CrunchBase : The Week’s 10 Biggest Funding Rounds: Pathalys Pahrama Lands $150M;

The Week’s 10 Biggest Funding Rounds: Pathalys Pahrama Lands $150M; Impel Drives Away With $104M

After a strong start to the year, this week slowed down. No round came close to $200 million, and only three rounds hit the $100 million mark. Health care and biotech were big again, as well as a startup that uses AI (it’s everywhere) to help people buy a car.

1. Pathalys Pharma, $150M, biotech: Raleigh, North Carolina-based Pathalys Pharma is the latest health/biotech startup to raise a big round this year. The late-stage biopharma startup raised $150 million through what it called “a combination of secured product financing and equity to support the two phase 3 clinical trials, registration efforts and pre-commercialization activities for upacicalcet” — which is used to treat hyperparathyroidism. Abingworth was the lead investor. Simultaneously, the company and Launch Therapeutics also announced a collaboration to advance phase 3 clinical trials for the drug. Founded in 2012, the company has raised $161 million to date, according to Crunchbase data.

2. Impel, $104M, automotive: AI is everywhere right now, so why not car buying? New York-based digital
engagement startup Impel landed $104 million in growth investment led by Silversmith Capital Partners with additional investment from Wavecrest Growth Partners. The startup offers an AI-powered customer engagement platform for the auto industry. Impel claims to have played a role in $2 billion worth of car sales since its inception in 2011. With so much data generated about buying cars — especially with so many buying cars online — Impel is able to use artificial intelligence to target customers with personalized messaging. Founded in 2011, the company has raised $130 million, according to Crunchbase.

3. Mill, $100M, environmental consulting: Mill was founded in 2020 by former smart home darling Nest alums. The San Bruno, California-based startup is on a mission to eliminate all waste, and in an effort to do that are asking people to buy a $33 monthly subscription for a 2-foot tall kitchen bin that “dries, shrinks and de-stinks,” as Bloomberg reports. That same report also revealed Mill has raised multiple funding rounds from investors like Breakthrough Energy Ventures and Energy Impact Partners, and has raised more than $100 million — but would not release an exact dollar figure.

4. SetPoint Medical, $80M, health care: Another health-related company cracks the top 5. Valencia, California-based clinical-stage health care startup SetPoint Medical raised $80 million in a preferred stock financing co-led by new investors Norwest Venture Partners and Viking Global Investors. The company is developing a treatment for chronic, inflammation-mediated autoimmune diseases with a focus on treating rheumatoid arthritis. Founded in 2006, the company has raised $344 million, per Crunchbase.

5. Vannevar Labs, $75M, national security: Defense startups seem to be having a moment. Drone companies that help with national security have raised money recently, and late last yearAnduril locked up a Series E worth nearly $1.5 billion that values the company at $8.5 billion. That nearly doubles the company’s previous valuation in June 2021. Palo Alto, California-based national security tech developer Vannevar Labs is the latest after raising a $75 million Series B led by Felicis1. Founded in 2019, Vannevar Labs has now raised more than $90 million, per the company.

6. Outrider, $73M, logistics: Golden, Colorado-based Outrider, a software developer that allows for autonomous yard operations for logistics hubs, closed a $73 million Series C financing led by FM Capital. Founded in 2017, Outrider says it has raised $191 million to date.

7. Cloudian, $60M, cloud storage: San Mateo, California-based cloud storage startup Cloudian closed a $60 million new funding round from several investors, including the likes of Intel Capital and Silicon Valley Bank. Founded in 2011, Cloudian has now raised $233 million, according to the company.

8. ADARx Pharmaceuticals, $46M, biotech: San Diego-based ADARx Pharmaceuticals, a clinical stage biotech startup developing RNA-targeting therapeutics, raised a $46 million Series B-1 led by Ascenta Capital. Founded in 2019, the company has raised $132 million to date, according to Crunchbase.

9. MacroFab, $42M, manufacturing: Houston-based cloud manufacturing platform developer MacroFab raised $42 million led by Foundry. Founded in 2013, MacroFab has raised a total of $82 million, per the company.

10. Sublime Systems, $40M, energy: Somerville, Massachusetts-based Sublime Systems, a developer of decarbonized cement, closed a $40 million Series A led by Lowercarbon Capital. It’s the company’s first funding, per Crunchbase.


