WSJ : British Ship Rubymar Hit by Houthi Missile Sinks in Red Sea

British Ship Rubymar Hit by Houthi Missile Sinks in Red Sea
The cargo vessel carried fertilizer, threatening the region’s marine ecosystem

A British-owned ship struck last month by Yemen’s Iran-backed Houthi forces has sunk into the Red Sea, U.K. and Yemen officials said Saturday, threatening to cause an environmental disaster with its cargo of fertilizer.

A Houthi missile strike on Feb. 18 had blown a hole in the cargo vessel, Rubymar, which was shipping 22,000 metric tons of Saudi fertilizer to Bulgaria. That evening, the crew abandoned the vessel, flagged in Belize, and it vanished into the sea late Friday after taking on water for two weeks.

The Houthis have carried out more than 60 attacks in the Red Sea region, upending the shipping industry’s ability to travel through one of the world’s busiest commercial waterways, which connects Asia to Europe and beyond through Egypt’s Suez Canal.

The U.S. and its allies have sent warships to the Red Sea, and the U.S. and the U.K. have conducted airstrikes against the Houthis in Yemen to deter the group from more attacks on the shipping industry. But the Houthis have proved resilient, saying they will continue to attack what they say are ships connected to Israel in response to its invasion of Gaza, though many of the vessels have no connection to Israel.

Cleaning up any damage to the Red Sea and its coastal areas from the Rubymar’s fertilizer cargo will be complicated by the continued threat from the Houthis. “There won’t be anyone to help under missile threat,” said Ami Daniel, chief executive of maritime artificial-intelligence provider Windward.

Even before the Rubymar was lost, the attack on the ship had already caused an 18-mile oil slick, according to the U.S. Central Command, which is responsible for U.S. military operations in the Middle East. Roy Khoury, chief executive of Blue Fleet Group, the ship-management company operating the ship in Beirut, said he had been struggling to bring salvaging companies to tow or at least repair it because they were concerned about operating in a war zone.

Ahmed Bin Mubarak, prime minister of the internationally recognized Yemeni government in Aden, which has been engaged in a civil war with the Houthis for a decade, said on X that the environmental disaster caused by the fertilizer cargo sinking “threatens the lives of our people and generations for decades.”

Shell, the giant U.K. oil company, has suspend all transit though the key waterway over fears of its oil tankers being struck and causing oil spills, The Wall Street Journal has previously reported.

The attack on Rubymar was the worst in the Middle East since 2006, when a suspected attack by Lebanon’s Hezbollah sank an Egyptian ship loaded with cement, said Windward’s Daniel, a former Israeli Navy officer, who witnessed the incident.

The Rubymar was flagged in Belize. Commercial ships are often flagged in offshore jurisdictions, separate from their owners’ headquarters, to benefit from their lax tax, labor and environmental regulations.

FT : Former Macquarie star trader agrees terms to join Swiss house Mercuria

Former Macquarie star trader agrees terms to join Swiss house Mercuria
Nick O’Kane, who earned more than Jamie Dimon last year, to grow trading group’s gas and power business from Dubai

The former Macquarie star commodities trader Nick O’Kane has agreed terms to join Mercuria as the Swiss trading house seeks to expand its gas and power business, according to people with knowledge of the discussions.

Under the preliminary agreement, O’Kane would be initially based in Dubai, the people said. The fifty-year old Australian is to join in a senior leadership role to grow Mercuria’s gas and power activities, particularly in Asia, one of the people added. The appointment has yet to be finalised, the person cautioned.

O’Kane, who quit Macquarie last month after almost three decades, was the group’s best paid executive in 2023, earning A$58mn ($38mn), or 75 per cent more than chief executive Shemara Wikramanayake. His pay also exceeded that of JPMorgan chair Jamie Dimon and Goldman Sachs chief David Solomon.

Commodity traders are anticipating huge increases in demand and volatility in gas and electricity markets as the global energy system transitions away from more polluting oil and coal. Mercuria’s rivals including Trafigura, Vitol and Gunvor have also been expanding their gas and power teams.

Mercuria and O’Kane declined to comment.

While at Macquarie O’Kane turned the Australian bank into an energy trading power house. Last year the commodities and global markets business he helped build and ran accounted for almost 60 per cent of Macquarie’s profits. The trader had been tipped as a potential successor to Wikramanayake.

Privately owned Mercuria has not outlined a succession plan for chief executive and co-founder Marco Dunand, is 63 this year. A person close to Dunand said he had no immediate plans to step down.

Mercuria — founded by Dunand and fellow former Goldman Sachs trader Daniel Jaeggi in 2004 — has hired senior bankers before. In 2014, the company recruited Magid Shenouda, a former co-head of commodities at Goldman Sachs. Shenouda was previously tipped as a possible successor to Dunand and Jaeggi.

In 2021, Frederic Barnaud, former boss of Singapore’s Pavilion Energy, joined Mercuria as chief strategy and commercial officer but left after less than a year.

