FT : Fifa halts new regulations for football agents

Fifa halts new regulations for football agents
Talent agencies had scored series of wins against the new rules in the courts

Fifa has abruptly suspended new global regulations for football agents on the eve of the January transfer window, in the latest legal reverse for an international sporting organisation.

Football’s global governing body unveiled new rules for football agents late last year and brought them into effect in October. The changes include a written exam for those seeking to work as licensed agents, a change to the way player representatives are paid and — most controversially — a limit on the fees agents can charge. 

Talent agencies responded with legal challenges in several countries, arguing that the fee cap was anti-competitive and would reduce their turnover from football by about 50 per cent. A case brought in Germany resulted in an injunction against the rules and ultimately forced Fifa to halt their introduction globally.

In a letter sent to member federations on Saturday, Fifa said it suspended the new rules globally to comply with the German ruling and “protect competitive balance at a worldwide level”, but that it had already launched an appeal.

“Fifa remains convinced that the [new regulations] are a necessary, proportionate and fully legal regulatory step to address systemic failures within the international transfer system”, the Zurich-based organisation added. “Not only all football stakeholders, but also all European political authorities have confirmed the importance of such a regulatory framework.”

Agents had warned that pushing ahead with the new rules would result in a chaotic January transfer window during which some — but not all — countries would have imposed the cap on fees. French law in effect protects agents’ fees, while this month a UK tribunal ruled that the cap went against national competition law. 

Fifa’s rationale for the new rules was to raise standards in the industry and reduce the amount of money spent by clubs and players on agents.

Figures published this month by the Fifa show that agents’ fees increased 43 per cent this year to a record of $888mn, while only a third of the 9,207 people who sat the new exam, which lasts an hour and consists of 20 multiple choice questions on Fifa regulations and the transfer market, had passed. 

A number of the big global agencies that led the legal challenges, such as CAA and Wasserman, had welcomed Fifa’s attempts to increase the barriers to entry in the industry and root out bad practices, but baulked at the notion of having their earnings subjected to a hard limit.

While agents can typically earn fees equal to about 10 per cent of a player’s salary, the new rules would have introduced a limit of 6 per cent. Payment of fees would also be spread out over a multiyear contract under the rules, rather than the bulk arriving up front. 

Fifa said it hoped its appeal in Germany would be heard early in 2024. Lawyers and agents expect the case to end up in front of the European Court of Justice, the EU’s highest court, some time in 2025.

The ECJ this month ruled against Fifa and Uefa, the European governing body for football, in a closely watched case related to the failed European Super League set up in 2021. In its judgment, the ECJ said Fifa and Uefa had acted unlawfully in threatening to impose sanctions on players and clubs that joined the breakaway league.

The Information : OpenAI’s Annualized Revenue Tops $1.6 Billion as Customers Shr

OpenAI’s Annualized Revenue Tops $1.6 Billion as Customers Shrug Off CEO Drama

OpenAI recently topped $1.6 billion in annualized revenue on strong growth from its ChatGPT product, up from $1.3 billion as of mid-October, according to two people with knowledge of the figure.

The 20% growth over two months represented in that figure—a measure of the prior month’s revenue multiplied by 12—suggests that the company was able to hold onto its business momentum in selling artificial intelligence to enterprises despite a leadership crisis in November that provided an opening for rivals to go after its customers.

THE TAKEAWAY
• Quarterly revenue pace passes $400 million
• Some managers think the annualized rate could hit $5 billion in 2024
• OpenAI has a lower valuation multiple compared to Anthropic

The latest annualized revenue figure implies that OpenAI is generating at least $130 million per month from the sale of subscriptions to ChatGPT and from letting software developers access its models through an application programming interface.

OpenAI also takes a cut of revenue from Microsoft’s sale of OpenAI models to Microsoft cloud customers as a result of a close partnership between the companies. Under that agreement, Microsoft is the only company that can resell OpenAI’s technology, and the enterprise software giant has wooed some customers that previously bought the technology directly from OpenAI. That has deprived OpenAI of some revenue because the startup keeps a much higher proportion of the sales it closes on its own.

An OpenAI spokesperson did not immediately have a comment.

OpenAI’s business progress underscores its lead over independent rivals such as Anthropic, a three-year-old firm whose leaders previously worked at OpenAI. Now financially backed by Google and Amazon, Anthropic has projected it will generate more than $850 million in annualized revenue by the end of 2024, The Information reported this week. By comparison, some OpenAI leaders believe their company can reach an annualized revenue rate of $5 billion by the end of 2024, while others believe it can reach a far higher figure, according to two people familiar with the projections.

