FT : Maersk forms green methanol start-up in decarbonisation push

Maersk forms green methanol start-up in decarbonisation push
Container shipping group prepares to welcome its first vessel powered by the alternative fuel

AP Møller-Maersk and the founding family of the container shipping giant have set up a new company to produce green methanol in an attempt to increase supply of the fuel the Danish group views as essential to decarbonise the pillar of global trade.

The start-up, to be called C2X, is looking at green methanol projects close to the Suez Canal in Egypt, the port of Huelva in Spain, and the US, India, and Australia.

Maersk has hit out at the oil industry for not producing cheap enough green fuel, leading to it founding C2X as shipping proves to be one of the hardest sectors worldwide to decarbonise.

The shipping industry remains almost entirely dependent on fossil fuels and accounts for about 3 per cent of global greenhouse gas emissions, according to the OECD.

C2X, which is 80 per cent owned by the family investment company with the rest belonging to the Maersk public company, is aiming to produce 3mn tonnes of green methanol a year by 2030.

About 110mn tonnes of conventional polluting methanol, mostly derived from gas or coal, is now used by the chemicals and transport industries. Shipping is expected to add 10mn tonnes of demand by the end of the decade.

At present, green methanol, which is made from biomass or captured carbon and hydrogen produced by renewable energy, is limited and expensive.

“First and foremost we’re looking to accelerate the availability of green methanol. If green methanol was available at a reasonable price it would be the logical choice for chemical and shipping industries,” Brian Davis, chief executive of C2X, told the Financial Times.

The new company’s launch comes as Maersk’s first vessel capable of being powered by methanol is set to be named by Ursula von der Leyen, the European Commission president, at a ceremony in Copenhagen on Thursday.

Maersk announced last week that Equinor, the Norwegian state-controlled oil and gas major, would supply it with green methanol for the first months of the new vessel’s life.

C2X will not produce enough green methanol for Maersk’s own demand — estimated to be up to 5mn tonnes by 2030 — but will aim to supply the chemical industry with a fossil fuel-free alternative and potentially other shipping companies.

Davis said it was not a defensive move by Maersk. “It hasn’t been conceived out of a fear of lack of supply. The business case is so compelling. What it really needs is people to step up and make it,” said Davis, who worked at Shell for more than 30 years.

C2X has already recruited a team of 60 from the chemicals and renewable energy industries. Its chief financial officer will be Alastair Maxwell, a former banker at Morgan Stanley and Goldman Sachs.

Maersk has ordered up to 19 green methanol-powered ships as it targets net zero emissions by 2040 — the most advanced of any large container shipping group — but all will be capable of burning fossil fuels too.

Critics of green methanol point out the need for CO₂ for the production of the e-fuel. Davis said finding a “biological” and not fossil source of carbon was “very hard” and that C2X would probably need to get it via carbon capture and storage projects. He estimated that demand for green methanol could reach 300mn tonnes by 2050.

C2X and Maersk declined to comment on how large its series A financing round had been. But Davis said C2X would need billions of euros to bring its projects to fruition by 2030 and so would need external partners.

“There is a pressing environmental requirement to scale the production of green methanol. C2X was founded to enable the energy transition in several hard to abate industries, including plastics, glues, textiles, and fuels,” said Robert Uggla, chief executive of AP Møller Holding and chair of Maersk as well as the fifth generation of the shipping group’s founding family.

>>> US After Hours Summary: SBUX -0.3% as Howard Schultz steps down from board;

After Hours Summary: SBUX -0.3% as Howard Schultz steps down from board; Wei Zhang joins board; SMTC -5.9% lower on earnings; DDD +2% delivers signed merger agreement to SSYS +1.9%

After Hours Gainers:

Companies trading higher in after hours in reaction to earnings/guidance: None

Companies trading higher in after hours in reaction to news: SCNI +8.4% (reports preclinical results for plaque psoriasis treatment), DVAX +2.3% (supply agreement with Avecia), HSTM +2% (authorizes new $10 mln share repurchase program), DDD +2% (DDD delivers signed merger agreement to SSYS), SSYS +1.9% (DDD delivers signed merger agreement to SSYS), TRIN +1.5% (increases dividend), HOOD +0.9% (reports August 2023 operating data), AMZN +0.3% (launching new generative AI tools)