Unlike Trafigura, Vitol and Gunvor, which remain more focused on physical oil trading, Mercuria has also pushed into financing, offering services more akin to those offered by investment banks. In 2014 it bought part of JPMorgan’s physical commodities trading business to bolster its operations, particularly in US power markets. 

The company recorded net income of $3bn in 2022 on revenues of $174bn, up from $1.25bn in 2021, as volatility in commodity markets supercharged profits for traders.

Oil trading represents about 30 per cent of total revenues, but alongside gas and power trading, the group is also investing in green technologies such as battery storage and biogas. Dunand has said that half of the company’s investments each year will go into energy transition projects.

>>> Weekly Market Update

Weekly Market Update: Earning’s season surged in volume as BTC soared above a faulty moon lander

Out of the tumult from the headiest first quarter of earning’s season, this week recorded another lunar landing, Putin’s vitriolic response to NATO involvement in Ukraine, PMI figures out of China, Germany, Italy, and the US, as BTC lead the bull to its next halving event in April 19th.
Focus lead a favorable eye on the markets influenced by the Jan PCE Deflator reading that came out on Thursday in-line with expectations, likely signaling continued steady moderation for inflation continuing in 2024.
In Asia, satellite images exposed China’s floating barrier in the disputed Scarborough Shoal, Chinese brokerages and funds cut the size of their quantitative tightening, and China’s PMI data expanded a point higher than consensus; Japan’s MUFG analysts anticipate the BoJ to exit from negative rates, and Japan’s CPI data concurred by beating estimates; Taiwan Jan exports improved and Russia again banned gasoline exports for 6 months.
In Europe, Parliament approved 10 second instant money transfers; ECB planned to narrow the corridor between lending and deposit rates; Spain and Germany’s prelim CPIs contracted a point; Italy’s Feb PMI contracted four points, while Russia cited justification for nuclear posturing.
In the US, Trump won Michigan’s Republican Primary (as expected), while Illinois ruled to remove him from the ballot, counting as the third state to do so; Feb S&P Manufacturing PMI rose whereas Feb University of Michigan’s confidence and Jan prelim wholesale inventories contracted. There were also data improvements in crude and Feb Richmond manufacturing index following a trend of other metrics reported throughout the week.
Earnings season peaked in volume as notable companies met with, or were a tad shy of, consensus estimates. Companies of note that beat their consensus were Autodesk, American Tower, Best Buy, Dell, Republic Services, and Workday, among others. INTC announced a new Edge Platform; Toyota is yet to reach a union agreement following their second meeting; DOJ is expected to file an antitrust suit against Apple before the end of March; SEC subpoenaed OpenAI; Airbus is reportedly exploring a purchase agreement for Spirit Aerosystems’ A220 wing plant; BTC crossed the 60k barrier, resting at 62K at the time of writing.