The financial losses sustained by those two prominent AI startups couldn’t be learned, but they have been substantial in the recent past.

High Revenue Multiples

Bloomberg reported earlier this month that OpenAI is raising new funding at a $100 billion valuation. That valuation would represent a multiple of around 62 times the startup’s forward revenue, which is steep compared to the multiples of many public enterprise software companies but in keeping with those of other fast-growing AI startups. If Anthropic is currently generating revenue at a pace of around $17 million per month, as it previously told investors it planned to, investors in that startup’s ongoing funding round are paying around 75 times forward revenue.

The new valuation for OpenAI would represent a jump from the firm’s implied valuation in an ongoing employee share sale, known as a tender offer. Investors led by Thrive Capital are paying for shares at a price that implies an $86 billion valuation for the company. OpenAI has been trying to lure talent from archrival Google by telling AI researchers there that they can lock in their compensation packages—worth as much as $10 million annually—before the tender offer sets a higher price for the stock. Shares of OpenAI are doled out in the form of profit units, which promise a slice of the company’s future profits.

The revenue should help OpenAI as it seeks to raise more money to support the costs of computing, which CEO Sam Altman has described as “eye-watering” for startups like his. He has previously said that OpenAI may need to raise $100 billion in capital to achieve its goal of creating AI that can reason the way humans do and handle an array of jobs people currently perform.

Wall Street firms and big banks have been among the most enthusiastic buyers of generative AI, which can help their software engineers automatically generate software code and their investment managers make better decisions. Other companies use the technology to create marketing materials and automate customer service interactions.

Microsoft has told investors it is on pace to generate $10 billion from new AI services, including those powered by OpenAI. Microsoft sells OpenAI-powered features in its business software, such as those that help customers generate summaries of long documents or videoconference recordings. Other features create PowerPoint presentations and other text or imagery based on simple descriptions of what customers want to see.

Profit Sharing

OpenAI’s technology is powered by Microsoft data centers, and Microsoft takes a cut of the revenue OpenAI generates. Microsoft also is in line to get a substantial share of the startup’s profits if and when they materialize, thanks to a $10 billion commitment Microsoft made to fund OpenAI at the start of the year. That hasn’t stopped other marquee startup investors, including Thrive, from buying shares of OpenAI—even after the recent firing and reinstatement of Altman in November, an event that brought the company to the brink of collapse.

The Altman episode prompted some companies that relied on OpenAI models for their products to consider using multiple providers. The nonprofit OpenAI board of directors, which oversees a for-profit unit led by Altman, is currently in the process of filling six of the nine board seats that remain empty. It also has hired a law firm to look at Altman’s conduct leading up to the drama.

While OpenAI and Microsoft have shown that conversational AI, enabled by large language models, can be a big business, it isn’t clear how much these models can improve relative to their capabilities today, and how much capital they will require to do so. OpenAI engineers have recently been excited about a breakthrough that enabled one of its models to solve math problems it hadn’t seen before.

But OpenAI isn’t the only game in town, and early customers say they are looking for cheaper options. Other cash-rich firms such as Google and Amazon are launching competing AI, including multimodal software that can recognize and analyze objects and charts. OpenAI and many of those rivals are already looking to use that kind of software to develop powerful AI voice assistants for personal devices.

>>> Barron’s Weekend Summary

Barron’s Weekend Summary: Saudi Arabia is investing over $3.2T to transform its economy by 2030

Cover:
-Saudi Arabia is investing over $3.2T to transform its economy by 2030, aiming to become a high-tech hub and global business destination. Despite the Middle East's instability, the country's investment outlook and stock market have seen an 11% increase in the past year. This aggressive plan is expected to boost sales for non-Saudi companies like Boeing, Oracle, and Hilton Worldwide Holdings, as well as attract Wall Street banks. This aggressive approach is rare in emerging markets, where countries have achieved significant progress within a shorter timeframe.

Interview:
-Barron’s spoke to Natasha Kaneva, the head of global commodities strategy at J.P. Morgan in early December about her outlook for oil, natural gas, and gold. Kaneva predicts a rebound in oil prices in 2024 as demand rises and OPEC holds back supply. The energy market's major players are at a crossroads, with most oil companies trailing the market by double digits in 2023. OPEC will face a tricky decision in 2024 about limiting supply growth to keep prices high, as it cedes market share to competitors outside the alliance. The oil market is on the verge of a structural change, with gasoline demand peaked in 2019 in the US and likely continuing to decline. 2024 is likely the last year of global gasoline demand growth before a slow decline.

Tech Trader:
-No update this week

The Trader:
-T-Mobile US has benefited both itself and SoftBank Group through its acquisition of Sprint from the latter, which included a provision for additional compensation if shares of the combined telecom company traded above a certain level for a long time. T-Mobile has issued SoftBank an additional 48.8M shares worth $7.6B billion, diluting T-Mobile's existing shareholders by about 4%. T-Mobile's outperformance over its peers is due to its fundamentals, with earnings per share set to increase 250% in 2023 and free cash flow rising 75% in 2023. The stock's valuation multiple has gotten cheaper, with its valuation multiple below 16 times, as the S&P 500's price/earnings multiple approaches 20 times. “T-Mobile is an expensive stock only in the world of telecom, where AT&T and Verizon trade for seven and eight times forward earnings, respectively.”
-The S&P 500 index failed to close at a record high in 2023, despite its efforts. The Nasdaq Composite's 43.4% rise fell short of a record, while the Dow Jones Industrial Average managed to climb to 13.7%. Despite the gloomy outlook, the year was considered a success, as the consensus opinion predicted a 2023 recession in the US, but the economy grew at a faster-than-2% annual rate in the first half of the year and accelerated to 4.9% in the third quarter.

Features:
-Hertz's investment in electric vehicles has failed, with the company's stock dropping almost 50% to around $10. The company's Tesla-heavy fleet faces high repair costs and price cuts, while customers are not keen on the cars. Despite these challenges, Hertz's projected 2024 earnings are 8.6 times higher than Avis, and its market value is less than half that of Avis. The investor group controlling Hertz could potentially buy out public shareholders if the stock remains cheap. The current stock price is “overwhelmingly attractive for patient investors,” wrote Chris Woronka, a Deutsche Bank analyst.
-Chevron, one of the world's best-run big energy companies, experienced a 16.5% drop in 2023, worse than its global supermajor peers, including Exxon Mobil. The company's underperformance was due to production shortfalls in two of its largest oil fields in the Permian basin and Kazakhstan, and its $60B deal to buy Hess, a 30% stake in Guyana's offshore field. Despite this, Chevron's shares appear inexpensive, with a 10.7 times projected 2024 earnings and a 4.2% yield. The company plans to boost its dividend by 8% in January and buy back $20B of stock annually after the Hess deal closes.

Europe:
-The Euro climbed over 3% against the dollar in 2023, but the race to cut rates isn't as close as markets think, suggesting further growth in 2024. The Fed is expected to cut rates in March, while the European Central Bank is expected to lower rates in the second quarter. The ECB has been slower to pause rate increases than the Fed and Bank of England, hiking in September and July 2022.

Emerging Markets:
-Turkey's equity markets have seen positive flows in November and December, with yields on 10-year dollar bonds dropping 200 basis points and central bank currency reserves increasing 40%. Economic policy surprises include President Recep Erdogan's orthodox approach, which has led to increased interest rates and a decrease in inflation. The new central banker, Hafize Erkan, has hiked rates from 8% to 42.5%, with an expected increase to 45% in January. Erkan and finance minister Mehmet Simsek are working on reducing regulations that subsidized credit to favored borrowers.

Commodities:
-The cost of food is rising slowly as inflation cools, but elevated energy costs, abnormal weather patterns, and potential interest rate cuts in 2024 could keep prices higher than expected. In November, the consumer price index for food items rose 0.2% from the previous month, about 2.9% higher from the same period last year. The US Department of Agriculture estimated that food inflation will continue to decelerate, with prices increasing 1.2% next year. Food purchased at grocery shops is projected to cost 0.6% less in 2024, down from the agency's 1.6% growth estimate just a few weeks ago. Food consumed at restaurants is predicted to become 4.9% more expensive next year. If the agriculture department's 2024 estimates hit the target, it would be the smallest annual increase in overall food prices since 2017 and the steepest decline in grocery prices since 2016.

