FT : Activist investor builds stake in Reckitt after baby formula verdict

Activist investor builds stake in Reckitt after baby formula verdict
Eminence Capital began buying shares in March when they were hit by a $60mn US damages award

Activist investor Eminence Capital has built a stake in Dettol and Nurofen maker Reckitt, piling further pressure on the consumer goods group whose share price has plunged over fears that its baby formula business could be on the hook for billions in damages.

Eminence, which has been leading an activist campaign against FTSE 100 gambling group Entain, owns at least 0.5 per cent of Reckitt’s stock, after it began buying up shares in March as they sank towards an all-time low, according to people familiar with the matter.

Shares in Reckitt, which also manufactures Lysol detergent and Durex condoms, are down about 15 per cent this year after a US jury ruled in March that one of its infant formulas had caused the death of a premature infant, and ordered the consumer goods company to pay $60mn in damages.

Analysts have estimated the total liability from the infant formula litigation could be anywhere between £400mn and £8bn.

The group’s market value was about £40.5bn at market close in London on Monday.

The presence of the New York-based activist fund, which has around $6.7bn of assets under management, on Reckitt’s shareholder register was likely to increase calls for Kris Licht, its chief executive, to push through a sale of the baby formula division, the people said.

Eminence also believed Reckitt’s management could do more to improve operating margins, which have shrunk in recent years, they added.

Eminence declined to comment. Reckitt did not immediately respond when contacted for comment.

Other activist investors were also circling Reckitt, according to people familiar with the matter, with investors believing that the fallout from the Illinois jury’s verdict had disproportionately weighed down its stock price. Eminence’s shareholding, which has not previously been reported, is below the UK disclosure threshold of 3 per cent.

Reckitt’s acquisition of infant formula manufacturer Mead Johnson for $17bn in 2017 is now widely regarded as a misguided move. The company has previously tried unsuccessfully to offload the business and sold its Chinese unit to private equity group Primavera for $2.2bn.

Reckitt has recently appointed a new chair, former Sky boss Sir Jeremy Darroch, who is also on the Disney board.

Speaking to the Financial Times following a 14 per cent one-day share price decline in March, Licht said Reckitt would appeal against the verdict and insisted that it had no liability.

Eminence has yet to meet Reckitt’s management and board in person, but has corresponded with the company. It is unlikely the activist investor would push for a management shake-up, according to a person familiar with its thinking.

Eminence founder and chief executive Ricky Sandler earlier this year took a board seat at Ladbrokes owner Entain and played a pivotal role in pushing for Entain’s chief executive Jette Nygaard-Andersen to leave and the naming of a new chair.

As well as the infant formula crisis, Reckitt shareholders have contended with a first-quarter revenue hit in the company’s Middle East business, after it reported an accounting anomaly.

>>> US After Hours Summary: TRNS +3.8% up on earnings; NDSN -12.4%, PANW -8.3% d

After Hours Summary: TRNS +3.8% up on earnings; NDSN -12.4%, PANW -8.3% down following quarterly results; PTON -5.9% dropping on global refinancing

After Hours Gainers:

Companies trading higher in after hours in reaction to earnings/guidance: TRNS +3.8%, DJT +0.8%

Companies trading higher in after hours in reaction to news: LRMR +23.4% (FDA removes partial clinical hold), INFU +7.8% ($20 mln repurchase plan), APA +0.4% (over $700 mln in asset sales), DYN +0.2% ($300 mln stock offering), FWRD +0.2% (CFO to step down; names interim CFO), CAAP +0.1% (reports April traffic data)

After Hours Losers:

Companies trading lower in after hours in reaction to earnings/guidance: NDSN -12.4%, PANW -8.3%, HSAI -4.9%, KEYS -2.7%, ZM -0.7%

Companies trading lower in after hours in reaction to news: PTON -5.9% (launching global refinancing), FIHL -4.1% (launches secondary stock offering), ZS -2.3% (trading in sympathy with PANW), TALK -1.8% (CFO stepping down; names new CFO), FTNT -1.7% (trading in sympathy with PANW), SUZ -1.5% (discussing higher bid for International Paper, according to Reuters), CRWD -1.5% (trading in sympathy with PANW), LNC -1.3% (stock offering related to incentive compensation plan), NRIX -0.9% (Board Chair stepping down; names new Chair), NWL -0.9% (files $2.75 bln mixed shelf), OKTA -0.9% (trading in sympathy with PANW), HL -0.5%, ALG -0.2% (strike at subsidiary ends), MO -0.1% (submits supplemental Premarket Tobacco Product Application to FDA), T -0.1% (provides updates ahead of conference; on track to meet financial guidance)

TechCrunch : VinFast crash that killed family of four now under federal investig

VinFast crash that killed family of four now under federal investigation

The top vehicle safety regulator in the U.S. has launched a formal probe into an April crash involving the all-electric VinFast VF8 SUV that claimed the lives of a family of four, TechCrunch has learned.