Mon 2/26
(CN) Reportedly new satellite images of the disputed Scarborough Shoal in the South China Sea show a new floating barrier across its entrance blocking the mouth of the shoal; China said to have removed the barrier a few hours after the Philippines' BFAR vessel left - press
(JP) JAPAN JAN NATIONAL CPI Y/Y: 2.2% V 1.9%E; CPI EX FRESH FOOD (CORE) Y/Y: 2.0% V 1.9%E (Core CPI above target for 22 months, but Jan at slowest pace of rise since Mar 2022)
(RU) Navalny's ally Pevchikh: Navalny was close to being freed in a prisoner swap; Navalny was killed on Feb 16th, while on the evening of Feb 15th I received a confirmation that exchange negotiations were in the final stages
(IL) Palestinian PM Shtayyeh and his govt resign – press
(EU) European Parliament formally approves new law to allow people to transfer money instantly within 10 seconds at any time of the day, including outside business hours, in the same country and to any other EU country; Expected to enter into force formally by Apr 2024 – press
(US) FEB DALLAS FED MANUFACTURING ACTIVITY: -11.3 V -15.0E
(US) Fed's Schmid (non-voter; hawk): No need to preemptively adjust policy; Fed is not out of woods on inflation - debut speech
(US) JAN NEW HOME SALES: 661K V 684KE
(US) NY Fed takes $524.96B (v $520.1B prior) in RRP program at 5.30%; 81 participating and accepted counterparties
(US) TREASURY $64B 5-YEAR NOTE AUCTION DRAWS 4.320% V 4.055% PRIOR, BTC 2.41 V 2.31 PRIOR AND 2.49 OVER THE LAST 12
AEP Reports Q4 $1.23 v $1.27e, Rev $4.6B v $5.22Be
CCO Reports Q4 Net $24.8M v $98.7M y/y, Rev $632.1M v $612Me; Guides Q1 strong; Notes out-of-home industry is forecasted to deliver healthy growth in 2024; Initiates sale process for its Latin American businesses alongside Europe-North segment
DPZ Reports Q4 $4.48 v $4.36e, Rev $1.40B v $1.42Be; Announces additional $1B share buyback; Raises Quarterly dividend 24.8% to $1.51 from $1.21 (indicated yield 1.39%)
WDAY Reports Q4 $1.57 v $1.44e, Rev $1.92B v $1.91Be
ZM Reports Q4 $1.42 v $1.15e, Rev $1.15B v $1.13Be; Board authorizes stock repurchase program of up to $1.5B
INTC Announces new Edge Platform, a modular, open software platform enabling enterprises to develop, deploy, run, secure, and manage edge and AI applications at scale with cloud-like simplicity
WFC CFO: Consumer continues to be resilient but expecting some deterioration in credit going ahead - UBS conference comments
Tues 2/27
(RU) Russia to again ban gasoline exports for 6 months from Mar 1st - Russia state media
(RU) Russian govt spokesperson Peskov: French Pres Macron comments about not ruling out sending NATO troops to Ukraine are very important new element; If this happens, talks would have to shift to the inevitability of a conflict with NATO
(IR) Iran reportedly has told militia groups in Iraq and Syria to curtail assaults on targets such as military installations – NYT
(IL) Hamas official: US Pres Biden's comments on halt to Gaza war are premature; Leaked truce proposal does not meet our demands
(TW) Taiwan Jan Export Orders Y/Y: +1.9% v -3.6%e (2nd positive Y/Y pace in 16 months); Sees February orders down between -15.7% and -11% y/y
(JP) MUFG Securities Co. analysts believe BoJ is setting the stage for an exit from negative rates which could come as early as at the next meeting in March
(US) Atlanta Fed GDPNow: Raises Q1 GDP forecast from 2.9% to 3.2%
(US) FEB RICHMOND FED MANUFACTURING INDEX: -5 V -9E; New Orders -5
(US) Former US Pres Trump wins Michigan Republican Primary (as expected) - US press
(US) JAN PRELIMINARY DURABLE GOODS ORDERS: -6.1% V -5.0%E; DURABLES (EX-TRANSPORTATION): -0.3% V +0.2%E
(US) NY Fed takes $519.7B (v $524.96B prior) in RRP program at 5.30%; 84 participating and accepted counterparties
(US) TREASURY $42B 7-YEAR NOTE AUCTION RESULTS: DRAWS 4.327% V 4.109% PRIOR, BID-TO-COVER RATIO: 2.58 V 2.57 PRIOR AND 2.53 OVER LAST 12 AUCTIONS
7203.JP Yet to reach wage agreement with union in 2nd meeting; Did not respond to the union's wage demand - Japanese press
A Reports Q1 $1.29 v $1.21e, Rev $1.66B v $1.57Be; Guides Q2 light, affirms FY24
AMT Reports FFO Q4 $2.29 v $2.18e, Rev $2.79B v $2.73Be
AAPL Follow up: DOJ expected to file Apple antitrust case before end of March; Apple reportedly met with DOJ last week in a final bid to avert Antitrust Suit - US financial press
BECN Jan Rev per day -4% y/y; Guides Q1 Rev up high single digits y/y - earnings slides
CRI Reports Q4 $2.76 v $2.52e, Rev $857.9M v $869Me; Guides Q1 below est; Raises quarterly dividend 7% to $0.80/shr; Assumes improved macroeconomic environment and consumer demand as the year progresses
GS CEO: Consumer behavior has softened, especially in lower tier of economy; Have work to do to narrow consumer business
RSG Reports Q4 $1.41 v $1.28e, Rev $3.83B v $3.72Be
URBN Reports Q4 $0.69 v $0.73e, Rev $1.49B v $1.49Be; Notes positive customer response to early spring offerings
VKTX Phase 2 VENTURE Trial of Dual GLP-1/GIP Receptor Agonist VK2735 in patients with Obesity achieves primary and all secondary endpoints; Intends to meet with FDA to discuss next steps in development of VK2735 and remain on track to report data from Phase 1 study of oral formulation later this quarter; total of 23 patients (13%) discontinued treatment in study