After Hours Losers:

Companies trading lower in after hours in reaction to earnings/guidance: IBEX -8.2%, SMTC -5.9%

Companies trading lower in after hours in reaction to news: IE -10.8% (files for $150 mln share offering), VTLE -9.8% (to significantly increase Permian Basin Scale through accretive transactions; also stock offering), IMAX -3.5% (expands strategic relationship with Prime Focus into streaming ecosystem), EPRT -1.8% (commences 8.7 mln share offering), ALNY -1.7% (announces outcome of FDA advisory committee meeting on patisiran), CTLP -1.5% (to delay 10-K filing), SBUX -0.3% (Howard Schultz steps down from board; Wei Zhang joins board)

FT : Meloni sticks by Italian bank windfall tax despite ECB criticism

Meloni sticks by Italian bank windfall tax despite ECB criticism
Levy poses risk to eurozone financial stability by reducing Italian lenders’ retained earnings, says central bank

The European Central Bank has taken aim at Italy’s windfall tax on banks, warning that it risked making the sector more vulnerable to an economic downturn and urging Rome to carefully assess the impact of the levy.

The ECB’s non-binding legal opinion, published as its governing council met in Frankfurt on Wednesday, is set to intensify tensions with Rome, already elevated after rate-setters’ sharp increases in borrowing costs.

But in a Wednesday night interview, Italian prime minister Giorgia Meloni ruled out scrapping the tax, though she said the details could be amended provided the revenues remained “unchanged” and the tax still yielded the “just under” €3bn in revenues Rome was now expecting.

“If there are corrections to be made, it can be done, but I do not want to backtrack,” she said on state television.

Her comments came hours after the ECB warned that banks with weaker capital levels or smaller institutions more reliant on traditional lending activities “could become less able to absorb the potential downside risks of an economic downturn” as a result of the proposed tax.

It added that Italy’s tax could also hurt eurozone financial stability, by reducing banks’ retained earnings, constraining their lending capacity and restricting their ability to build up capital buffers to absorb future losses.

Last month’s shock decision to impose a 40 per cent tax on a portion of Italian banks’ net interest incomes — the margin between what they earn on loans and pay to depositors — was announced at a late-night press conference by deputy prime minister Matteo Salvini last month. It jolted investors and sent bank stocks tumbling the following morning.

Adding to the confusion, multiple versions of the details of the proposed tax emerged, as banks and investors sought clarity. After nearly 24 hours, the finance ministry partially backtracked, scaling back the scope of the levy and capping the collection at 0.1 per cent of banks’ total assets. 

Italy’s proposal follows similar moves made by EU governments in Spain, Hungary, the Czech Republic and Lithuania over the past year, most of which have drawn similar rebukes from the ECB.

Meloni has repeatedly defended the one-off tax, which she said was necessary to curb lenders’ “illegitimate profits” from failing to raise deposit rates even as the ECB’s policy rates have increased. In a social media video, she called the move “a tax on an unfair margin”. 

Lenders have contested the tax, questioning its basic legality. The Italian Banking Association said in testimony submitted to parliament this week that the levy violated the Italian constitutional principle of the right to property, given the “expropriation nature of the measure on the wealth of the company”.

The association also argued that comparing current margins with those from a period when “interest rates hovered around zero” was not a fair parameter, and could violate the EU’s fundamental principle of free competition.  

The ECB warned the tax’s “retroactive nature may fuel perceptions of an uncertain taxation framework and give rise to extensive litigation, creating problems of legal uncertainty”.

Although rising interest rates have boosted banks’ profits by allowing them to increase the cost of lending faster than the rate they offer to savers, the ECB said this may not last as the sector could be hit by lower lending volumes and higher losses from defaults on existing loans.

The Italian economy contracted 0.4 per cent in the three months to June from the previous quarter, reflecting a manufacturing slowdown and the scaling back of tax incentives to renovate houses.

“The ECB recommends that in order to assess whether its application poses risks to financial stability, and in particular whether it has the potential to impair the banking sector’s resilience and cause market distortion, the decree law be accompanied by a thorough analysis of potential negative consequences for the banking sector,” it said.

This analysis should examine the tax’s impact on banks’ “longer-term profitability and capital base, access to funding and the provision of new lending and competition conditions in the market, and its potential impact on liquidity”, the ECB added. 

It said some lenders may make higher net interest income while losing money overall if their fee-earning operations suffered a setback. The tax could also cause fragmentation of Europe’s banking system “because of the heterogeneous nature of such taxes”.

>>> Semtech says it's in compliance with financial covenants, but has has taken

Semtech says it's in compliance with financial covenants, but has has taken actions to reduce expenses to preserve cash and maintain compliance with its financial covenants

  • In 10-Q filing, co says "The accompanying interim unaudited condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. Management evaluated whether there are any conditions and events, considered in the aggregate, that raise substantial doubt about the Company's ability to continue as a going concern over the next twelve months from the issuance of the accompanying interim unaudited condensed consolidated financial statements. Compliance with the Company's leverage and interest expense coverage financial covenants is measured quarterly based upon the Company's performance over the most recent four quarters, and compliance with the liquidity covenant is measured as of the last day of each monthly accounting period. As of July 30, 2023, the Company was in compliance with the financial covenants in the Credit Agreement (as defined in Note 9, Long-Term Debt). In response to adverse market demand conditions, the Company has taken actions to reduce expenses to preserve cash and maintain compliance with its financial covenants. In the absence of additional actions, the Company may not maintain compliance with the financial covenants over the next twelve months from the issuance of the accompanying interim unaudited condensed consolidated financial statements, which noncompliance would raise substantial doubt about the Company's ability to continue as a going concern. Failure to meet the covenant requirements in the Credit Agreement would constitute an event of default under the Credit Agreement and there is no certainty the Company would be able to obtain waivers or amendments with the requisite lenders party thereto in order to maintain compliance. If an event of default occurs and the Company is unable to obtain necessary waivers or amendments, the requisite lenders may elect to declare all outstanding borrowings, together with accrued and unpaid interest and other amounts payable thereunder, to be immediately due and payable. Further, if an event of default occurs, the lenders will have the right to proceed against the collateral granted to them to secure that debt. If the debt under the Credit Agreement were to be accelerated, the Company's assets may not be sufficient to repay in full the debt that may become due as a result of that acceleration. The Company could seek replacement financing at prevailing market rates or raise additional capital by issuing equity or debt securities; however, this may not be on terms favorable to the Company, or available at all. Based on the Company's current projections and management's plan to further manage controllable expenditures through cost-saving initiatives that are planned and probable to be implemented, management believes the Company is expected to maintain compliance with its financial covenants and the Company's existing cash, projected operating cash flows and available borrowing capacity under its Revolving Credit Facility (as defined in Note 9, Long-Term Debt) are adequate to meet its operating needs, liabilities and commitments over the next twelve months from the issuance of the accompanying interim unaudited condensed consolidated financial statements."

>>> 3D Systems delivers signed merger agreement to Stratasys (SSYS) (5.16 -0.08)

3D Systems delivers signed merger agreement to Stratasys

  • 3D Systems (DDD) announces that it has delivered a signed merger agreement to Stratasys Ltd. (SSYS), substantially in the form shared with the Stratasys Board on September 6, 2023, and as required, will now be filed on Form 8-K with the SEC by 3D Systems.
  • The binding offer presents shareholders with a certain, superior alternative to Stratasys' planned acquisition of Desktop Metal (DM) and can be countersigned by Stratasys following termination of its merger agreement with Desktop Metal.
  • DDD believes that Stratasys' reasons for rejecting the company's proposal and its refusal to continue negotiations were either well-known to Stratasys and investors when Stratasys determined that 3D Systems' July 13 proposal was likely to lead to a superior proposal, or misleading, self-interested and overly focused on short-term prospects.
  • While near-term share prices for all companies in the sector have been pressured, the long-term trajectories of Stratasys and 3D Systems remain fundamentally unchanged in the past two months, raising serious questions to the credibility of Stratasys' evaluation of the 3D Systems proposal.
  • Most importantly, Stratasys affirmed that the 3D Systems combination would generate significantly more synergies, and therefore value creation, than any other available alternative.

>>> US Close Dow -0,20% S&P +0,12% Nasdaq +0,29%

Closing Stock Market Summary
Today's trade was lackluster with the major indices registering only modest gains or losses. The A-D line favored decliners, but there wasn't a lot of conviction overall. The major indices followed the direction of the mega cap stocks, which drove some choppy action in the morning and later in the afternoon.

Briefly, total CPI was up a robust 0.6%, as expected, and core-CPI, which excludes food and energy, was up 0.3% (Briefing.com consensus 0.2%). That left total CPI up 3.7% year-over-year, versus 3.2% in July, and core CPI up 4.3% year-over-year, versus 4.7% in July.

The key takeaway from the report is that core inflation, which is what the Fed monitors more closely, showed ongoing improvement on a year-over-year basis; however, it is still well above the Fed's 2.0% target, reflecting a sticky quality that probably won't compel the Fed to raise rates further at this point, but which will certainly keep the Fed in a "higher for longer" mindset.

The Treasury market saw some knee-jerk selling in response to the data. Things quickly calmed down, though, which was supportive for the stock market. The 2-yr note yield jumped to 5.07% after the data, but finished at 4.99%, one basis point lower from yesterday's settlement. The 10-yr note yield, which hit 4.34% following the data, fell two basis points from yesterday to 4.25%.

Rate hike expectations did not change much following the CPI report. According to the CME FedWatch Tool, the probability of a 25 basis points rate hike at the November FOMC meeting is 40.1% versus 44.2% yesterday.

Six of the 11 S&P 500 sectors logged a gain. The utilities sector (+1.2%), which was the only sector to gain more than 1.0%, led the lineup, and the real estate sector (-1.0%), which was the only sector to lose more than 1.0%, fell to the bottom of the pack.
Airline stocks were a notable weak spot in the market after Spirit Airlines (SAVE 16.20, -1.08, -6.3%), Frontier Group (ULCC 5.95, -0.56, -9.2%), and American Airlines (AAL 13.31, -0.80, -5.7%) warned about their Q3 outlooks due in part to rising fuel costs. The U.S. Global Jets ETF (JETS) fell 2.7%.

On a related note, the industrial sector (-0.7%) was among the weakest performers, partially due to its weak airline components. Separately, Netflix (NLFX 412.24, -22.45, -5.2%) was a key individual laggard, falling in response to its disclosure that the ad business is not material yet to its overall revenue.
  • Nasdaq Composite: +32.0% YTD
  • S&P 500: +16.4% YTD
  • S&P Midcap 400: +5.5% YTD
  • Russell 2000: +4.5% YTD
  • Dow Jones Industrial Average: +4.3% YTD
Reviewing today's economic data:
  • Total CPI increased 0.6% month-over-month in August, as expected, with rising gasoline prices accounting for over half of the increase. Core CPI, which excludes food and energy, rose a stronger-than-expected 0.3% month-over-month (consensus 0.2%). On a year-over-year basis, total CPI was up 3.7%, versus 3.2% in July, and core CPI was up 4.3%, versus 4.7% in July.
    • The key takeaway from the report is that core inflation, which is what the Fed monitors more closely, showed ongoing improvement on a year-over-year basis; however, it is still well above the Fed's 2.0% target, reflecting a sticky quality that probably won't compel the Fed to raise rates further at this point, but which will certainly keep the Fed in a "higher for longer" mindset.
  • The weekly MBA Mortgage Index was down 0.8% after decreasing 2.9% a week ago. The Refinance Index was down 5.4% while the Purchase Index was up 1.3%.
  • The August Treasury Budget showed a surprising surplus of $89.2 billion compared to a deficit of $219.6 bln in the same period a year ago. The surplus in August resulted from receipts ($283.1 billion) exceeding outlays ($193.9 billion). The Treasury Budget data is not seasonally adjusted so the August 2023 surplus cannot be compared to the July 2023 deficit of $220.8 billion.
    • The key takeaway from the report is that outlays included impacts from the $319 billion Debt Relief Reversal downward modification to the DOE's Federal Direct Student Loans program. August typically shows a budget deficit (68 times out of 69 fiscal years) since there are no major tax due dates.
  • Weekly crude oil inventories increased by 3.954 mln barrels after decreasing by 6.307 mln barrels a week ago.
Thursday's economic calendar features some potentially market-moving releases. The weekly jobless claims report, the August Producer Price Index, and the August Retail Sales report will be released at 8:30 a.m. ET. Other data includes:
  • 10:00 ET: July Business Inventories (consensus 0.1%; prior 0.0%)
  • 10:30 ET: Weekly natural gas inventories (prior +33 bcf)