Big global deals
Despite some big rounds from U.S.-based startups this week, the three largest all came from abroad.
  • India-based PhonePe, a mobile payment application, raised a $350 million venture round.
  • China-based GenScript ProBio, a biopharmaceutical R&D and production platform, raised a $220 million Series C.
  • London-based electric vehicle manufacturer One Moto closed a venture round worth approximately $152 million.

WSJ : Tesla Is Last Stronghold for Investors Buying the Dip in Tech Stocks

Tesla Is Last Stronghold for Investors Buying the Dip in Tech Stocks
‘Why would I invest in a basket of dinosaurs?’ one die-hard says of other big U.S. stocks

After a brutal year for technology stocks, individual investors have lost their appetite for buying the dip, with one notable exception. They are still scooping up shares of Tesla Inc. TSLA 4.91%

Individual investors’ net purchases of a basket of eight popular tech stocks hit a recent peak in November, before dropping sharply through the end of the year, according to Vanda Research. Buying has since picked up slightly in the new year as tech shares rebound.

As for Tesla, individuals have been steady buyers since the end of 2021, doubling down when the stock tumbled to close out 2022. They have spent more money on Tesla shares in the past six months than in the five years prior, Vanda found. And on Jan. 10, one-day net purchases of Tesla shares hit a record high of $316 million.

“As markets took a big hit, we saw retail investors shift into their favorite tech stock rather than investing across the whole sector,” Vanda analyst Lucas Mantle said of Tesla. “It might be the last shoe to drop.”

The Federal Reserve’s fight to tame inflation through aggressive interest-rate increases last year abruptly changed the outlook for big tech stocks, which for years had lifted the major stock indexes to new highs. Investors were forced to reassess the pros and cons of investing in companies whose appeal centered on the prospect of huge profits years down the line.

Tesla shares dropped 65% in 2022, their worst year on record. Facebook parent Meta Platforms Inc. sank 64%, and Netflix Inc. declined 51%. But tech and other growth stocks have rebounded to start the new year, buoyed by hopes that the Fed will slow its pace of rate increases. The S&P 500 has edged up 3.2% in January.

In the coming week, investors are awaiting quarterly earnings reports from Tesla, along with Microsoft Corp. , Intel Corp. and other big companies for the latest updates on how they are weathering tough economic conditions. They will also parse the Fed’s preferred gauge of inflation for clues about the trajectory of monetary policy.

Even as skeptics cite concerns about production disruptions, demand worries and Chief Executive Elon Musk’s divided attention after his acquisition of Twitter Inc., Tesla’s most ardent supporters keep their faith in a long-term payout.

Abhas Gupta, a 41-year-old entrepreneur in Irvine, Calif., said he moved his whole equity portfolio into Tesla shares in 2018, enamored by its electric cars and promise of disruptive innovation. Last year, he lost his entire seven-figure retirement fund after taking out margin loans and using options to turbocharge his bets on Tesla, he said. Still, he said he is far from calling it quits.

“I basically burned a lifetime’s worth of wealth, but none of this has shaken my confidence in the company. There is just no company even remotely close to Tesla on innovation,” Mr. Gupta said.

“Why would I invest in a basket of dinosaurs?” he said of the S&P 500.

Mr. Gupta said he is aggressively buying long-dated call options on Tesla. Call options give traders the right, though not the obligation, to buy shares at a stated price by a certain date, while put options grant the right to sell.

Overall, options volume in Tesla has grown in the past few months, according to Cboe Global Markets. One of the largest options bets on Tesla is that shares will reach $825 in the next three years; the stock closed at $133.42 per share Friday.

Gabriel Wilson, a 52-year-old physician who splits his time between Texas and New York, said the Fed remains his primary concern in the market. After first leasing Tesla’s Model X in 2018, he said he moved all of his investments into Tesla. Although he cashed out his holdings around the end of 2021 due to concerns about near-term market weakness, he is looking to buy Tesla shares again soon, he said.

Despite last year’s market turmoil, he hasn’t touched a roughly $100,000 trust fund for his son held solely in Tesla shares, he said.

“No one can compete with Tesla,” Dr. Wilson said. “I have absolutely no doubt Tesla is the future.”