Weds 2/28
(CN) China Securities Regulator (CSRC): Confirms brokerages and funds to cut size of QT; Vow to enhance law enforcement efficiency; Will guide the securities industry to control business size and leverage
(JP) Japan's University of Tokyo top professor and BOJ counselor Yoshikawa: Of course it’s time for the BOJ to normalize policy; BOJ should make straightforward policy shift [**Note: Yoshikawa said to be a friend of BOJ Gov. Kazuo Ueda for more than five decades]
(RU) FT, citing secret Russian military files drawn up between 2008 and 2014, notes Russia's nuclear posture allows a tactical nuclear weapon to be used to try to prevent Russia from becoming embroiled in a sprawling war, particularly one in which the US might intervene
(RU) Moldova's pro-Russian Transnistria breakaway region asks Russia to protect it against Moldova pressure - press (as speculated)
(US) DOE CRUDE: +4.2M V +2.7ME; GASOLINE: -2.8M V -1.3ME; DISTILLATE: -0.5M V -2.0ME
(US) Fed’s Bostic (dove, voter): Reiterates sees first rate cut in Summer; Still work to do on inflation, haven't declared victory - Q&A
(US) FDA Chief Califf: Very concerned about sales of compounded or fake versions of new weight loss drugs
(US) Illinois judge rules to remove Trump from state ballot in the state; the Trump campaign will appeal the ruling - press [**Note: the third US state to block Trump from a Republican ballot after Colorado and Maine; decisions appealed in Supreme Court]
(US) JAN PRELIMINARY WHOLESALE INVENTORIES M/M: -0.1% V 0.2%E
(US) NY Fed takes $569.9B (v $519.7B prior) in RRP program at 5.30%; 87 participating and accepted counterparties
(US) Q4 PRELIMINARY GDP ANNUALIZED Q/Q: 3.2% V 3.3%E; PERSONAL CONSUMPTION: 3.0% V 2.7%E
(US) Q4 PRELIMINARY GDP PRICE INDEX: Q/Q: 1.6% V 1.5%E; CORE PCE Q/Q: 2.1% V 2.0%E
AAP Reports Q4 -$0.59 (unclear if comp) v $0.24e, Rev $2.50B v $2.47Be; Continues ongoing operational and strategic review of the business, including the separate sales processes for Worldpac and Canadian unit
AMC Reports Q4 -$0.54 v -$0.70e, Rev $1.10B v $1.06Be; Currently expect that the industry box office in 2025 will grow by $1-2B, or more, in size over 2024
BA US FAA gives Boeing 90 days to deliver quality control plan to address systemic quality control issues - FAA statement
BABA Public Cloud President: Cuts again cloud service prices by up to 55% (average price cut is ~20%); impacts >100 products; effective on Thurs. [Feb 29th]
BIDU Reports Q4 (CNY) 21.86 v 17.86e, Rev 35.0B v 35.0Be
BTC/USD *TESTS $60,000 (highest since Nov 2021); Bitcoin price currently up more than 40% MTD in Feb (biggest M/M gain since Dec 2020)
CRM Reports Q4 $2.29 v $2.26e, Rev $9.29B v $9.21Be; Guides initial FY24 EPS above ests; Initiates quarterly dividend of $0.40/shr; Share Repurchase Program authorization increased by $10B
EME Reports Q4 $4.47 v $2.63 y/y, Rev $3.44B v $2.95B y/y; Guides init FY24 strong; To Increase dividend 39% to $0.25/shr in Q2-24
FWRD Reports Q4 $0.81 v $0.97e, Rev $338.4M v $399Me
HPQ Reports Q1 $0.81 v $0.82e, Rev $13.2B v $13.6Be
NTNX Reports Q2 $0.46 v $0.29e, Rev $565.2M v $552Me; Raises outlook
OPENAI.IPO SEC subpoenaed OpenAi after ouster of CEO Altman last year; the regulator is probing if investors were misled – WSJ
TJX Reports Q4 $1.12 adj v $1.12e, Rev $16.4B v $16.2Be; Plans to raise quarterly dividend 13% to $0.375/shr and $2.0-2.5B share buyback for FY25 (up to 2.2% of market cap)
WLN.FR Reports FY23 Rev €4.61B v €4.61Be

Thurs 2/29
(CN) CHINA FEB CAIXIN PMI MANUFACTURING: 50.9 V 50.7E (4th month of expansion)
(CN) CHINA FEB MANUFACTURING PMI (GOVT OFFICIAL): 49.1 V 49.0E (5th month of contraction)
(DE) GERMANY FEB PRELIMINARY CPI M/M: 0.4% V 0.5%E; Y/Y: 2.5% V 2.6%E
(DE) GERMANY FEB UNEMPLOYMENT CHANGE: +11.0K V +5.0KE; UNEMPLOYMENT CLAIMS RATE: 5.9% V 5.8%E
(EU) Reportedly ECB plans to narrow corridor between lending and deposit rates, bringing lending rate closer to its 4.0% deposit rate; To continue putting a "floor" under market interest rates in the years to come, but banks will play a greater role in deciding how much liquidity they want – press
(EU) ECB’s Holzmann (Austria, ultrahawk): Serious ECB rate cut discussion unlikely before June
(EU) Estonia PM Kallas: Western leaders must Not rule out sending ground troops to Ukraine; Everything on table to help Ukraine beat Putin
(ES) SPAIN FEB PRELIMINARY CPI M/M: 0.3% V 0.4%E; Y/Y: 2.8% V 2.8%E (lowest annual pace since Aug 2023)
(RU) RUSSIA PRES PUTIN: 'DO NOT THEY UNDERSTAND THERE IS A DANGER OF NUCLEAR CONFLICT?' - ANNUAL PARLIAMENT ADDRESS
(RU) Russia Pres Putin: Strategic forces are combat ready; Not planning to deploy nuclear weapons in space; Our military has gained colossal combat experience - annual parliament address
(UR) Ukraine reportedly sees risks that Russia will break through its defence by summer 2024 unless western partners increase ammunition supplies - press
(US) BOFA INSTITUTE: WEEK-TO-FEB 24TH TOTAL CARD SPENDING +0.4% Y/Y V -0.2% AVG IN JAN; OVERALL SPENDING REMAINED SOFT BUT STABLE IN FEB
(US) FEB CHICAGO PURCHASE MANAGER’S INDEX (PMI): 44.0 V 48.0E
(US) Fed's Goolsbee (non-voter for 2024); Even with Jan PCE data showing a month of rebound, should be careful to extrapolate
(US) JAN PENDING HOME SALES M/M: -4.9% V +1.5%E; Y/Y: -6.8% V -4.4%E
(US) JAN PERSONAL INCOME: 1.0% V 0.4%E; PERSONAL SPENDING: 0.2% V 0.2%E
(US) JAN PCE DEFLATOR M/M: 0.3% V 0.3%E; Y/Y: 2.4% V 2.4%E (lowest annual pace since Apr 2021)
(US) Nevada reports Jan casino gaming Rev $1.28B, +0.5% y/y, Las Vegas strip Rev $686.2M, -3.8% y/y
ADSK Reports Q4 $2.09 v $1.95e, Rev $1.47B v $1.43Be
BBY Reports Q4 $2.72 v $2.51e, Rev $14.7B v $14.5Be; Raises quarterly dividend 2.2% to $0.94 from $0.92 (indicated yield 4.72%)
DELL Reports Q4 $2.20 v $1.73e, Rev $22.3B v $22.1Be; To increase dividend 20%

