TheChek News Flow

Finance ministry accountant general says demobilisation of reservists will boost economy

Israel plans to raise about $60bn in debt this year, freeze government hiring and increase taxes as it almost doubles its defence spending to support its war in Gaza, according to a senior finance official.

Israel’s more than four-month conflict with Hamas has taken a severe toll on the economy, which shrank almost 20 per cent on an annualised basis in the last quarter of 2023.

The hit came as the government mobilised a record 300,000 reservists; tens of thousands of people were displaced in the north and south of the country; and consumer spending slumped. About 150,000 Palestinians workers have also been prevented from entering Israel from the occupied West Bank.

But Yali Rothenberg, the finance ministry’s accountant general, told the Financial Times that he expected the economy to begin to recover as large numbers of reservists are demobilised and consumer spending picks up.

“The economic fundamentals are there,” he said. “If you look at the high-tech sector, it’s there. If you look at the infrastructure investment, it’s there. If you look at the private consumption, it’s there.”

Rothenberg said a critical factor in restoring the health of Israel’s economy was the demobilisation of reservists. He said that the number still serving was about a fifth of the 300,000 called up after Hamas’s October 7 attack that killed 1,200 people, according to Israeli officials, and triggered the war.

That number was expected to drop to between 30,000-40,000 by the end of March, he added, saying the conflict was “de-escalating”.

“This is the scenario which is budgeted,” Rothenberg said.

The government is, however, threatening to expand its offensive in Gaza to Rafah, a southern city where more than 1mn people already displaced from their homes have sought sanctuary, despite international warnings that an assault in such a densely populated area would be devastating.

The Israeli offensive has killed more than 29,000 people, according to Palestinian health officials, devastated huge swaths of the strip and forced more than 85 per cent of the 2.3mn population from their homes.

And despite demobilising thousands of reservists, Israel has said it expects to maintain a security presence in the strip for the foreseeable future. The office of Prime Minister Benjamin Netanyahu on Friday released a plan for postwar Gaza that envisages Israel maintaining a sizeable security buffer within the enclave.

There are also concerns that almost daily clashes between militant movement Hizbollah and Israeli forces across the Lebanese-Israeli border could escalate into a full-blown conflict.

It is against this backdrop that the government plans to raise defence spending this year by 55bn shekels ($15bn), an 85 per cent increase on the prewar defence budget. That would push defence spending to about 20 per cent of the 2024 budget, the finance ministry said, up from 13.5 per cent before the war. The draft budget for 2024 is being reviewed by committees in the Knesset and is expected to be passed next month.

“We think there will be increased defence spending in Israel for the coming years,” Rothenberg said. “This is why we took the fiscal steps right now.”

He added that a committee of experts from outside the government had been established to advise on future defence spending.

State revenue for 2023 came in at 12bn shekels below forecast, while the government increased spending by about 26bn shekels because of the war. That included an additional $4.7bn on defence as the finance ministry issued special permits to allow the government to operate outside the budget immediately after Hamas’s October 7 attack.

In a bid to balance the books, the ministry plans to increase value added tax from 17 per cent to 18 per cent in 2025, while this year and next it will increase taxes such as those on smoking and banking, freeze government hires and defer public sector wage increases.

Moody’s this month lowered Israel’s sovereign rating from A1 to A2 over concerns about the war in Gaza, its indefinite duration and the broader impact on the economy. The rating agency also lowered Israel’s debt outlook to negative due to the risk of the conflict spreading to the country’s northern front. 

Last month, Israel’s central bank governor urged the government to rapidly curb spending, warning that its market “credibility” depended on it making budget adjustments, including cuts to expenditure and increases to revenue.

Israel’s government is forecasting a budget deficit of 6.6 per cent of gross domestic product this year, and predicts that growth will drop from 2 per cent in 2023 to 1.6 per cent this year.

After the war broke out, it borrowed about 81bn shekels, pushing the debt-to-GDP ratio to about 62 per cent, its highest level in about eight years.

The ministry expects that ratio to rise by another five or six percentage points this year as it looks to tap domestic and international markets to raise about 250bn shekels. However, it forecasts that debt-to-GDP will remain below 70 per cent.