Many professional investors remain cautious on tech stocks to start the new year. Fund managers rotated out of technology stocks in January and are more underweight the sector than their historical positioning, according to Bank of America Corp.’s latest global fund manager survey.

But some individuals are betting that tech could reign supreme again if the Fed signals plans to pivot from raising interest rates. Federal-funds futures, used to wager on the course of interest rates, show traders expect the central bank to cut rates later this year, even though Fed officials have repeatedly said their work to cool the economy isn’t done.

Nicki Bourlioufas, 51, said she bought shares of Advanced Micro Devices Inc. and Nvidia Corp. last year, then refrained from adding new positions as those semiconductor stocks struggled. The financial public-relations consultant in Sydney said she is looking for opportunities to pick up shares of Tesla, along with Microsoft, Apple Inc. and Alphabet Inc.

“As soon as there’s any hint that interest rates will be cut, then I expect tech stocks will rally and I’d like to be there and positioned,” she said. “I use their products and I’d like to also reap their profits.”

>>> Nuclear Regulatory Commission (NRC) issued its final rule in the Federal Reg

Nuclear Regulatory Commission (NRC) issued its final rule in the Federal Register to certify NuScale Power’s small modular reactor. The company’s power module becomes the first SMR design certified by the NRC and just the seventh reactor design cleared for use in the United States.

The rule takes effects February 21, 2023 and equips the nation with a new clean power source to help drive down emissions across the country.

The design is an advanced light-water SMR with each power module capable of generating 50 megawatts of emissions-free electricity.

NuScale’s VOYGR™ SMR power plant can house up to 12 factory-built power modules that are about a third of the size of a large-scale reactor. Each power module leverages natural processes, such as convection and gravity, to passively cool the reactor without additional water, power, or even operator action.

WSJ : Crypto Banks Borrow Billions From Home-Loan Banks to Plug Shortfalls

Crypto Banks Borrow Billions From Home-Loan Banks to Plug Shortfalls
Signature and Silvergate turn to government-chartered lenders after customer withdrawals surge

Two of the biggest banks to cryptocurrency companies are rushing to stem a flood of customer withdrawals by borrowing billions of dollars from Federal Home Loan Banks, the system originally designed to support mortgage lending in the 1930s.

Signature Bank SBNY 7.47% tapped its local home-loan bank for nearly $10 billion in the fourth quarter, among the largest such borrowings by any bank since early 2020, according to securities filings. Silvergate Capital Corp. SI 13.00% , a competing lender that shifted its business toward crypto a decade ago, received at least $3.6 billion.

The borrowings at Signature—a commercial bank mostly known for multifamily real-estate lending before hitching onto the crypto craze—are more than double its previous highest sum in several years. Silvergate, meanwhile, didn’t have any home-loan bank borrowings a year earlier.

The $1.1 trillion home-loan bank system provides low-cost funding to its more than 6,500 members, which include commercial lenders, thrifts, credit unions and insurers. Comprising 11 government-chartered cooperatives, Federal Home Loan Banks, also known as FHLBs, were founded to help support housing finance during the Great Depression. Now they funnel cash into the banking system, using their implicit government backing to borrow money cheaply.

Although helping banks shore up liquidity is part of the mission of FHLBs, some observers say backstopping the crypto industry’s fallout is far removed from the original intent.

“This is why I’ve been warning of the dangers of allowing crypto to become intertwined with the banking system,” said Sen. Elizabeth Warren (D., Mass.). “Under no circumstance should taxpayers be left holding the bag for collapses in the crypto industry—a market brimming with fraud, money laundering and illicit finance.”

The banks began hemorrhaging deposits last year when crypto prices collapsed and FTX, one of the industry’s largest exchanges, filed for bankruptcy. The two were among a small subset of banks that vacuumed up deposits from crypto companies when the industry was booming and many other banks shunned their business.

Deposits declined at Signature in 2022 for the first time in its two-decade history, dropping below $89 billion from nearly $103 billion at the start of the year. Silvergate raced to cover $8.1 billion in withdrawals, selling assets at a steep discount and leading to a fourth-quarter loss of more than $1 billion. Shares of Signature and Silvergate are down around 60% and 85%, respectively, over the past year.

Eric Howell, Signature’s chief operating officer, said the bank’s higher borrowings are “pretty low historically for banks,” especially as Federal Reserve tightening has drained liquidity.

Signature has doubled down on its recent commitment to reducing crypto-linked deposits and said it has already begun paying down some of its borrowings.

“There’s still some runoff left to go in crypto,” said Mr. Howell. “For the next couple quarters, we’ll have to use higher-cost borrowings to replace deposits.”

Silvergate declined to comment. The bank has taken a different approach, emphasizing its commitment to the crypto industry despite the recent turmoil.

“This industry has experienced a significant crisis of confidence across the ecosystem because of all of the overleverage in the system and some of the bad actors and the bankruptcies,” Chief Executive Alan Lane said on a January conference call. “What we’re trying to communicate is that we are here; we are here for the long haul.”

Crypto banks aren’t the only ones in need of quick cash. Borrowing from home-loan banks surged to $661 billion in the third quarter last year, the latest period for which data are available, up from $344 billion a year earlier and approaching a recent peak of nearly $800 billion in the first quarter of 2020.

Traditional banks are struggling to retain customers who have been enticed by higher-yielding Treasurys and money-market accounts. Through the first three quarters of 2022, cash balances at small banks, or those with less than $3 billion in assets, fell to 6% of total assets, down from more than 13% just nine months earlier, according to the Federal Reserve Bank of New York.

Traditional finance has remained insulated from crypto contagion thus far, though FHLB lending to crypto-exposed banks threatens to amplify that risk. Home-loan bank advances are superior to all other debt, meaning that in the event of a member bank’s bankruptcy, an FHLB bank would be first in the collection pecking order, even ahead of the Federal Deposit Insurance Corp.

To be sure, banks receiving advances provide a generous amount of mostly mortgage-tied securities to back their debt, and FHLBs have yet to book a credit loss in their 90-year history.

Ryan Donovan, president and chief executive at the Council of Federal Home Loan Banks, said FHLBs “have been a financial first responder” during times of crisis by extending their balance sheets to members.

“You can’t have mission without margin,” Mr. Donovan said.

Still, investors said they would rather see banks attract deposits than go to a home-loan bank for cash.

“If you tapped FHLB advances in a big way, you’re going to have to explain why that was more attractive than organically going out to new or existing customers,” said Brett Rabatin, head of equity research at Hovde Group. “The pressure and need for funding will only increase—I expect bank borrowings from FHLBs will continue to grow over the coming quarters.”

WSJ : How Milan’s Seafood King Made Langosteria a Must for Foodies and Fashionis

How Milan’s Seafood King Made Langosteria a Must for Foodies and Fashionistas Alike
Enrico Buonocore’s Italian restaurant chain, now opening in St. Moritz, is winning a well-heeled following with its minute-fresh fish and savvy partnerships.

The new ski-in, ski-out Langosteria that just opened at the foot of the slopes in St. Moritz, Switzerland, has many of the same features as the original namesake restaurant in Milan’s Design District: plush-red banquettes, robata grill, high-piled seafood towers. But there are Alpine peaks out the window. And the waitstaff navigate the 150-seat dining room and an equally expansive terrace in parka-topped uniforms custom-made by Moncler.

“It’s Langosteria, but Langosteria in the mountains,” says founder Enrico Buonocore, 46, of the Swiss outpost of his fashion-world haunt, a destination for seafood since 2007. “Our restaurants are not copy and paste, all are unique projects. The layout is the same, the gastronomic line is the same, but the restaurant is different.”

This season, the St. Moritz menu includes seafood with white-corn polenta and king crab fregola—new dishes developed for the chalet branch, specifically—along with baked potatoes served with a choice of four caviars, as part of a collaboration with Caviar Kaspia in Paris.

The opening, Buonocore’s seventh Langosteria—and second outside of Italy—continues an ambitious push that began in 2018 when Archive, the investment vehicle controlled by Remo Ruffini, chairman and CEO of Moncler, took a 40 percent stake in the brand. “We’ve been regular [Langosteria] customers, me and my family, since 2011,” says Ruffini’s son Pietro, who works with his father as managing director of Archive. “We really appreciated the way it was always innovating, evolving, opening new restaurants, changing the menu, year after year.”