WSJ : Arm Set to Price IPO at $52 a Share

Arm Set to Price IPO at $52 a Share
Price would modestly exceed expectations and value British chip designer at more than $55 billion

Arm is preparing to price its shares at $52 apiece, as the British chip designer lays the groundwork for the biggest U.S. public offering of the year.

The price will be set in a meeting Wednesday afternoon between underwriters and company executives, according to people familiar with the matter. The situation remains fluid and the price could still shift.

At a per-share price of $52, Arm would be valued at $55.5 billion on a fully diluted basis. That’s below the $64 billion Arm owner SoftBank Group 9984 -1.63%decrease; red down pointing triangle recently valued the company at when it bought out a stake held by its Vision Fund.

Arm shares are set to start training Thursday on Nasdaq under the symbol ARM.

WSJ : Musk Warns Senators About AI Threat, While Gates Says the Technology Could

Musk Warns Senators About AI Threat, While Gates Says the Technology Could Target World Hunger
Tech leaders debate perils and possibilities of artificial intelligence at closed-door Senate session

WASHINGTON—Elon Musk, Bill Gates, Mark Zuckerberg and other technology heavyweights debated the possibilities and risks of artificial intelligence Wednesday in a closed-door meeting with more than 60 U.S. Senators who are contemplating legislation to regulate the technology.

Musk, the CEO of Tesla and owner of X (formerly Twitter), warned about what he views as AI’s potential to threaten humanity, according to a participant. Microsoft MSFT 1.29%increase; green up pointing triangle co-founder Gates said the technology could help address world hunger, said Sen. Chuck Schumer (D., N.Y.), who convened the session.

Other speakers included Facebook founder Zuckerberg and the CEOs of Google, Microsoft, Nvidia NVDA 1.37%increase; green up pointing triangle and IBM IBM 0.16%increase; green up pointing triangle, along with union leaders.

Schumer at one point asked the guests if they agreed that the government needed to play a role in regulating artificial intelligence. Everyone present raised their hands, Schumer said during a break in the daylong session.

Despite that consensus—and Schumer’s vow to move toward passing legislation within months—the meeting also laid bare some of the tension points ahead.

One debate centered on the practice of making certain AI programs “open source,” or available for the public to download and modify. Some in the room raised concerns about the practice, which has the potential to put powerful AI systems in the hands of bad actors, according to one participant.

But Zuckerberg, whose company Meta Platforms has released powerful open source models, defended the practice. He told Senators in his opening statement that open source “democratizes access to these tools, and that helps level the playing field and foster innovation for people and businesses,” according to excerpts released by the company.

Another point of tension related to workers who see AI as a potential threat to their jobs. Sen. Maria Cantwell (D., Wash.) recounted a moment where the head of the Writers Guild of America West, Meredith Stiehm, described the views of members who are on strike seeking a new contract with Hollywood studios in part to address those fears.

Also in the room: The head of the Hollywood trade group Motion Picture Association.

“That was, like, two sides right there,” Cantwell said. “Lots of different viewpoints.”

The closed-door nature of the session drew criticism from some quarters. Sen. Josh Hawley (R., Mo.) questioned whether the meeting was designed “to prevent senators from asking tough questions the CEOs don’t want to answer,” and called on Schumer to bring AI legislation up for a vote.

“This is a lot of song and dance that covers the fact that actually nothing is advancing,” Hawley told reporters Wednesday.

Schumer, who organized the meeting with a bipartisan group of three other senators, said the format was designed to allow a frank debate.

“They talked at each other unvarnished,” he said. “Everyone learned from everybody else.”

The tech leaders arrived just before 10 a.m. on Wednesday, stepping out of tinted SUVs and strolling past a phalanx of cameras—with the exception of Musk, who arrived in a jet black Tesla sedan. They gathered around a table with name cards inside the marbled Kennedy Caucus Room.

Most of the tech leaders avoided the cameras stationed outside. Musk told reporters as he departed that he didn’t believe Congress was ready to regulate AI, while adding that it also made sense for them to study the issue before writing legislation.

“I saw very little disagreement actually,” he said of the meeting in a video posted by CBS News.

Schumer described Wednesday’s meeting as the first in a series designed to develop legislation addressing rapid adoption of powerful artificial intelligence tools.

Lawmakers are far from consensus on what that legislation will say, but Schumer’s involvement gives the effort more justice than Congress’ previous tech-regulation efforts, many of which the majority leader never called up for a vote on the Senate floor.

One open question is what areas the legislation will cover. Issues previously raised by participants in Wednesday’s meeting cover a wide range of potential concerns involving esoteric areas of law. Among them: Copyright violations, privacy invasions, racial discrimination, economic ties with China, and the use of AI by the government for military or other purposes.

“You want to be able to maximize the benefits and minimize the harms,” Schumer said. “That will be our difficult job.”

FT : Arm shares expected to price above initial IPO range ahead of debut

Arm shares expected to price above initial IPO range ahead of debut
Pricing for SoftBank-backed UK chipmaker could reach as much as $52 a share, sources say

Shares in UK chip designer Arm are expected to be priced above the initial range at as much as $52 per share, which would give the company a valuation of nearly $54bn, according to three people involved in the initial public offering.

Arm and its parent company SoftBank will officially price its shares with underwriters later on Wednesday, with trading set to begin on Thursday on the Nasdaq exchange. These people cautioned that pricing could still change ahead of the final decision.

The people said that the IPO price is expected to be set above the prior range of $47-51 a share due to high demand that resulted in its stock being more than five times oversubscribed.

The listing has been watched closely as a barometer for new tech IPOs. It is the largest IPO in two years, since electric-truck maker Rivian debuted in 2021, raising about $12bn. Tech valuations have slumped from their coronavirus pandemic-era highs in the past 18 months amid economic uncertainty and rising interest rates.

A $52-per-share price tag would value Arm at about $53.9bn by market capitalisation, and raise approximately $5bn for SoftBank, which has offered 9.4 per cent of the company’s stock.

Arm declined to comment ahead of the pricing decision.

A series of big tech customers of Arm’s chip designs, including Apple, Google, Nvidia, Samsung, Intel and TSMC, are expected to purchase $735mn worth of Arm shares at the IPO price.

The banks underwriting the listing closed orders for shares on Tuesday, a day earlier than planned. Goldman Sachs, JPMorgan and BofA Securities are among a 28-strong army of banks selling the Arm IPO.

High demand has helped to crack open a window for tech listings in the US after a dearth of deals this year.

On Monday, the San Francisco-based ecommerce company Instacart announced the price range for an IPO that would raise up to $616mn. On a fully diluted basis the IPO would value Instacart at up to $9.3bn, less than a quarter of its private valuation two years ago.

Marketing automation company Klaviyo also announced its IPO pricing on Monday. It said it would sell 19.2mn shares at a range of $25 to $27 a share. This would value the company at up to $6.3bn. It was last valued by venture capitalists at $9.5bn.

SoftBank paid $32bn to acquire Arm in 2016, but the IPO price is set to be below the $64bn valuation implied less than a month ago in a transaction with its own Vision Fund, the $100bn Saudi-backed investment vehicle the Japanese company manages.

Arm’s core market of smartphone chips has stagnated this year, but it is hoping for growth from artificial intelligence and data centre customers, despite playing only a peripheral role in the technology required to build the kinds of large language models that power ChatGPT and other generative AI systems.

SoftBank originally hoped the deal would value Arm at as much as $70bn. However, it reported flat sales in its latest financial year, and investors have expressed concerns about a drop in profits in the past quarter and the company’s exposure to multiple risks in China.