Rothenberg, who has been meeting investors in New York and London, said most of the debt would be raised locally, but added the ministry was looking “intently” at the dollar market, saying “everything was on the table”.

“Investors really want to own some Israeli paper, they think it’s an opportunity and people recognise the de-escalation,” he said.

German stocks have stalled this year after a decent 2023. The Global X DAX Germany exchange-traded fund has gained less than 1% year to date, while the S&P 500 index jumped another 5%.

No wonder. Europe’s biggest economy shrank last year, and the Bundesbank just predicted more of the same for the first quarter. Airbus

Expectations for corporate profit increases have cratered from 8% at the start of the year to 1%, says Uwe Hohmann, equity strategist at Metzler Bank in Frankfurt. The government lost 177 billion euros ($191 billion) in spending power when the Constitutional Court ruled last November that it couldn’t repurpose revenue left over from an emergency pandemic fund. Transit strikes are roiling the land of labor-management consensus.

It’s early to say that Germany is returning to the “sick man of Europe” status it occupied two decades ago. But an uneasy stasis could last a while. “Germany will not get out of this stagnation very easily or quickly,” says Carsten Brzeski, chief euro zone economist at Dutch bank ING.

Germany has been a big loser from recent geopolitical fissures. It rocked for most of this century on cheap Russian natural gas feeding industries that sold on to a voracious China. Russia cut off its end entirely after invading Ukraine in 2022. China is buying less and competing more, most notably in automobiles.

“What we are seeing in Germany clearly stems from a world that has changed,” says Matt Gertken, geopolitical strategist at BCA Research.

Germany’s internal fabric isn’t in the best shape to combat these external challenges. Chancellor Olaf Scholz presides over a fractious three-party coalition with approval ratings below 20%. Societal “complacency” runs deeper, Brzeski says.

The country has slipped steadily in World Economic Forum competitiveness rankings, coming in a derisory 22nd for 2023. The mighty automotive complex dozed through the early stages of the electric-vehicle transition. “I remember the auto industry laughing at Tesla, saying this isn’t a car,” Brzeski says.

With government debt around 60% of gross domestic product, half the U.S. level, Germany might benefit from some stimulative deficit spending. But a constitutionally enshrined “debt brake” limits budget gaps to 0.35% of GDP. The two-thirds parliamentary majority to overturn it looks well out of political reach.

Not everything is quite so bad. European natural-gas prices have fallen well below pre-Ukraine War levels, thanks in part to the Scholz government moving fast to replace Russian imports. Energy-intensive industries like chemicals are “thinking twice about leaving the country,” says Cyrus de la Rubia, chief economist at Hamburg Commercial Bank.

Employment is at record levels. Real wages are rising a bit as inflation subsides and labor shortages loosen employers’ purse strings.

The biggest listed German companies are more dependent on the global economy in any case. Software giant SAP, machinery colossus Siemens, financial empire Allianz, and jet maker Airbus (AIR.Germany) account for a third of the DAX index among them.

The market is still cheap, at least relative to the U.S. The average price/earnings ratio is 12, a hair under the historical mean of 12.5 and half the S&P 500’s multiple, Hohmann reports.

“We have lots of industrial names with mid-single digit P/Es, which could gain with any acceleration in demand,” he argues.

Writ large, though, Germany looks stuck. Angela Merkel cured the national malaise 20 years ago, loosening the labor market and trimming the welfare state. This time, no turnaround leader is on the horizon—at least not yet.

After last week saw 10 rounds of $100 million or more, investors followed up with another strong week that saw a half-dozen startups raise similarly. Also like last week, rounds were split across several verticals, including energy, healthcare and AI. Is the large growth round making a comeback? Or is this a two-week aberration?

1. Ascend Elements, $162M, batteries: It was only about five months ago that Ascend Elements made this list with a huge $460 million Series D led by Decarbonization Partners — a partnership between BlackRock and Temasek focusing on companies in the decarbonization space — Temasek and Qatar Investment Authority. Well, this week the Westborough, Massachusetts-based startup followed up that round with a $162 million investment from investors including Just Climate, Clearvision Ventures and Irongrey. Ascend is a manufacturer of sustainable battery materials for EVs. Founded in 2015, the company has now raised $1.7 billion, per Crunchbase.

2. (tied) Abridge, $150M, healthcare: AI is making a big impact on healthcare — and funding to healthcare startups. Abridge, which is building AI-powered clinical documentation tools, is the latest startup in that realm to raise big. The Pittsburgh-based startup raised a $150 million Series C led by Lightspeed Venture Partners and Redpoint Ventures. The new round reportedly values the company at about $850 million. Founded in 2018, the company has raised nearly $208 million, per Crunchbase.

2. (tied) Antora Energy, $150M, energy: Speaking of Decarbonization Partners, the New York-based partnership led a $150 million Series B for Antora Energy this week. The Sunnyvale, California-based startup uses renewable electricity to heat blocks of carbon. That stored heat is then delivered to large industrial customers. The company also produces a thermal battery. Founded in 2017, Antora has raised $230 million, per the company.

4. Hornblower Group, $121M, leisure: Strategic Value Partners acquired a majority ownership stake in New York-based Hornblower, a travel experience company. The M&A agreement also gives Hornblower a fresh infusion of $121 million in financing from SVP-managed funds and Crestview Partners, which retains a minority stake in the company. Hornblower also announced a reshuffling of some of its units, including trying to sell its overnight cruising business. Clearly a lot is going on.

5. Recogni, $102M, artificial intelligence: Although most startup chipmakers have not seen much love from investors so far this year, Recogni seems to have bucked that trend. The San Jose, California-based firm, which is developing its AI inference chip for both the generative AI and automotive industries, raised a $102 million Series C co-led by Celesta Capital and GreatPoint Ventures. While the company has its roots in designing chips that help autonomous vehicles detect objects, it is now also exploring the AI market. The company’s accelerator chip uses live data in trained models for predictions — all while requiring less energy, the company says. U.S.-based semiconductor funding has slowed in recent quarters, despite the need for new chip designs, thanks to industries such as AI and automotive. Last year such startups saw only $1.2 billion in 66 deals — per Crunchbase data — after raking in more than $2 billion in 2022. This year has seen only a trickle of deals.

6. Eigen Labs, $100M, blockchain: Seattle-based Eigen Labs, the creator of EigenLayer for staking Ethereum, raised a $100 million round from a16z crypto. Founded in 2021, the company has raised $164 million, per Crunchbase.

7. Hadrian, $92M, manufacturing: Per a report, this round actually was completed in December but never really formally announced. Hawthorne, California-based Hadrian raised a $117 million Series B that included $25 million in debt. RTX Ventures, the venture arm of defense prime contractor RTX (formerly Raytheon) and a16z, participated in the round. The company builds “highly automated precision component factories” mainly to produce components for the space and defense industries. Founded in 2020, the company has raised nearly $217 million, per Crunchbase.

8. Frontier Medicines, $80M, pharmaceuticals: South San Francisco, California-based Frontier Medicines, a startup researching therapies against undruggable disease-causing targets, raised an $80 million Series C co-led by Deerfield Management Co. and Droia Ventures. Founded in 2018, Frontier says it has raised $235.5 million.

9. Clumio, $75M, data backup: As risk and regulation grow, so does the data backup industry. After reportedly increasing its ARR 4x last year, Clumio locked up $75 million in a Series D led by Sutter Hill Ventures. The Santa Clara, California-based startup provides data backup and recovery services for companies using the public cloud. Founded in 2017, Clumio has now raised $261 million, per the company.

10. Fabric, $60M, artificial intelligence: New York-based Fabric, which uses artificial intelligence to automate clinical and administrative healthcare work, raised a $60 million round led by General Catalyst. Founded in 2021, the company has raised $80 million, per Crunchbase.

Stellantis, the automaker that owns 14 brands including Chrysler, Jeep and Ram, and autonomous vehicle technology company Waymo are not only still working together, the companies are deepening the partnership, CEO Carlos Tavares told TechCrunch in a recent interview.

This “deepened” partnership will focus on commercial self-driving Ram delivery vans, a target that was first announced in 2020 and promptly faded from public view. Discussions on this “improved” deal have focused, in part, on a crux around driverless delivery: how does the package get from the vehicle to the customer?

“When you reach the destination, how do you take the parcel out of the van?” Tavares said in a wide-ranging interview. “This has been a point of discussion that doesn’t seem easy to solve and we are now upgrading our collaboration deal with them to take that into consideration.”

“At the same time, we understand their needs and there are a lot of things that we can do for them in terms of engineering,” he said, adding it is too soon to share details. “But I would say that the partnership with Waymo is getting deeper. And I think, more exciting.”

Tavares played coy on the important what, where and when details. But he did add that he expected to be able to share more “possibly by summer.”

A Waymo spokesperson confirmed that the company continues to look at ways to deepen its relationship with Stellantis, but didn’t share any other details or if progress had been made.

Tavares’ comments suggest the company has more than a passing interest in reviving a deal

that appeared destined to fizzle out as so many other autonomous vehicle-OEM partnerships have in the past two years.

Even if the two companies do cement a broader deal, there is still the very real challenge of executing it.

Waymo, which is owned by Google parent-company Alphabet, currently doesn’t operate a commercial delivery service using its self-driving vehicles. Last summer, it shuttered its self-driving trucks program, Waymo Via, to put all of its resources into scaling the robotaxi service.

In May 2023, Waymo and Uber agreed to a multi-year strategic partnership to allow Uber users to hail a driverless vehicle via the app in Phoenix. That deal did include a future plan to include delivery via Uber Eats, but as of today, it has not launched, according to a Waymo spokesperson.

The two companies have been partners since 2016 when a deal was struck to supply Waymo with thousands of custom Chrysler Pacifica Hybrid minivans that would become the first driverless vehicles to launch.

Under the deal, Fiat Chrysler — now known as Stellantis — would handle the manufacturing and provide Waymo with minivans that built in redundancies designed for autonomous driving.

Waymo never got close to the 62,000-minivan order it agreed to in 2018 as part of an expanded partnership with Fiat Chrysler. Hundreds, not thousands, of minivans were delivered to Waymo. But the minivan did become a critical part of its commercialization plan and over its lifespan the fleet provided tens of thousands of rides to the public, according to the company. (Waymo has never revealed detailed figures of its minivan fleet beyond that its total global fleet is somewhere around 700 vehicles.)

Waymo ended the Chrysler Pacifica program in May 2023. Today, its robotaxi service uses all-electric Jaguar I-Pace vehicles.

Meet the Former CFO Who Thinks He Can Fix Disney

Jay Rasulo wants to return from the sidelines. Disney says his perspective is stale

When Disney’s efforts to build a theme park in China became snarled in the late 2000s, Chief Executive Bob Iger sent his parks chief to Shanghai to figure out why government officials weren’t returning calls.

Jay Rasulo recalls meeting with a high-ranking Communist Party official on the trip who urged him not to give up. “Jay, keep knocking at the gate,” the official said. “Someday it will open.”

Nearly a decade after leaving Disney, Rasulo is back, once again knocking at the gates of power, this time as a nominee to join Disney’s board as part of activist investor Nelson Peltz’s proxy campaign against the company.

For more than a year, Peltz and his hedge fund, Trian Fund Management, have publicly criticized Disney’s current board and Iger’s management. Trian controls around 33 million Disney shares and is urging shareholders to vote Peltz and Rasulo onto the board at the company’s April 3 annual meeting.

The outcome of the vote could reshape how one of America’s most iconic entertainment companies is governed for years to come. The inclusion of Rasulo is a sign that Peltz thinks some shareholders will be persuaded to vote for a slate that includes an executive who grew intimately familiar with Disney over the course of his nearly 30-year tenure.

“When people call me about the company and what’s going on, I say, ‘Don’t ask me! It’s breaking my heart!’” Rasulo said in an interview. “When Nelson called me, I decided I couldn’t sit on the sidelines.”

Rasulo, once considered a potential successor to Iger, said he knows how to work with the veteran Disney CEO and that shareholders deserve “objective, passionate, owner-focused representatives” to hold the company’s management accountable. Peltz has said he wants Disney to target higher profit margins in the streaming business and have the board review the movie studio’s strategy.

Disney in recent weeks has argued that Peltz lacks the experience to help the company and told shareholders not to vote for him or Rasulo. A Disney spokesman said Rasulo left more than eight years ago and “in our view, his analog perspective is not relevant to the challenges of today’s digital media landscape.”

The company says the activist’s campaign is colored by personal animus. More than 25 million Disney shares in Peltz’s war chest—nearly 80% of the total—come from his friend and former Marvel Entertainment chairman Isaac “Ike” Perlmutter. Iger fired Perlmutter in March 2023 after the two men had quarreled for years over movie budgets and creative decisions.

‘Activator and a motivator’

Rasulo, born in Brooklyn, N.Y., and raised in Staten Island, cut his teeth as a finance executive in the hospitality industry. After earning an M.B.A. from the University of Chicago in 1984, he joined Marriott, helping launch new hotel lines.

He soon joined a wave of Marriott executives recruited by Disney to help manage the eruption of new business ideas prompted by the arrival of new CEO Michael Eisner.

Many of these executives ended up on Eisner’s Strategic Planning team, a division that advised the various Disney business units on how to best deploy capital and launch new products. Rasulo began working closely with the theme-park division, helping with pricing strategy and developing hotels at Disney’s resorts.

Rasulo later launched Club Disney, a short-lived chain of children’s play centers. He spent several years living in Paris managing Euro Disney, taking an immersive language course that helped him speak French fluently.

He returned to Burbank, Calif., to lead the Parks and Resorts division in the early 2000s and was credited with turning around Disneyland Resort’s finances and planning a $1.1 billion remodeling of its California Adventure theme park.

Bill Ernest, who worked under Rasulo in the early 2000s running Disney’s Asian theme parks, said he built up confidence in his subordinates.

“He asked a lot of probing questions to help you think about things,” Ernest said.

Experiences like Rasulo’s solo trip to China helped teach him the value of persistence, which he describes as one of his core business principles. Despite delays, Disney opened Shanghai Disney Resort in 2016, the first-ever project of its scale built by a Western entertainment company in mainland China.

“Jay was always a maniac about excellence,” said Regynald Washington, former vice president for food and beverage at Disney’s resorts, who described Rasulo as an “activator and a motivator.”

He said Rasulo was passionate about culture as well as business, recalling his taste for fine Italian and French food, Bordeaux wine and the music of B.B. King and Steely Dan. Rasulo has served on the board of the Los Angeles Philharmonic for nearly two decades.

He had critics inside Disney as well. Several former executives who worked alongside him said Rasulo could be harsh toward executives whose units were underperforming, and he had a bedside manner that sometimes came across as indelicate inside a company where a polite decorum usually prevails.

“I’m a very direct guy. Many people at Disney are not direct,” Rasulo said. “There are people who want to do their thing, and they don’t like it when someone calls them on it in a studio budget meeting, for example.”

Life after Disney

In 2010, Iger had Rasulo trade the parks chief job for Tom Staggs’ chief financial officer role, setting off a horse race to determine which of the two men would likely succeed the CEO. When Staggs was elevated to the position of chief operating officer—effectively Iger’s second-in-command—in 2015, the CEO asked Rasulo to stay on as finance chief.

Rasulo declined, resigning a few months later. “Was I disappointed? Of course I was. But that’s not a personal grudge,” Rasulo said. He added that he isn’t interested in a management role.

Inside the company, however, some senior executives have interpreted Rasulo’s partnership with Peltz and public comments he has made about Disney’s recent challenges as evidence that he is motivated by ill will toward Iger.

Since leaving Disney, Rasulo has served on boards of media executive Haim Saban’s private investment company and the radio and podcast company iHeartMedia. He was diagnosed with non-Hodgkin lymphoma, a form of blood cancer, in 2019. The cancer is now in remission, he said.

Rasulo became friendly with Perlmutter after meeting him in 2010 and stayed in touch with him after leaving Disney. In January 2023, Rasulo was introduced to Peltz at a meeting at the Beverly Hills Hotel. Perlmutter, who had advocated for Rasulo to succeed Iger as CEO, urged Peltz to consider him as a board nominee.

The Disney spokesman said the company questions Rasulo’s ability to work constructively with its management team given his decision to leave the company in 2015 and his “close association” with Perlmutter.

In recent months, Disney has made a series of announcements that seem designed to counter Peltz’s narrative of a company in disarray, including a new sports-streaming partnership, forays into sports-betting and videogames and a surprise sequel to the animated feature “Moana.”

Its share price is up about 9% since its Feb. 7 earnings report, to $107.74, but Peltz says he isn’t impressed. Disney’s share price also rose a year ago after a flurry of strategic initiatives were announced during earnings, prompting Peltz to end an earlier proxy campaign.

“We dropped out after that earnings announcement because we trusted Disney would execute,” Peltz said in a statement. “We are not doing that again.”

Brazil rolls out dengue vaccines as cases rise sharply

Infections quadruple from last year after warnings that warming temperatures will increase cases

Brazil is scrambling to roll out new vaccines against dengue fever after the number of cases of the mosquito-borne disease more than quadrupled from last year’s rates.

The sharp increase, which has prompted several states to declare health emergencies and the Rio de Janeiro government to declare an epidemic, came after health officials warned of a rise in cases due to warmer weather from climate change and the El Niño weather pattern.

The country has reported more than 700,000 cases so far this year, up sharply from the 165,000 cases in the same period of 2023. More than 100 deaths have been reported from the virus, which is transmitted by mosquitoes and can cause high fever, muscle pain and internal bleeding.

The health ministry warned earlier this year that the number of dengue cases could reach a record 5mn in 2024, a more than threefold increase from the 1.65mn cases recorded last year, which resulted in 1,094 deaths. The previous record was 1.68mn cases in 2015.

The number of dengue cases typically peaks in April before tapering off, although health officials have said that rising global temperatures will allow the mosquitoes that carry the virus to thrive for longer. Last year Brazil reported its hottest year on record.

Argentina and Paraguay have also reported a surge in dengue cases. The Argentine ministry of health this week said 48,000 cases had been recorded between late July 2023 and mid-February, compared with just 1,000 in the same period a year earlier.

Nísia Trindade, Brazil’s health minister, said: “Now is the time for all of Brazil to unite against dengue. This is the time to intensify care and prevention . . . After 40 years of dealing with dengue epidemics, we now have an important scientific achievement: a vaccine.”

This month Brazil started distributing a vaccine produced by Japanese pharmaceutical group Takeda. Known as Qdenga, the vaccine has an efficacy rate of 80.2 per cent and consists of two shots with a three-month interval between them.

Because of supply bottlenecks, the vaccine is primarily being administered to children between the age of 10 and 14, who are the group most often hospitalised with the virus after elderly people. Regulators have not yet approved the vaccine for senior citizens.

Trindade said Brazil was the first country to incorporate a dengue vaccine into its free public health system. The São Paulo-based Butantan Institute has also developed a vaccine, but it has yet to be approved by regulators.

The disease is transmitted by the Aedes aegypti mosquito, which thrives in pools of stagnant water.

“The poorest regions suffer the most because of the housing conditions and urban structure that support the spread of mosquitoes. Mortality is higher among the poorest,” said Alberto Chebabo, president of the Brazilian Society of Infectious Diseases.

“We’re now in the rainy and hot season, so we can’t reverse the proliferation of the mosquito. The focus now is on care to reduce mortality.”

The World Health Organization has described dengue fever as a “substantial public health challenge”, noting a “10-fold surge in reported cases worldwide increasing from 500,000 to 5.2mn” between 2000 and 2019.

Goldman insider-trading conviction shows UK watchdog sharpening its teeth

Financial Conduct Authority says case should be ‘wake-up call’ to City of London

Mohammed Zina held his head in his hands in the dock at London’s Southwark Crown Court after the jury foreperson repeated “guilty” nine times in answer to each of the charges against him.

