading forum, Reddit warned in its prospectus that trading in its shares could be particularly volatile.

The business, spun out as an independent subsidiary by Condé Nast parent company Advance Publications in 2011, has not made a profit in its 19-year history, and recorded a $91mn loss in 2023.

It had $800mn in sales last year, coming largely from advertising. Reddit will tell potential investors that it is building an advertising business similar to Pinterest, whereby it does not gather much personal data about its users and instead targets advertising by interest and intent, according to one person familiar with the plans.

On top of advertising, Reddit is attempting to lure potential investors with the promise that licensing user data to artificial intelligence groups looking to train their large language models will be a lucrative business. It has already struck a deal with Google worth about $60mn annually.

The industry is undergoing a painful reset but it's not all doom and gloom

Clouds are clearing for US offshore wind

The skies are looking brighter for US offshore wind.

Last week, New York awarded new contracts to two troubled offshore wind projects as part of an effort to rescue the nascent industry that has been pummeled by tough macroeconomic conditions. The state has one of the most ambitious targets in the country for offshore wind, making it central to the Biden administration’s goal to deploy 30GW of capacity by 2030.

“This is just psychologically very reassuring to the industry,” said Theodore Paradise, a partner at the K&L Gates law firm, adding that the contracts will go a “long way to encouraging the sector and sending good market signals to the supply chain”.

The two projects awarded were Equinor’s Empire Wind 1 project and Ørsted and Eversource’s Sunrise Wind facility, totalling 1.7GW of capacity. At least one supply chain reaction has already been seen — on Tuesday, Vestas announced it was preparing to meet turbine orders for Equinor’s project off the coast of Brooklyn. Whether the turbines will be US-made is still uncertain: the company last year said it was taking a “wait-and-see” approach for plans to build a US factory because of a lack of market certainty.

“States are signalling clearly that they value the local jobs, supply chain investments, and large-scale clean energy generation that offshore wind offers,” said Ørsted and Eversource in a statement.

US offshore wind is undergoing a “fundamental reset” as high interest rates, inflation, and supply chain constraints made projects contracted prior to the pandemic uneconomical. More than half of US offshore wind contracts were cancelled or at risk of cancellation last year, including Ørsted’s flagship scrapped projects in New Jersey. Partnerships between big developers including BP and Equinor and Ørsted and Eversource have also ended (Ørsted is purchasing Eversource’s stake in Sunrise Wind). 

It hasn’t been all doom and gloom. The country’s first two utility-scale offshore wind projects have kicked off operation. Wind turbine makers reported improved profits last quarter. In addition to New York, a consortium of New England states are allowing developers to rebid contracts for more favourable terms.

“The market is going through a tremendous reset . . . I believe the better days are ahead,” Vic Abate, chief executive of the wind business at GE Vernova, told investors in New York yesterday. The firm expects its wind segment, which has suffered steep losses, to enter profitability in 2025.

Josh Irwin, senior vice-president at Vestas, said the recent state contracts were a “step in the right direction” but larger conclusions cannot be drawn. “Long-run certainty for the industry means a consistent level of project construction over many years while leveraging the investments being made in infrastructure today to support future US projects,” Irwin told Energy Source.

Big questions include how much US offshore wind will cost and how quickly the industry will recover. Last week’s awards show the bill impact for Empire Wind 1 and Sunrise Wind will now cost ratepayers more than double, from $0.73 per month to about $2. Analysts note the price tag reflects the wider increase in the cost of capital and excludes savings from commodity shocks and the benefit of emissions reductions.

“If you look at the fundamentals of the energy source, we are at higher prices, but in the end we will provide a different energy source with a different shape of energy production,” said João Metelo, an offshore wind veteran and founder of investment firm Gateway Zero. “If you think about the east coast, there’s just a lack of [land-based] resources there, so you need those resources to come in.”

The US is widely expected to miss its 30GW target, with consultancy BNEF expecting only 14.5GW to be deployed by the end of the decade. Atin Jain, BNEF’s senior wind analyst, said “it cannot be ruled out that projects may face more challenges in the future”.

“We’re making good strides to find ourselves in a position we want to be in, but we also do so not with a lens of complete optimism,” said Doreen Harris, president of New York State Energy Research and Development Authority, which awarded the new contracts and expects New York to reach its own 9GW offshore wind target by 2035. “We have to recognise that there will be bumps in the road.”

Of course, there’s also the uncertainty of the presidential election. Former Trump administration officials have told the FT that he will repeal the IRA, which includes lofty subsidies for offshore wind, if he returns to the White House. Another Trump administration could also slow reviews and lease sales or put Biden-approved projects in jeopardy if they are challenged in court, warns ClearView Energy Partners.

“While we believe the IRA survives, you can’t discount the power of the executive branch. You can see scenarios where a new administration delays permitting of offshore wind,” said Keith Derman, co-head of infrastructure opportunities at Ares Management.

Gapping down
In reaction to earnings/guidance:

Other news:

Gapping up
In reaction to earnings/guidance:

Other news: