Nasa signals turn to data-driven approach in search for UFOs
US space agency may enlist ‘citizen scientists’ in drive to find out more about unexplained anomalous phenomena
Nasa is expected to call on companies, citizen scientists, pilots and air traffic managers to track UFO sightings as part of the US space agency’s efforts to gather more robust data on unidentified flying objects.
The US space agency on Thursday unveiled the results of a nearly year-long study of unclassified UFO sightings, now more commonly known as unexplained anomalous phenomena (UAP).
The study, carried out by an independent team of 16 scientists, data and artificial intelligence experts, and aviation safety specialists, was not looking for evidence of extraterrestrial visits. Instead it was tasked with designing a road map for Nasa to lead a more scientific approach to gathering and analysing data about these phenomena.
Bill Nelson, Nasa’s administrator, said the study marked “the first time Nasa has taken concrete action to seriously look into UAP”. The initiative should help to end decades of suspicion that the US government has been hiding information about UFOs, with Nelson pledging that any findings on UAP would be made public.
“We don’t know what these UAP are but we will try to find out. Whatever we find we will tell you,” he added.
Nasa’s decision to make UAP research a priority comes as the government grows increasingly concerned by the rising number of sightings of unexplained objects in the air, space and ocean. While they may be described as UAP, there are concerns they could pose a threat from new technologies at a time of tensions with both China and Russia.
“The observed increase in the reporting rate is partially due to a better understanding of the possible threats that UAP may represent — either as flight safety hazards or as potential adversary collection platforms,” the report said.
The report’s recommendations included crowdsourcing information on events filmed by the public, perhaps through a mobile phone app, as well as using earth and space observation networks operated by commercial operators. The companies offered “a potent mix of Earth observing sensors that have the collective potential to directly resolve UAP events”, it found.
The aviation industry’s safety reporting system could also be leveraged to provide a critical database, the team said. Finally, in addition to using its own assets to identify UAP activity, Nasa could help to develop “new concepts and ideas for air traffic management systems . . . to assist in the effort to better understand [UAP]”.
“There is a lot more to learn,” Nelson added. “There is so much concern that there is something locked up and the American government is not being open. [But] we will be open about this.”
The findings come just days after Nasa hinted that the James Webb space telescope launched at the end of 2021 had found chemical signs that could indicate life on an exoplanet about 120 light years from Earth.
Last year the US defence department set up the All-domain Anomaly Resolution Office (AARO) to co-ordinate government efforts to investigate UAP in air, space, sea and land. Nasa has appointed a director of UAP research to co-ordinate its own UAP activities and work with AARO.
According to a report for the Office of National Intelligence last year, 247 UAPs were reported since 2021, a huge increase from 263 for 2004-2021. The majority of new sightings have come from US Navy and US Air Force personnel while on duty, the report found. In 2004, naval pilots spotted a white oblong object emerge from the ocean and speed off across the surface in what has become known as the Tic Tac encounter.
The majority of the sightings were subsequently attributed to objects such as military drones and research balloons or conventional explanations, such as commercial aircraft observed through shaky sensors. Yet enough incidents remained unexplained to merit further study.
Nelson said he believed in extraterrestrial life. “If you ask me do I believe there is life in a universe that is so vast it is hard to comprehend how big it is, my personal answer is yes,” he said.
Electric vehicles: EU/China trade spat highlights the plight of European automakers
Imposing tariffs would not be a straightforward win as it raises the possibility of a trade war
Electrical storms are characterised by much thunder and lightning. So, too, is the spat between the EU and China over the latter’s exports of cheap electric vehicles. The EU is threatening to impose import tariffs if it finds Chinese EVs in breach of trade rules. China is making retaliatory noises. The growing animosity is a reflection of the perilous place European carmakers find themselves in.
Europe’s legacy car companies have a long, illustrious history producing internal combustion engines. Their heavy spend on branding has supported these types of products.
But ICEs are on their way out. EVs are now materially cheaper to run than their fossil fuel equivalents. Worse, the purchase price of EVs has fallen as well. That alone helps attract consumers. Sales are set to increase worldwide from about 10mn in 2022 to about 14mn in 2023, or 18 per cent of all cars sold.
This partly explains legacy carmakers low valuations. Volkswagen trades at 3.5 times this year’s forward earnings. Stellantis and Renault are even cheaper, hovering around 3 times.
Moreover, consumers are increasingly focused on the software in the cockpit, alongside the hardware. So far, Chinese carmakers have integrated these capabilities well. Volkswagen, which previously was a leader in China’s own auto market, has been surpassed by EV specialist BYD.
The switch to EVs — where legacy branding matter less — lowers barriers to entry into the European market. Indeed, Chinese imports already account for about 15 per cent of EVs sold on the continent. Currently, Chinese carmakers such as BYD are penetrating the mass market segment, which offers a $130bn revenue opportunity by 2030.
It is no wonder, then, that EU policymakers are keen to protect their domestic industries — especially if Chinese carmakers are found to benefit from market distorting subsidies. But imposing tariffs would not be a straightforward win. For one, it raises the possibility of a trade war. That would hit German automaker Volkswagen particularly hard: over half its net income comes from Chinese operations, estimates Daniel Roeska at Bernstein. BMW’s is above 30 per cent.
Investors are fully aware of problems legacy carmakers face. The persistently lowly valuations of their shares, even as operating margins surged in 2021-2022, point to this reality.
Arm shares jump by 20% as trading begins
SoftBank-backed chipmaker’s stock climbed as high as $61.99 in early trading as valuation exceeds $60bn
Shares in chip designer Arm jumped by as much as 20 per cent as it began trading on the Nasdaq exchange on Thursday, valuing the SoftBank-backed company at more than $60bn.
Arm opened at $56.10 per share on Thursday afternoon and climbed as high as $61.99 in early trading, significantly above the $51 offer price agreed on Wednesday evening.
The price in early trading gave the chipmaker a market capitalisation of $63.6bn based on shares outstanding, or nearly $66.2bn on a fully diluted basis.
The IPO raised almost $5bn for SoftBank, making it the largest US listing in almost two years.
Rene Haas, Arm’s chief executive, said discussions with investors during the IPO roadshow presented a chance to explain “just how different a company that we are today” since SoftBank acquired the Cambridge-based chip designer for $32bn in 2016.
“We are far more diversified,” he said, noting the company had shifted from earning about two-thirds of its revenues from mobile phone chips to less than half. “We did a lot of work in the years between 2016 and 2023 to transform the company.”
Despite selling around 10 per cent of Arm in the IPO, SoftBank has been a “net buyer” of the company’s shares, Haas said. SoftBank last month bought back the 25 per cent of Arm that it did not already own from Vision Fund, an investment firm managed by the Japanese conglomerate, in an internal transaction that valued the chip company at $64bn.
“[SoftBank chief executive Masayoshi Son] owns more of Arm today than he did a number of weeks ago, so that should tell you that he is very, very optimistic about the future,” said Haas.
“If you look at the fact that they have not sold very many shares, they’re going to be a big shareholder in Arm going forward, they are sharing the vision that I have that the best days for our company are ahead of us,” he added.
The strong reception to Arm’s listing will fuel confidence in the wider IPO market, which has been gradually reopening after one of the worst fundraising downturns in decades.
“Just because Arm can come and do a good IPO . . . does that mean everyone can do it? Probably not,” said one banker involved in the deal. “But are conditions improving? Yes.”
IPOs for grocery delivery app Instacart and marketing software group Klaviyo are expected to provide a further test of investor appetite next week.
A large first-day “pop” for a new listing can be disappointing for company executives and existing shareholders as it indicates that they could have raised more cash in the initial offering.
The $51 offer price was at the top of Arm’s announced price range. Bankers discussed pricing the deal even higher given the strong demand.
However, several people involved in the listing have said SoftBank and Son were most concerned with ensuring the stock trades well than maximising their initial payout.