The sharply dressed 35-year-old ex-Goldman Sachs analyst was convicted this month of insider dealing and fraud after a trial lasting nearly three months. The following day, he started his 22-month sentence at HMP Wandsworth, a men’s prison dating from Victorian times in London.

“I cannot help but feel pity for you, because you have thrown away what was undoubtedly a promising career in banking,” Judge Tony Baumgartner said as he sentenced Zina on February 16. “Your reputation now is lost, and it is likely you will never be trusted to work in a position of such responsibility again.”

The Zina case — known as Operation Kempston by the FCA — is the first insider dealing conviction the UK Financial Conduct Authority has secured since 2019. The agency’s new enforcement heads are hoping it will send a message to the City of London that it is serious about the offence, according to Therese Chambers, joint executive director of enforcement and market oversight at the FCA.

“There are many successful professionals across the City who are also in positions of trust and this outcome should be a wake-up call to them that trust is there for a reason, it is not there to be abused,” Chambers said in an interview with the Financial Times on Thursday, her first since taking up the role in April.

Zina’s solicitor declined to comment on his conviction. A spokesperson for Goldman said the bank had “zero tolerance for this conduct”.

After a fallow period for enforcement in the UK during the Covid-19 pandemic, the FCA is showing signs that it is looking to get back on the front foot. The watchdog arrested three London-based individuals on suspicion of insider dealing this month and is in the midst of prosecuting a number of others for the offence.

The FCA currently has 17 insider dealing investigations open, compared with 22 in 2022 and 14 in 2021, according to data provided by the agency.

The regulator has had a mixed record on pursuing insider trading.

In the past decade, it has secured the convictions of employees from blue-chip firms including UBS and BlackRock Investment Management. The agency also prosecuted the UK’s biggest-ever insider trading ring — Operation Tabernula — charging nine men, from day traders to a former corporate broker at Deutsche Bank.

Yet, prosecutions have been lacking in recent years and cases it has pursued have not always gone smoothly. Only two of the five men tried in Tabernula were convicted — although another three previously pleaded guilty and one was convicted in absentia — and even the Zina case lost a defendant partway through the proceedings. The watchdog has also faced questions over the credibility of some of its witnesses.

Originally charged alongside his brother, Suhail Zina, a former Clifford Chance lawyer, was acquitted on all nine counts before the trial ended, after the FCA withdrew the fraud counts against him and the judge ruled that there was no case for him to answer on insider trading.

Mohammed Zina had used Suhail’s name, as well as their sister’s, to open trading accounts as a way of disguising his activity from Goldman. He took out loans with Tesco Bank, applying for them on the basis he wanted to finance home improvements, and used the funds in part to place 46 illegal trades through the accounts in his brother’s and sister’s names.

“When this case was opened [ . . .] the narrative upon which you were addressed [was that] this was a joint enterprise between two siblings to purchase property and cars,” said Brendan Kelly KC, defence counsel for Mohammed Zina, in his closing speech. “Well, we now know where one of the siblings sits: he’s not guilty.”

Meanwhile, Fergal O’Driscoll, head of Emea conflicts and reputational risk at Goldman and a prosecution witness, was interviewed by police for possible contempt of court after speaking to another Goldman witness during the trial. A witness for Tesco who was called to testify about the loan applications was described by the FCA’s own lead prosecutor Peter Carter KC as “useless”.

“As with every case, I think we’ll review it and we’ll see what learning comes out of it,” Steve Smart, Chambers’ fellow head of FCA enforcement, said in the same FT interview.

O’Driscoll was found not to be in contempt. Goldman declined to comment on the witness issues.

For Mohammed Zina, the end came in December 2017. In an interview with FCA investigators at a London police station following his arrest, Zina said he had beaten the odds to get a job at Goldman after his dream to become a professional cricketer failed to pan out.

He picked up an investment banking brochure that was lying around in the bedroom he shared with his more academic brother, Suhail, and Goldman was the first name he saw. While at Durham University, he secured a placement year at the bank in its operations division, working daily with agencies like the FCA, he said.