Fri 3/1
(CN) China end-Feb Standing Lending Facility (SLF) at CNY0M (nil) v CNY2.70B m/m
(CN) US Commerce Dept opens probe into Chinese-made vehicles; More reports that Biden Admin reportedly may ban or restrict Chinese vehicle imports citing national security risks – press
(DE) GERMANY FEB FINAL MANUFACTURING PMI: 42.5 V 42.3E (confirms 20th straight contraction)
(EU) EURO ZONE FEB ADVANCE CPI ESTIMATE Y/Y: 2.6% V 2.5%E; CPI CORE Y/Y: 3.1% V 2.9%E (lowest Core CPI since spring 2022)
(IT) ITALY FEB PRELIMINARY CPI M/M: 0.1% V 0.3%E; Y/Y: 0.8% V 1.0%E
(IT) ITALY FEB PMI MANUFACTURING: 48.7 V 49.1E (11th straight contraction)
(RU) Russia Pres Putin: Reiterates Russia is not planning to deploy nuclear weapons in space
(US) Apollo's Chief Economist Slok: Fed will Not cut rates in 2024, US economy is simply not slowing down and Fed will spend most of 2024 fighting inflation
(US) FEB FINAL S&P MANUFACTURING PMI: 52.2 V 51.5E
(US) FEB FINAL UNIVERSITY OF MICHIGAN CONFIDENCE: 76.9 V 79.6E
KNIN.CH CEO: Volumes for sea freight have normalized in Q4; The trend will continue in 2024 - post earnings comments
PLUG Reports FY23 -$2.30 v -$1.25, Rev $891M v $872Me

WSJ : Chinese Gangs Use Cryptocurrencies to Launder Billions

Chinese Gangs Use Cryptocurrencies to Launder Billions
Tether and other tokens are allowing criminal organizations linked to the country to cover their tracks

Chinese crime syndicates are using cryptocurrencies to launder billions of dollars, including money raised from helping supply drugs to the U.S. or scamming American victims.

These gangs are exploiting the decentralized nature of cryptocurrency markets to evade the grasp of Chinese and foreign authorities. They are using crypto to launder the profits of drug dealing and illegal gambling, and have made huge amounts from investment scams that promise easy returns in the cryptocurrency markets.

Crypto addresses linked to a group of suspected chemical traders based in China have received more than $37.8 million worth of assets since 2018 in exchange for shipping a key ingredient of fentanyl, the research firm Chainalysis said in a report last year. These shipments are often sent to Central America and Mexico, where drug cartels use them to manufacture the drug, which is then shipped to the U.S.

In October, the U.S.’s Office of Foreign Assets Control sanctioned a network of individuals and companies based in China over the manufacturing and distribution of ingredients used in fentanyl and other drugs. Some of those individuals held cryptocurrency wallets to send and receive funds, the Treasury Department said.

Fentanyl use by Americans has become a major public health issue, contributing to more than 100,000 deaths a year, according to the latest figures from the Centers for Disease Control and Prevention. It has also been a rare area where the world’s two superpowers have appeared to be on the same side: Chinese and U.S. officials agreed this year to work together to tackle the issue.

These cases highlight the changing nature of money laundering, which is increasingly being done through cryptocurrencies rather than old-fashioned methods such as shipping suitcases of cash.

That is a problem for investigators, but it also gives them new ways to track money flows, since most cryptocurrency transfers are saved on a public ledger.

Scammers of several victims in China and Florida shared the same two crypto wallet addresses, implying they are likely parts of the same group, according to a joint investigation published in January by ChainArgos, a Singapore-based blockchain data platform, and Bitrace, a China-based blockchain research group. One of those wallets processed at least $20.7 million worth of tokens since early 2021, the report said. The study found that the stolen funds from those two addresses were later deposited onto two major crypto exchanges, OKX and Huobi, now called HTX.