Streetwise:
-The 2024 US presidential election could generate $15.9B for the advertising industry, according to GroupM. This is a 30% increase from the last presidential cycle and five times the spending on the recent midterms. Wall Street is bullish on shares of Trade Desk, a key player in placing ads on streaming services. Investment banks Truist and Macquarie have called Trade Desk a favorite, and D.A. Davidson has added it to its list of "Best of Breed" companies. Trade Desk, founded in 2009, has seen revenue grow from $200M to approaching $2B and is growing at about 20% a year.

FT : Predictions: Apple’s $4tn target will remain out of reachl

Predictions: Apple’s $4tn target will remain out of reach
There is a noticeable gap between tech company’s market cap growth and expansion in its profits

In 2024, Apple will release its first new hardware product in close to a decade. If demand for the bulky Vision Pro virtual reality headsets is high, the company will be one step closer to proving that its future does not rest on iPhone sales.

Add a billion paying subscribers and a vast cash pile and its position as the most valuable stock makes sense. In the past five years it has surpassed $1tn, $2tn and $3tn market cap milestones. But its path to becoming the world’s first $4tn company will be steeper.

On the plus side, Apple’s net income margin has remained high thanks to growth in services such as streaming and payments. However, revenue is forecast to drop 3 per cent in fiscal 2023 year as global demand for new smartphones slows. VR headsets are not expected to make up for this decline.

There is also a noticeable gap between Apple’s market cap growth and its profit expansion. Apple became a $1tn company in the summer of 2018. Since then its market value has almost tripled. Over the same period, annual net income has grown by 63 per cent.   

The distance between the two does not bode well for the market cap growth spurt necessary for the company to reach $4tn. The stock trades at 27 times forward earnings, according to S&P Capital. At this multiple, next year the stock would trade at about $3tn.

Apple can help matters by using its $166bn cash pile to buy back more shares. Having bought a fifth of its own shares since 2018, Apple stays popular with investors. But high interest rates could damp demand for its shares. 

Problems in China may also eclipse any financial engineering. As its third-largest market by sales, clearly Chinese consumers value the Apple brand. But some government agencies have banned the use of its devices. Should a wider crackdown follow, that will give domestic rivals a leg-up. The sales hit would not only put a $4tn valuation out of reach, it could also knock Apple off its top rank in the US stock market.

FT : Predictions: powering nuclear energy with spent fuel

Predictions: powering nuclear energy with spent fuel
Industrial groups and start-ups are working on reactor designs that can use recycled fuel

Why throw away anything that can be reused? That principle has created the $500bn-revenue global recycling industry. But climate and energy security fears mean it will become a resurgent theme in less likely industries — including nuclear power.

A number of industrial groups and start-ups, including UK-based Newcleo and Denmark’s Copenhagen Atomics, are working on reactor designs that can use recycled nuclear fuel.

More than 90 per cent of the energy potential of nuclear fuel remains, even after it has been used in a reactor for five years, according to the US Office of Nuclear Energy. Reusing it would partially solve the problem of what to do with sizeable stockpiles. It would also lessen dependence on uranium imports from Russia ally Kazakhstan.

Recycled fuel is nothing new. About a tenth of France’s nuclear electricity is generated using MOX, made from depleted uranium mixed with plutonium recovered from used reactor fuel. More expensive recycled fuel can only generally be used once in conventional light-water reactors.

It is better deployed in technologies such as fast reactors. Many countries including the UK pursued this from the 1950s onwards. It proved uneconomic, especially against power plants using fuels such as gas.

Groups such as Newcleo, backed by Italy’s Agnelli family, must get its latest fast reactor designs to generate electricity at competitive prices.

Many new reactor developers target a levelised cost of energy between $60-$75 per megawatt hour. That beats the UK’s first large nuclear plant in a generation, Hinkley Point C, guaranteed a price of £92.50/MWh in 2012 money. 

Nuclear power fans need patience. Indeed, nuclear programmes are often state-backed given the high capital costs and construction risks. Wealthy philanthropists such as Bill Gates are often the driving force behind new designs, mostly unproven.

Reusing spent nuclear fuel makes sense in terms of sustainability. But for the near term this should remain a niche area.