In 2016, two years after he joined the bank full time, Zina was moved into the conflicts resolution group, where he was privy to the inside information that prosecutors accused him of using to trade.

Even after he started at Goldman full time, he worked at Sainsbury’s supermarket at the weekends for a while because “he missed working with ordinary people”, a school friend said in a witness statement.

During the trial, the jury heard how Zina had made about £140,000 in profits from trading on stocks including semiconductor designer Arm and pub company Punch Taverns.

His biggest win was about £55,000 in profit on trades in US food company Snyder’s-Lance.

In his interview, Zina told investigators that his passion for trading had kept him afloat while he was caring for his mother who had cancer and later died.

“On one level this is a tragic story,” said Chambers. “A young man from an ordinary background who has worked very hard to build a prestigious career that he’s thrown away for what he thought was going to be a risk-free profit”.

She added: “The risk equation he obviously got fundamentally wrong.”

European football needs innovation and drama, says Real Madrid and FC Barcelona investor

Alan Waxman, head of US investment group Sixth Street, foresees ‘more structural change’ in sport to excite fans and attract new audiences

European football needs more matches with drama and competitive tension to keep fans interested and attract new audiences to the sport, according to the chief of the US investment group that has backed top Spanish clubs Real Madrid and FC Barcelona.

Alan Waxman, a former Goldman Sachs partner and co-founder of Sixth Street, which manages more than $75bn in assets, said the sport needed to innovate in order to appeal to a wider audience.

“There are more and more forms of entertainment that people, especially younger demographics, can consume,” he told the Financial Times. “If you don’t create more drama . . . you can start to lose the core and once that starts, it’s hard to get people back in. That’s why the best businesses innovate before that happens.”

The San Francisco-based investment group executed deals in 2022 with La Liga giants Barça and Real Madrid. The two clubs are backers of a plan to create a new European Super League to replace the Uefa Champions League, Europe’s most prestigious club competition.

Waxman, who declined to comment on the ESL, expects to see “more structural change in European football” in the search for more games of consequence that can excite fans.

Next season Uefa is overhauling the Champions League format, with the aim of reducing the number of inconsequential matches.

Waxman warned that unless football clubs with global brands continued to invest, they were at risk of losing their lustre. Clubs that may have had global recognition historically could become “melting ice cubes because they don’t do the right things from a business and fan perspective and they don’t invest in the experience”, he said.

The opportunity for clubs is to tap into new technology that allows fans to follow them from wherever they are in the world, Waxman said, in a continued diversification of revenues in addition to ticket sales and traditional television deals.

Waxman, who co-founded Sixth Street in 2009, also highlighted the urgent need to upgrade stadiums and other infrastructure to give fans a “centre of gathering”. Real Madrid and Barça are investing heavily in their stadiums.

Sixth Street took a majority stake in a company that owns 25 per cent of Barça’s La Liga television rights for 25 years, allowing the member-owned club to generate capital gains and pay down debt. Separately, Sixth Street and Legends, the live events business in which it has a majority stake, struck a deal with Real Madrid, which received €360mn to invest across the business.

The investments are part of a surge of private capital into the world’s most popular sport.

Private equity firm CVC Capital Partners has financed the Spanish and French football leagues, while US investors have bought famous clubs, including Italy’s AC Milan and Premier League side Chelsea.

As well as backing two of the most famous clubs in sport, Sixth Street last year committed $125mn to buy a new National Women’s Soccer League club, now known as Bay FC. 

“The biggest growth opportunity in sports over the next 10 years will be global women’s football,” Waxman said. “You can already see that happening, but that’s just getting started.”

US football legends Brandi Chastain, Aly Wagner, Danielle Slaton and Leslie Osborne co-founded Bay FC in partnership with Sixth Street. The NWSL side has made a series of international signings ahead of its first season, which starts in March, including Nigerian international Asisat Oshoala, Zambian forward Racheal Kundananji from Spanish side Madrid CFF and Scottish defender Jen Beattie from Arsenal.