“This is going to be their biggest asset going forward, so every decision they make should be around protecting the value of the 90 per cent [of Arm that SoftBank still owns], not optimising the value of the 10,” said one person who worked on the deal.
Barclays, Goldman Sachs, JPMorgan and Mizuho acted as lead bookrunners on the deal, with a further 24 banks working as underwriters.
BP chair rules himself out as next chief executive
Helge Lund has sought to reassure investors following Bernard Looney’s abrupt departure
ssure shareholders it was “business as usual” following the abrupt departure of boss Bernard Looney.
Lund, a Norwegian former chief executive of Equinor, has told investors in a series of emergency meetings that he will remain chair and will not replace Looney, BP confirmed on Thursday.
Looney unexpectedly quit BP on Tuesday after failing to disclose past relationships with staff. Lund, who is also chair of Danish drugmaker Novo Nordisk — which this month became Europe’s biggest company by market capitalisation — was mooted as a possible replacement CEO.
In the meetings with investors, Lund stressed that the company’s strategy will remain unchanged and presented himself as a “safe pair of hands” and would remain in the role of chair, according to one major shareholder who spoke with him this week. “He said it was business as usual and strategy unchanged.”
But Lund offered no further information on the number or nature of Looney’s personal relationships with staff, including those the departing CEO allegedly failed to disclose, the investor added.
A second major shareholder questioned whether the board had conducted sufficient due diligence when selecting Looney to run the company in the second half of 2019.
The nature of Looney’s resignation “raises questions around BP’s ethics and culture . . . we are left wondering how it could still happen in companies of that size,” the shareholder said. “The real question we have is . . . how come the board was not stricter”.
Looney is not the first BP chief executive to resign under strained circumstances over personal relationships. Lord John Browne resigned in 2007 after lying to a court over how he met his partner.
BP said there was a “rigorous and thorough appointment process” when Looney was selected to be chief executive in 2019. That included “a thorough due diligence process pre-appointment, vetting of open-source data and interviews with Bernard”.
When new information about past relationships with colleagues surfaced from an anonymous source in May 2022, BP’s board opened an external review, after which Looney assured the board he had nothing further to disclose.
The Irish executive then resigned on Tuesday after the board received a second set of allegations as recently as last week. BP’s chief financial officer, Murray Auchincloss, was appointed interim chief executive after Looney’s resignation.
The first major shareholder said he understood that Looney had disclosed information about some past relationships to the board in 2019. “As long as the board was happy he made full disclosure. They did all that they could do,” the investor said. “He was a good CEO for the business so I wouldn’t give the board a hard time for putting him in that position.”
One person familiar with the CEO selection process said in the years prior to Looney’s appointment, the board and top BP executives viewed his widely known active social life and successive relationships as private and not the domain of the company. He married in 2017 and was divorced by the time he became chief executive in February 2020.
Three people familiar with Looney’s appointment said any misgivings about him because of his personal relationships with colleagues were outweighed by his record at the company.
Hipgnosis has sold some songs to itself, and that’s not even the odd bit
We Can Merck It Out
In 2018, Hipgnosis was the future. The music management group had floated a royalties fund in London with a tricksy corporate structure and an asset class that might be considered cool, at least relative to peers. Founder-manager Merck Mercuriadis would turn up in places not typically associated with closed-end investment trusts, such as the cover of Billboard magazine and backstage at the MTV Music Awards.
Several hundred catalogue acquisition press releases later, Hipgnosis Songs Fund might be liquidated. HSF shareholders will vote later this month on whether to persist with a fund that has tended to trade at a ~50 per cent discount to its published net asset value. Turns out the cool asset class involves recondite valuation methods, and that income funds are quite sensitive to stuff like interest rates and cashflow visibility; see Alphaville passim.
HSF shareholders have been pushing for an incentive to vote for another five years of worrying about whether The Chainsmokers and Shawn Mendes have staying power. Today, they got one: a share buyback programme of up to $180mn and lower advisory fees for Hipgnosis Song Management, the investment advisor formerly called The Family that literally employs Mercuridas’s family.
There are some peculiarities to the proposal.
Hipgnosis is funding the cash return by selling 19 per cent of its portfolio to Blackstone for $465mn, which is a related party transaction. Blackstone bought a majority stake in Hipgnosis Song Management in 2021 on undisclosed terms and pledged $1bn to Mercuriadis so he could build its own private fund.
Shareholders of the listed entity accepted this at the time, in the hope that the involvement of Blackstone would add some professionalism to operations, even though it created an obvious conflict. Having already been tapped nine times since IPO, they had recently extracted a promise from HSF that it wouldn’t raise more acquisition capital for at least a year.
The suspicion was that Mercuriadis was finding an different outlet for his hoarder tendencies. Blackstone built a private portfolio including songbooks from Justin Bieber, Nelly Furtado and music festival fixture Nile Rodgers, a co-founder of HSF, while the listed fund mouldered. Whatever professionalism the relationship had encouraged within Hipgnosis wasn’t apparent in the share price.
Today’s deal will see the Blackstone-owned fund buy some songs from HSF. The catalogue for disposal (known as first portfolio) averages a bit newer than the retained portfolio, which according to HSF’s statement will improve its proportion of “culturally important and successful songs”. The explainer also mentions that, with no change of manager, artists should remain happy — though being in the disposal group may not help relations with the likes of Barry Manilow and the Kaiser Chiefs:
HSF says it has “put in place appropriate governance arrangements and information barriers” between Hipgnosis (PLC), Hipgnosis (Blackstone) and Hipgnosis (management group). Liberum Capital calls this “a boilerplate statement”:
In our view these are standard measures of good governance, but it leaves us with the question of where the really good investment team members at the investment advisor are going to sit. Are they going to be on the team that advises the company or on the team that advises [Blackstone-owned] Hipgnosis Song Capital? Furthermore, are the two teams at the investment advisor going to use the same models to value catalogues? If so, it will be of no surprise to anyone that even with Chinese walls in place, the two teams will think alike and not be independent in their assessment of the value of the catalogues.
Wouldn’t it have been cleaner to sell a simple percentage share of the whole songbook to Blackstone? Do the above assets have better or worse than the portfolio average? Do New Rules by Dua Lipa and Yeah! by Usher (both in the disposal group) have superior or inferior DCFs to Whatever it Takes by Imagine Dragons or Chop Suey! by System of a Down (both retained by HSF)?
Who knows? Who could possibly know?
“The primary goal of this transaction was to provide comfort over the NAV and provide a re-rating to the share price. The complex nature of the deal suggests that it is hard to say the NAV has been validated,” write Stifel analyst Sachin Saggar. “Perhaps it lends itself to our view of skepticism of the valuation agent.”
HSF outsources catalogue valuation to Massarsky Consulting, owned since 2022 by Citrin Cooperman. In May 2022, Nari Matsuura of Citrin Cooperman gave a fascinating interview to Music Business Worldwide on how “when interest rates go up, we will not have to raise our discount rate,” and how “we are protecting all of our clients: valuations will not go down.” When an independent valuation agent says stuff like this, some skepticism is perhaps merited.
The songbooks are being sold at a headline 17.5 per cent discount to the fair value given on March 31, 2023. That’s slightly weird, not least because it compares rather poorly to Round Hill, HSF’s only peer in the London market, which last week received a take-private at an 11.5 per cent discount to NAV. Also, it’s a headline discount because it doesn’t take into account bonuses, earn-outs and other contingent payments that will be paid by HSF rather than Blackstone up to a cap of $30mn. The actual discount might be in the low to mid 20 per cent range.
Valuation also has to be considered on headline and underlying levels. Blackstone has agreed to pay 18.3 times the catalogue historical net publisher share, which is quite high by industry standards for a b-grade portfolio — but royalties etc are backdated to the start of the year. There’s already $15.3mn of backdated payments accrued, so if the deal completes by the end of the year that’s 5 per cent or thereabouts off the purchase price.