It is tough for victims in the U.S. to recover their money because many of them lose $10,000 or less—big enough to be someone’s life savings but too small for organizations such as the Federal Bureau of Investigation to consider it a priority, said Jonelle Still, adjunct professor in blockchain analytics at the Middlebury Institute of International Studies.

The transnational nature of these syndicates adds further difficulty in catching criminals or helping victims recover their assets, since it requires cooperation between officials in different countries, say antifraud advocates.

FT : Red Bull turmoil is ‘damaging’ F1, says boss of governing body

Red Bull turmoil is ‘damaging’ F1, says boss of governing body
Comments by Mohammed Ben Sulayem come after email leak of messages involving Christian Horner

The president of the body that governs Formula One has warned that the furore over Red Bull Racing chief Christian Horner is “damaging” the sport, following allegations of inappropriate conduct by the British team boss.

Speaking on Friday after meeting Horner, Mohammed Ben Sulayem, president of the Fédération Internationale de l’Automobile, acknowledged the impact of the claims about the Red Bull team boss’s behaviour towards a female colleague.

“It’s damaging the sport . . . This is damaging on a human level,” Ben Sulayem told the Financial Times.

But he added that the governing body currently had no plans to conduct its own investigation because it had not received a formal complaint itself.

Red Bull said on Wednesday that a complaint against Horner had been dismissed following a barrister-led investigation into the allegations, which Horner repeatedly denied.

A day later, a cache of messages was anonymously sent to Ben Sulayem, F1 chief Stefano Domenicali, Toto Wolff, the boss of rival F1 team Mercedes, and other leading figures in motorsport. It contained screenshots of messages allegedly exchanged between Horner and the woman whose complaint had triggered the investigation.

Responding to questions about the email, Horner said he would not comment on “anonymous speculation” and reiterated that he had “always denied the allegations”.

“I respected the integrity of the independent investigation and fully co-operated with it every step of the way,” he said. “It was a thorough and fair investigation, conducted by an independent specialist barrister, and it has concluded dismissing the complaint made. I remain fully focused on the start of the season.”

Horner and Ben Sulayem met in Bahrain on Friday, a day before Red Bull begins the defence of its constructors’ and drivers’ titles in the Middle Eastern island state.

Ben Sulayem declined to comment on what the two men discussed but said a barrister had undertaken a “thorough investigation” on behalf of Red Bull.

The FIA president added that it was vital to “protect our sport from all of this”.

“It is the beginning of the season. F1 is becoming so popular,” he said. “We just need to enjoy the beginning of the season. Look at the competition. Why do we overshadow it with negativity?”

The Emirati former rally driver, who has led the FIA since his election in December 2021, cautioned that the governing body “cannot jump the gun” but that it had to “look into any complaint that comes through our compliance officer”.

Formula One, which is owned by US group Liberty Media, and Ben Sulayem’s FIA are discussing the situation, according to people with knowledge of the matter. F1 and the FIA declined to comment.

The investigation has drawn scrutiny from rival teams and from US automaker Ford, which is planning to re-enter F1 in 2026 through a partnership with Red Bull. The US car company, which had previously called for a transparent and rapid investigation, declined to comment on the latest allegations.

Asked about the cache, Red Bull said it would be inappropriate to comment on “a private matter between Mr Horner and another”. Red Bull Racing, the F1 team owned by the Austrian energy drinks group, declined to comment.

Red Bull has not published the investigation report, adding that the complainant can still appeal against its decision not to pursue the matter.

Horner, 50, has led Red Bull Racing since early 2005, shortly after the late Dietrich Mateschitz, founder of the drinks company, bought the F1 team.

The F1 team chief, who is married to former Spice Girl Geri Halliwell, has been one of the stars of the hit Netflix series Drive to Survive, which has been credited with boosting the popularity of the sport.

He has led Red Bull to six constructors’ championships — which measure the performance of the entire team — and seven drivers’ titles.

FT : Boeing in talks to acquire fuselage supplier Spirit AeroSystems

Boeing in talks to acquire fuselage supplier Spirit AeroSystems
Plane maker says reintegrating its former unit would strengthen safety and improve quality

Boeing is in talks to acquire Spirit AeroSystems, the troubled fuselage supplier it spun off nearly 20 years ago, as the plane maker faces pressure to improve its safety record.

The Virginia-based group confirmed the “preliminary” discussions on Friday afternoon, saying it believed that the “reintegration” of Spirit “would further strengthen aviation safety, improve quality and serve the interests of our customers, employees, and shareholders”.

The confirmation came after reports of the talks prompted sharp moves in both companies’ shares on Friday. Boeing’s stock fell 1.8 per cent to $200, putting them down 20 per cent since the start of the year, while Spirit’s shares closed 15.4 per cent higher at $32.98, valuing it at almost $4bn.

Spirit, based in Wichita, Kansas, also confirmed the talks while cautioning that it could give no assurances that the two groups would reach an agreement, or on what terms.

The news, which was first reported by The Wall Street Journal, came as both companies are undergoing an audit by the US Federal Aviation Administration, following a mid-air blowout of a door panel on a 737 Max flown by Alaska Airlines in January.

Spirit supplies Boeing with the fuselage to the 737 Max, and Boeing comprises nearly two-thirds of its business. The operation used to be Boeing Wichita until the plane maker spun it off as a public company in 2005.

But Spirit has suffered from lopsided contracts with Boeing, and Boeing had to renegotiate its agreements with Spirit this past autumn to forestall a looming cash crunch at the supplier.

Spirit separately caused two notable quality lapses on the Max in 2023, though neither incident endangered public safety. It shipped Maxes with first improperly installed fittings on the vertical stabiliser, then four months later incorrectly drilled holes in the rear pressure bulkhead.

The door panel blowout in January was caused by missing bolts, according to a preliminary report by the National Transportation Safety Board. The door panel arrived at Boeing’s factory in Washington with damaged adjacent rivets, forcing workers to open it for repairs by a team from Spirit. The bolts required to hold the door panel in place were never added back.

In its statement on Friday Boeing said it was “committed to finding ways to continue to improve the safety and quality of the airplanes on which millions of people depend each and every day”.

Investors have speculated in recent months that Boeing might move to reacquire Spirit. The plane maker needs a healthy operation there to ensure smooth final assembly for the 737, as well as other programmes Spirit supplies, including the 787 Dreamliner and KC-46 refuelling tanker.

Former chief executive Tom Gentile was replaced as head of Spirit in October by Patrick Shanahan, who worked at Boeing for three decades before his turn as acting US Secretary of Defence.

Robert Stallard, analyst at Vertical Research Partners, said bringing Spirit back in-house would be “great for Spirit, not so great for Boeing”.

“As the relative share price moves suggest, if Spirit were able to sell its Wichita operations to Boeing this would be a coup. Clearly Spirit is in a world of pain at the moment, and the ongoing regulatory risk on its largest programme — the 737 — makes things worse,” Stallard wrote in a note.

While the deal would give Boeing the opportunity to fix Spirit’s problems, he added the US aerospace giant “has its own issues and has hardly covered itself with glory when it comes to execution of late”. Integrating Spirit would put further pressure on Boeing’s commercial aircraft team, while Boeing’s balance sheet could do “without the cost acquiring Spirit”, Stallard said.

Spirit is also exploring whether to sell its operations in Belfast, in Northern Ireland, The Wall Street Journal reported. Although Boeing is Spirit’s biggest customer, the company is also an important supplier to European rival Airbus. It builds wings for Airbus A220 jets in Belfast and also makes parts for the A350 and A320.

The European group had been discussing the future of the operations after the Alaska Airlines incident, according to two people familiar with the situation. Airbus declined to comment on Friday.

FT : Lawyers in Elon Musk pay case seek $6bn in Tesla shares

Lawyers in Elon Musk pay case seek $6bn in Tesla shares
Plaintiffs’ firm Bernstein Litowitz described their request as ‘unprecedented’ and ‘conservative’

Attorneys for shareholders who defeated Elon Musk’s $56bn Tesla pay package have asked a Delaware state court to award them shares in the electric vehicle maker worth nearly $6bn as payment.

In a filing with the Delaware Court of Chancery on Friday, Bernstein Litowitz Berger & Grossmann, the lead counsel for the plaintiff shareholders, conceded such an award was “unprecedented” in absolute value. However, they noted the implied percentage of value won for shareholders remained “conservative” and in line with previous Delaware awards.

“This structure has the benefit of linking the award directly to the benefit created and avoids taking even one cent from the Tesla balance sheet to pay fees,” the filing said, regarding the choice to take the carmaker’s stock instead of a cash award. “We are prepared to ‘eat our cooking’.”

The request follows a landmark ruling last month in which Kathaleen McCormick, the judge overseeing the case, rescinded a 2018 pay package the Tesla board had granted to Musk, which included multiple tranches of stock that vested after the company hit aggressive operating and financial milestones.

McCormick ruled the Tesla board was insufficiently independent of Musk, and that the governance process leading to the grant as well as the value of the shares had been “unfair” to other shareholders.

Lawyers who bring civil suits typically work on a contingency basis — rather than billing clients on hours worked, they will instead take on the odds of winning a case or securing a settlement, and seek a cut of the winning pot. The Musk pay case is more complex as no cash changed hands in the share-grant nullification.

Bernstein wrote in its filing that it believed it could have fairly asked for a third of the “benefit conferred” from the $56bn cancelled award, based on past precedent. It said the benefit came out to 267mn of the 304mn shares that Musk had earned — the difference reflecting the cost to him of exercising the options.

Bernstein pointed to a Delaware case from 2012 in which plaintiffs’ lawyers were awarded a fee of nearly $300mn, or 15 per cent of the shareholder recovery, which had been the record for that court.

It noted its request represented just 11 per cent of the recovery, less than the 15 per cent in the previous case. Bernstein also requested that it be allowed to freely sell the Tesla shares without a mandated holding period — for that concession, it said, it was willing to accept the lower 11 per cent fee.