The crash happened in Pleasanton, California at about 9 p.m. on April 24. Police told local news outlets at the time that it appeared the vehicle lost control before crashing into an oak tree and catching fire. A spokesperson for the National Highway Traffic Safety Administration (NHTSA) told TechCrunch on Monday that its Special Crash Investigations division will “document the crash circumstances and the ensuing fire.”

The victims, who have been identified by the Alameda County Sheriff’s Department as Tarun and Rincy George, and their two children, did not own the vehicle.

A few days after the crash, a complaint was lodged with NHTSA that explained the owner had loaned the EV to a co-worker. The purported owner had experienced at least one instance where the car’s lane assist feature had jerked the vehicle to the right, according to the complaint.

The National Transportation Safety Board told TechCrunch on Monday that it has not opened an investigation into the crash. The Pleasanton police department said its own investigation is ongoing. VinFast did not immediately respond to a request for comment.

Vietnamese EV-maker VinFast started shipping its VF8 SUV to the U.S. in early 2023. The rollout has not gone well. The company was pilloried by reviewers for poor quality. In May 2023, it issued a recall over problems with the dashboard screen going blank. At least one other complaint lodged with NHTSA at the time this article was published references an incident where the driver assistance system unexpectedly turned the wheel.

>>> US Close Dow -0.49% S1P +0.09% Nasdaq +0.65% Russell +0.32%

Closing Stock Market Summary
The Nasdaq Composite (+0.7%) logged another record closing high, support by gains in mega caps and semiconductor-related names. The S&P 500 (+0.2%) and Russell 2000 (+0.3%) also closed with gains and the Dow Jones Industrial Average (-0.5%) fell nearly 200 points.

Market breadth favored advancers by a slim margin at both the NYSE and at the Nasdaq. The overall upside bias was driven by carryover momentum following last week's solid gains in addition to the strength in mega caps and chipmakers. The PHLX Semiconductor Index (SOX) jumped 2.2% and the Vanguard Mega Cap Growth ETF (MGK) logged a 0.7% gain.

NVIDIA (NVDA 947.80, +23.01, +2.5%) was a winning standout from both spaces after several analysts raised their price targets in front of NVDA's earnings report Wednesday afternoon. Microsoft (MSFT 425.34, +5.13, +1.2%) also logged a decent gain after introducing Co Pilot+ PCs and in front of its Build Developers Conference, which starts tomorrow.

The S&P 500 information technology sector (+1.3%) led the index by a wide margin, benefitting from price action in its semiconductor and mega cap components.

The heavily-weighted financial sector logged the largest loss, falling 1.2%. This price action was due in part to a sizable loss in JPMorgan Chase (JPM 195.58, -9.21, -4.5%) after turning lower in response to CEO Dimon saying at its Investor Day that the company is not expecting to buy back a lot of stock at these levels.

The consumer discretionary sector (-0.7%) was the next worst performer due to losses in Amazon.com (AMZN 183.54, -1.16, -0.6%) and Tesla (TSLA 174.95, -2.51, -1.4%). Declines in retailer components also contributed to the underperformance of the consumer discretionary sector in front of earnings report from some influential names in the space this week.

Market rates settled slightly higher, acting as a limiting factor for equities. The 10-yr note yield settled two basis points higher at 4.44% and the 2-yr note yield rose two basis points to 4.84%.

There was no US economic data of note today and will be none tomorrow. The Minutes from the April 30-May 1 FOMC meeting and the Existing Home Sales report for April will be released Wednesday, the weekly jobless claims report and New Home Sales report for April will be released Thursday, and the Durable Goods Orders for April will be released Friday.

  • S&P 500:+11.3% YTD
  • Nasdaq Composite: +11.9% YTD
  • S&P Midcap 400: +8.6% YTD
  • Dow Jones Industrial Average: +5.6% YTD
  • Russell 2000: +3.7% YTD

FT : Gucci focused on building ‘sound foundations’, Kering’s top executive says

Gucci focused on building ‘sound foundations’, Kering’s top executive says
Deputy chief executive Francesca Bellettini tasked last year with turning around flagship brand

A top Kering executive has said the French luxury group is going back to basics as it is battling to revive the fortunes of its underperforming flagship brand Gucci.

Speaking at the Financial Times’ Business of Luxury conference on Monday, Kering deputy chief executive Francesca Bellettini said that Gucci needed to build “sound foundations” after a period of fast growth that was now coming to an end.

“What we are going to do at Kering, [and] at all the brands learning from Gucci, is to become more focused — even while growing — on the foundation,” Bellettini told the conference.

“It is true in life but also in business that sometimes it’s easier to go fast, fast, fast . . . If I draw a parallel to the luxury industry, if you don’t create that structure underneath in terms of operational capability, efficiency practices, planning you don’t have [a] sound foundation,” she said.

The Kering veteran was referring to a period of rapid growth at its brands led by Gucci, but that has now tapered and left fissures in the business exposed.

Belletini was appointed to her role last year to oversee all of the group’s brands — which include Bottega Veneta, McQueen and Balenciaga — as part of a reshuffle at the top of the group led by billionaire chief executive François-Henri Pinault.

Paris-listed Kering has been dogged by the underperformance of Gucci, which accounts for half of group sales and two-thirds of profits. Belletini, who has been at the French group for more than two decades, also remains chief executive of Saint Laurent, the group’s second-biggest brand by revenues.