The Ruffinis made the original introductions that helped bring Langosteria to Paris, opening in the LVMH -owned Cheval Blanc Paris in September 2021. “We have the same ideas about quality, positioning, creativity,” says Buonocore of his partners. Together they’re planning a second stand-alone Paris branch to meet the high demand along the Seine. “We have a very long waitlist,” says Buonocore of the Cheval Blanc restaurant. Other European cities are also on the drawing board. “I love London, I love Madrid, I love Copenhagen, too,” says Buonocore, reciting a wish list of Langosteria locations.

The restaurateur, whose family came from the Amalfi Coast, grew up in a working-class suburb of Milan, in a tight-knit family that came together, he says, around the dining room table. “We are a very typical southern Italian family,” he says. “We want to eat well every day.”

Paccheri with sea bass, a Langosteria standard.

After a short-lived career in his early 20s hawking hair-care products for Corani & Partners (“After six months I was the best seller at the company,” he says), he opened his own Milan bar and restaurant, Caffè Savona, launched in 2004. The dinner menu included his mom’s signature eggplant Parmesan. “When I’d say, ‘This was made by my mamma,’ everyone would order it,” he says.

Catering to the surrounding design businesses earned him a fashionable following, and a built-in clientele for his next venture, the first Langosteria, which he opened just up the street. Buonocore oversaw every element of the high-end seafood restaurant, which was inspired by classic brasseries he’d visited in Paris, like Bofinger and Au Pied de Cochon, and by the conviviality inherent in sharing a generous seafood platter. (The name is a portmanteau of langoustine and osteria.) “I designed it myself, at first, because I had no money for an architect,” he says. “Langosteria is my university. I’ve learned on the job, year by year.”

To ramp up the energy, he packed the tables in tight—a hallmark of every restaurant he’s opened since. “A little bit of confusion is good for the crowd,” he says. In the kitchen he installed high-powered odor extractors. “One of the problems of a fish restaurant is after dinner you go home with the smell on your clothes—oh, mamma mia,” he says.

Buonocore made ingredient sourcing a priority, scouring the continent for premium seafood—Mazara red prawns from Sicily, blue lobster from Brittany, baby squid from the Adriatic Sea. He returned from a trip to Boston smitten by the king crab legs he ate there and soon tracked down an Italian supplier—the ingredient was largely unknown in Milan at the time, he says. The supplier eventually became a Langosteria investor. Recently Buonocore found a new source in Norway for top-shelf live langoustines. He was so impressed by the quality that he committed to buying up the entire catch. “When they don’t catch any, we don’t have any langoustines—no problem,” says Buonocore. “I think it’s important to put the best on the table, but the best is not every day.”

The second restaurant of the group, the slightly less formal Langosteria Bistrot, opened around the corner from the original in 2012. The more-casual-still Langosteria Café (“very fast, very American style,” he says) debuted near the Duomo in 2016. A beachfront outpost followed a year later, facing the sea at the Bagni Fiore beach club near Portofino; a regular at the Milan restaurants had approached with the deal. Last summer, at Buonocore’s suggestion, Dior CEO Pietro Beccari (who will become Louis Vuitton CEO in February) opened a pop-up shop in the villa Buonocore owns next door.
A new polenta dish created for Langosteria St. Moritz.
Networking with the high-powered diners who fill his restaurant dining rooms, Buonocore has expanded his business over the years. At a Dior Cruise fashion show in Seville, Spain, last spring, he met Ramon Mac-Crohon, CEO of the Caviar Kaspia Group, which has also been growing internationally at a rapid clip.
They launched a collaboration in Milan in December, serving signature Caviar Kaspia dishes—with co-branded plates and serving vessels—to diners at Langosteria Cucina, the tasting menu restaurant with a focus on family-style dishes that Buonocore opened in late 2021. “We started sharing each other’s passions,” says Mac-Crohon, “not only as restaurateurs but as experience creators.”

WSJ : More Classified Documents Found at President Biden’s Delaware Home

More Classified Documents Found at President Biden’s Delaware Home
Justice Department’s search of president’s Wilmington residence lasted about 12 hours

WASHINGTON—A Justice Department search of President Biden’s home in Wilmington, Del., Friday prompted authorities to take possession of six additional items with classified markings and some related materials, according to Mr. Biden’s personal attorney Bob Bauer.