Based on Tesla’s closing price on Friday, 11 per cent of 267mn shares comes out to roughly 29mn shares, which would be worth $5.9bn. If granted by the Delaware court, Bernstein would be among the 10 largest shareholders of the company. The law firm wrote in the filling that a fee paid in shares would also be tax deductible for the carmaker.

Musk can challenge the fee request. He is also expected to appeal against the pay nullification decision. Lawyers for Musk did not immediately respond to request for comment. Greg Varallo, the lead attorney from Bernstein declined to comment beyond the filing.

Bernstein emphasised how difficult it believed the case was to litigate on a contingent fee basis, describing the saga as a “steep uphill climb” where it “shouldered significant risk in marching forward against elite defence counsel”.

After the February decision, Musk complained about the Delaware corporate law court and exhorted other companies to move their domicile to Nevada and Texas. Since then, he has shifted incorporation of two of his companies away from Delaware — SpaceX to Texas, and Neuralink to Nevada.

In its filing on Friday, Bernstein noted there had been two larger jury awards made in past US civil lawsuits — both of which were in Texas.

FT : ‘Spoofing’ case might draw back curtain on high-speed trading firms

‘Spoofing’ case might draw back curtain on high-speed trading firms
Seven broker-dealers including Citadel Securities face a challenge from a cancer vaccine company

File under: huge if true. A group of Wall Street traders maliciously drove down the share price of a Maryland biotech with a promising new brain cancer vaccine, in pursuit of the marginal profits to be made by buying the stock cheaply and selling it back to the market.

That, at least, was the allegation made by Northwest Biotherapeutics in a suit filed against seven broker-dealers including Virtu and Ken Griffin’s Citadel Securities in late 2022. 

It accused the firms of “repeated spoofing” by using their trading platforms to place tens of millions of orders to sell NWBO that they had no intention of fulfilling. These orders were visible to the rest of the market, the complaint alleged, which led other investors to dump the shares, hammering NWBO’s valuation even as a key clinical trial yielded impressive results.

Predictably, the claims sent conspiracy-minded Redditors — including some of those who previously pumped meme stocks such as Gamestop — into a frenzy. Their refrain for several months has been that hedge funds “want to bury this company”, while largely avoiding mention of factors that might have dissuaded investors from buying into NWBO, such as a study questioning the design of its cancer trial and a negative news report on its results. Northwest had also been mired in governance problems, settling with the SEC over failures in financial reporting oversight.

Last month, NWBO and its Reddit fans were rebuffed by a Manhattan court, which granted Citadel et al’s motion to dismiss the case.

But there was a sting in the tail. In his report recommending dismissal, magistrate Gary Stein concluded that while the company had not yet done enough to tie the trading in question to losses sustained by selling shares at the artificially low prices on specific dates, almost all of NWBO’s other claims were prima facie plausible enough to be allowed to proceed.

An attempted distinction by Citadel Securities and others between orders that were cancelled or merely reduced in volume was “unconvincing”, Stein wrote. He also concluded that at this stage in the litigation, it mattered not whether they were executing orders on behalf of clients, as they exerted “control over the high-speed trading algorithms” behind the trades.

He further found that when “viewed in the light most favourable” to the plaintiff, the “allegations amply support the inference that defendants’ conduct affected the market price for NWBO stock”. In a line that seemed destined to make its way on to the r/wallstreetbets message boards on Reddit, Stein further called the claims “cogent and at least as compelling as the inference that defendants were simply engaged in legitimate trading activity.”

The report came hot on the heels of another spoofing decision in the same New York courthouse, in a civil case brought by Bermudian hedge fund Harrington against Bank of America Merrill Lynch, CIBC and TD Securities. That suit — which was referenced by Stein — survived a motion to dismiss and is currently scheduled to go to trial as early as this year. 

NWBO intends to refile its complaint within days. This time around, if a judge finds the deficiencies in the biotech’s case have been fixed, it could pave the way for the so-called discovery process in which Citadel Securities and its co-defendants would be compelled to hand over internal records and relevant communications. Critics of high-frequency trading firms, who claim they have an outsized and malign influence on global markets, will be watching closely.

Citadel Securities labelled the case a “malicious lawsuit [that] blatantly misrepresents how the market functions in an attempt to shake down the world’s leading liquidity providers”, and neither Northwest nor Harrington is necessarily any closer to proving their claims. To date, no spoofing case outside those brought by the US prosecutors or regulators has prevailed.

But the default stance adopted by market-makers — who claim allegations of market manipulation are implausible while declining to divulge the commercially sensitive intricacies of their high-tech platforms — has now been effectively knocked back.

Stein wrote that the fact NWBO did not specify what algorithmic trading programmes were used by defendants to execute their schemes or how they were used was not an impediment to its case. “It is hard to imagine how any spoofing case would survive the motion to dismiss stage if . . . ‘facts solely within the defendant’s knowledge,’ were required to be set forth in the complaint”, he added. In other words, if Citadel Securities and its ilk are to beat this case and prevent a string of copycat suits, they will probably have to give the rest of us more of a peek behind the curtain.