Kering is focused on turning around Gucci and improving performance across the group amid an industry-wide slowdown. It has suffered more than competitors such as LVMH and Hermès, as demand for Gucci’s maximalist aesthetic popularised by former star designer Alessandro Michele waned.

Kering’s sales fell 10 per cent in the first quarter, compared to 3 per cent growth at industry giant LVMH. Paris-listed rival Hermès posted 17 per cent growth in revenues. Pinault is now betting on Gucci’s new creative director Sabato de Sarno, whose collections are being rolled out in stores, to revive growth.

“Don’t waste the opportunity coming from a good crisis, because in a crisis you really have to focus on what you can control. That has been my motto with my team all of my career,” Belletini said.

“We had already started by February . . . to work on enhancing the brand’s attractivity, working on exclusivity of the brand, the quality and the efficiency,” she said.

This included making crucial hires in the team around Gucci. A new head of operations is focusing on initiatives such as reducing lead times to get leather goods to market.

“It’s not going to be a one man show at Gucci . . . We are going through a transition, not a revolution.”

Belletini believes De Sarno, the first “outsider” to be appointed as Gucci creative director, can bring fresh perspective on how to rebuild the brand. By always promoting creative directors internally “you can build ways of working that are not always right for the future”, she said.

The Information : Tencent, Alibaba Place Bets on Startups Racing to Become China

Tencent, Alibaba Place Bets on Startups Racing to Become China’s OpenAI

In China, dozens of startups have been competing to develop conversational artificial intelligence for the Chinese market. Now some are starting to pull ahead, in part due to backing from tech giants with large cloud operations like Tencent and Alibaba.

Among them is Moonshot AI, developer of a chatbot that can process millions of Chinese characters in a single prompt. The one-year-old startup’s executives have been in talks with investors about raising money at a $3 billion valuation, before the investment, from investors including WeChat operator Tencent, according to a person involved in the discussions. Just a few months ago, the Beijing-based startup raised $1 billion from Alibaba and others at a pre-money valuation of about $1.5 billion, already giving it one of the biggest war chests among Chinese AI developers, according to the person.

The Takeaway
• Beijing-based Moonshot AI is in talks with investors including Tencent
• The startup is raising money at $3 billion pre-money valuation
• The talks come just a few months after a $1 billion funding round led by Alibaba

Moonshot’s capital raising plans point to a shift happening among China’s AI startups. Unlike in the U.S., where only a handful of companies including OpenAI, Google and Anthropic have emerged as leaders in developing the most advanced LLMs, no Chinese tech company has taken a significant lead in AI development. And China blocks OpenAI and other U.S. competitors by requiring government approvals for generative AI products. This opportunity led Chinese founders to launch dozens of startups in what Chinese media have dubbed the “hundred-model war.”

That field is starting to narrow as Alibaba and Tencent, which operate major cloud computing businesses that can service these AI models, put their weight behind certain startups in addition to building their own models. Alibaba has invested in Chinese startups that develop LLMs such as MiniMax, 01.AI, Zhipu AI and Baichuan AI. It’s also invested in Moonshot, in part with cloud credits for Alibaba Cloud.

Tencent is likely to invest in Moonshot, the person said. That stake could pave the way for deeper collaborations between Tencent’s popular WeChat messaging app and Moonshot AI’s chatbot. Tencent has already backed MiniMax, Zhipu AI and Baichuan AI.

A Tencent spokesperson declined to comment. Moonshot AI’s founder didn’t respond to an emailed request for comment.

For Chinese LLM developers, chatbots’ ability to process and summarize long texts—such as books, research reports and meeting notes —has become a key battleground. That’s similar to a feature Google touted when it announced a new version of its Gemini LLM in February.

Moonshot AI has an edge in this aspect. When the startup launched the first version of its Kimi chatbot in October, it was capable of processing up to 200,000 Chinese characters in a single prompt. Then in March, it unveiled an upgraded version of Kimi that can handle 2 million characters. During the week when the new version became available, Kimi's website traffic surpassed that of Ernie Bot, a popular AI chatbot from search giant Baidu, making it the most visited in China, according to web analytics service Similarweb. Since then, Baidu and Alibaba have upgraded their own LLMs and introduced long-text processing features.

The company, whose Chinese name, Yue Zhi An Mian, means “the dark side of the moon,” has also developed voice and coding assistants—two areas where Google and OpenAI are also competing. But Moonshot AI is mostly known for its text chatbot, which it’s been offering for free. Similar to OpenAI, it's likely to introduce a paid version for more active users, though it’s not clear when. However, business customers and developers in China are more reluctant to pay a premium for software than their U.S. counterparts.

Yang Zhilin, a young assistant professor at Tsinghua University, founded Moonshot after receiving his doctorate from the School of Computer Science at Carnegie Mellon University and working in the AI labs of both Google and Meta Platforms, according to his profile on code-sharing site GitHub. China’s HongShan, formerly known as Sequoia Capital China, was an early investor in the startup, The Information reported in April 2023.