Unusually for a UK transaction there’s a go-shop clause that gives other interested parties 40 days to come up with a better proposal. But they’ll have to pay a $6.6mn termination fee to the management company, Hipgnosis Songs Capital, and factor in the cul-de-sac risk that their offer will be matched. As it says in the small print:
If Hipgnosis Songs Capital matches the superior proposal, such transaction will be final and binding and the company will not be permitted to have any further discussions or negotiations relating to a superior Proposal or other alternative transaction with any person.
Among the other sweeteners, there’s a $250mn paydown of HSF’s revolving credit facility to address interest cost, which for obvious reasons have gone stratospheric in recent years, and reduced management fees if the market cap stays around current levels. The concession on fees brings to light the possible conflicts of interest within the group, as Liberum explains:
Is the investment advisor in the end going to make more money out of managing the first portfolio inside Hipgnosis Songs Capital that it outweighs the loss of income from the [HSF] investment advisory fees? If so, what impact do these incentives have on the proposed transaction? And what are the incentives of Merck Mercuriadis after the transaction? We do not intend to accuse the investment advisor of cherry-picking or rigging the disposal in its favour, but we wish there was more transparency about the transaction and the incentive structures of all parties involved.Overall, we cannot shake off the impression that the company has received a lot of feedback from investors that the continuation vote may fail and that last week’s announcement by Round Hill Music Royalty Fund to sell its entire portfolio may have forced the board’s hand to sell some of the family silver. Whether this will calm investors depends, in our view, very much on reassuring them that the carrying NAV of the remaining portfolio is not overstated and that governance concerns are properly addressed and incentives are truly aligned with shareholders so that the investment advisor provides the best service to the company rather than Hipgnosis Songs Capital.
Stifel offers a more terse summary:
It’s unclear how any shareholder can assess the transaction as a good or bad deal given the structuring involved and that may prove to be an obstacle.
An eventual Blackstone buyout is the only clean solution for shareholders, so has become a big part of the HSF investment case in spite of being entirely hypothetical. Ahead of the AGM vote Mercuridas is offering shareholders the chance to keep hope alive for another five years, but has also shown once again why his company is ill suited to public markets.
“We would not be surprised to see votes split by a relatively fine margin,” say Winterflood Securities. Ditto.
Shipping industry: risk of war has yet to be fully priced in
Chinese aggression against Taiwan would increase insurance cover for ships in the area as has happened in the Black Sea
Geopolitical divisions threaten the global order of sea trade. The war in Ukraine has already disrupted energy and grain shipments from Russia. A potential invasion or blockade of Taiwan by mainland China could do the same in east Asia. But war is not yet being priced into all insurance cover.
Open sea lanes with Russia and Ukraine are critical for grain and other commodity supplies. Recent drone attacks in Crimea highlight the risks. Open trade with Taiwan is even more important given the concentration of global chip supplies.
China’s largest-ever naval exercises in the Pacific are a worry. However, unlike the Black Sea region, the seas around Taiwan are not on Lloyd’s of London’s Joint War Committee list. War cover only becomes necessary for an asset to enter a region after it appears on the list.
Expect costs to rise if it does. A basic global war cover premium might cost 10 basis points of a ship’s value annually. Entry into the Black Sea conflict zone could add a further 100 to 150bp on top of that. This compares with a premium of 10 to 25bp for cover to traverse the Gulf, another JWC-listed area. At the height of the Libyan civil war, rates were as much as 500bp — albeit not for very long.
Maritime tension is just one of several problems facing the global shipping industry. Supply chains are still recovering from pandemic-era disruption and putting shippers, such as AP Møller-Maersk, under cost pressure. Port congestion has pushed up rates for hull and cargo cover at the busiest bottlenecks. Fire risks are also rising, given ships are carrying greater amounts of lithium-ion batteries.
But the war in Ukraine has caused a sustained increase in rates unlike anything seen for a generation, says Dan McCarthy, head of marine at Markel International. It was one of the first to insure the Ukrainian grain trade following the start of the war.
Rates reflect the region’s danger. A similar situation in the seas around China would mean an expensive increase in coverage.