>>> What to look at today - 28th of December 2023

Stocks and bonds in Asia followed Wall Street higher as investors position themselves for anticipated Federal Reserve interest-rate cuts next year. Gold rose to a record high. The rally global bonds spread to Asia with sovereign debt in Australia and New Zealand rallying after yields on five- to 30-year Treasuries fell at least 10 basis points on Wednesday, and Germany’s 10-year yields dropped to a fresh 2023 low. The gains pushed one global measure of the bond market to the cusp of its best two-month rally on record. A gauge of Asian equities climbed for the fourth day, its longest run since early November, with the year-end rally primed to end on a high note. Chinese stocks were headed for their best day in four months amid a rotation into oversold largecap stocks, while Japanese shares declined on yen strength. US stock futures were firm, adding to Wednesday’s modest advance in the S&P 500.  A measure of global stocks is on pace for its highest close since February 2022, up more than 15% from its October low, reflecting traders’ optimism for interest rate cuts next year. Traders have stepped up bets on Fed rate cuts as early as March, according to Fed swaps pricing. A view that has gained momentum since policymakers updated their forecasts this month to show they expect to reduce borrowing costs at a stronger pace than indicated in their previous projections. The gains in bonds were helped by bumper demand for five-year Treasury notes Wednesday, which itself followed strong appetite for a two-year auction the day before. Strong appetite for the paper is a sign investors want to lock in attractive yields prior to expected Fed cuts. Expectations of aggressive policy easing are getting front-loaded, said Vishnu Varathan, head of economics and strategy at Mizuho Bank Ltd. in Singapore. “The ferocity of the bond market rally has really augmented the total returns for investors — there’s a feeling markets are signaling we’re heading half-way toward easy monetary policy again,” he said. Treasury yields were steady in Asia. The US dollar dropped against all its Group-of-10 peers, with the Australian dollar rising to the strongest level since July. 
In Asia, the yen gained for the second day after Bank of Japan Governor Kazuo Ueda continued to prepare the ground for the nation’s first interest rate increase since 2007. China’s CSI 300 Index is headed for the first weekly gain since early November, with technology stocks contributing the most to the rally Thursday.  Japan industrial output slowed less in November than economists forecast. Other data on the docket for release includes trade data for Hong Kong and Thailand, and the November budget balance for the Philippines. In corporate news, Apple Inc. won a court ruling temporarily pausing a US sales ban on its newest smartwatches. The New York Times Co. sued Microsoft Corp. and OpenAI Inc. for the use of content to help develop artificial intelligence services. Shipping giant Hapag-Lloyd AG said it will keep its vessels away from the Red Sea even after the launch of a US-led taskforce to protect the key trade route. Oil declined amid signs of building US stockpiles. Elsewhere, Bitcoin inched higher, trading above $43,000 amid renewed speculation that the US Securities and Exchange Commission is getting close to approving an exchange-traded fund investing directly in the biggest token.  US After Hours SQM +6.6% as it reaches MoU with CODELCO; SATS +4% to join S&P SmallCap 600.

Nikkei -0.45% Hang Seng +2.75% CSI +2.23% Shanghai +1.30% Shenzen +2.18%

Eur$ 1.1109 CNH 7.1087 CNY 7.1066 JPY 141.19 GBP 1.2809 CHF 0.8406 RUB 91.3234 TRY 29.4315 WTI$ 74.24 Gold 2,085 +0.38% BTC 43,160-0.54% ETH 2,390 +1.26%

S&P +0.15% Nasdaq +0.21% EuroStoxx +0.39% FTSE +0.31% Dax +0.34% SMI +0.17%

Macro :
- US Proposes G-7 Explore Seizing $300 Billion Russia Assets: FT
- Norwegian Pension Fund Blacklists Aramco, Other Gulf Companies

Keep an eye on :
- ATUS US : Altice USA Jumps as Billionaire Niel Said to Eye Altice Portugal
- CO FP : Intermarché to Sell 3 Stores Bought From Casino: AFP (Dec. 27)
- HEIA NA : Exodus From Russia Lands Small-Town Mogul With $1 Billion Prize
- IDR SM : Indra Mulls Assets Sale, Entering Hispasat Capital: El Pais
- RWAY IM : RAI Way Rises After Report of Holders Pushing for Ei Towers Deal
- SCST SS : Scandi Standard Buys Ready-to-eat Activities in Finland
- SOGL LN : Copper Explorer Solgold’s Shares Jump by Most in Seven Years
- STRO NO : PSI Group to List on Nasdaq Via Merger With SPAC AIB Acquisition
- TTE FP : TotalEnergies to Sell 17.5% Stake in NextDecade: Rtrs (Dec. 27)
- VWS D C : Vestas Secures 1,089 MW Onshore Order in US