The search of Mr. Biden’s home, which came after his team offered Federal Bureau of Investigation agents full access to the property, lasted more than 12 hours and “covered all working, living and storage spaces in the home,” Mr. Bauer said. The six items taken included some papers from Mr. Biden’s tenure in the U.S. Senate, where he served for 36 years. Others came from his time as vice president.

During the search, which lasted from around 9:45 a.m. to around 10:30 p.m. Friday, members of Mr. Biden’s personal legal team were present along with officials from the White House Counsel’s Office, according to Mr. Bauer’s statement. Federal investigators also took materials including handwritten notes, “for further review,” Mr. Bauer said.

According to Mr. Bauer, the Justice Department had full access to the president’s home, including personally handwritten notes, files, papers, binders, memorabilia, to-do lists, schedules and reminders going back decades.

Friday’s search is at least the fifth that has turned up classified material in places used by Mr. Biden.

The first batch of papers was discovered in early November at the Penn Biden Center, a Washington think tank. Additional documents marked classified were found at Mr. Biden’s Wilmington home in December. Then, earlier this month, Mr. Biden’s lawyers revealed that another batch was found at the home.

Mr. Biden has played down the earlier instances. “I think you’re going to find there’s nothing there,” Mr. Biden said Thursday while in California to tour storm damage. “I have no regrets. I’m following what the lawyers have told me they want me to do. It’s exactly what we’re doing. There is no there there.”

A Justice Department spokesman said “the FBI executed a planned, consensual search of the president’s residence in Wilmington, Delaware,” but declined to comment further.

Agents opted to do the search before a newly appointed special counsel Robert Hur, a former Trump-appointed U.S. attorney, formally begins his work, after Attorney General Merrick Garland tapped him for the role on Jan. 12. People familiar with Mr. Hur’s plans have said he plans to begin in the coming days.

Department officials earlier considered having FBI agents monitor a search by Mr. Biden’s lawyers for classified documents at his homes but decided against it, both to avoid complicating later stages of the investigation and because Mr. Biden’s attorneys had quickly turned over a first batch and were cooperating, the Journal reported this week. Some FBI officials had discussed the possibility of going further by asking Mr. Biden’s team for consent to have agents search the property themselves, the Journal reported.

Officials didn’t immediately take those steps in part to preserve their freedom to take a tougher line as the investigation progressed, including by executing a search warrant, the Journal reported.

Instead, the two sides initially agreed that Mr. Biden’s personal attorneys would inspect the homes, notify the Justice Department as soon as they identified any other potentially classified records, and arrange for law-enforcement authorities to take them.

After Mr. Biden’s team alerted the Justice Department to the presence of classified documents at the president’s Wilmington home last week, his lawyers made the offer to the Justice Department to have them search the property in full, according to people familiar with the matter.

The actions suggest federal investigators are girding for an inquiry that could stretch well into Mr. Biden’s third year in office and overlap with his re-election campaign should he decide to seek a second term—and that Mr. Biden’s legal team wants to resolve it as quickly as possible.

“Since the beginning, the president has been committed to handling this responsibly because he takes this seriously,” Richard Sauber, the special counsel to the president, said Saturday evening.

The situation has drawn parallels with the discovery of a much larger number of documents at former President Donald Trump‘s Mar-a-Lago home in Florida, which federal agents obtained a warrant to search in August after more than a year of negotiations between Mr. Trump’s lawyers, the National Archives and the Justice Department and after Mr. Trump’s lawyers said all documents had been returned.

In the case of Mr. Biden, his personal lawyers offered FBI agents access to the home, avoiding the need for them to ask a judge to sign a warrant.

Mr. Trump’s supporters have accused the Justice Department of a double standard in treatment. Mr. Biden’s supporters have pointed to the cooperation of the president’s legal team and its swift moves to inform the Justice Department of the documents’ discovery as a key difference.

Mr. Biden was welcoming mayors at an event in the East Room of the White House as the search of his home was being conducted. He typically travels to Wilmington on weekends, but on Monday the White House said that this weekend he would be going to Rehoboth Beach, Del., where he also has a home.

Asked on Friday if the president’s travel plans were related to the documents inquiry, White House press secretary Karine Jean-Pierre said, “As it relates to his travel, as you know, he often travels to Delaware on the weekends.”

FT : AI chatbot’s MBA exam pass poses test for business schools

AI chatbot’s MBA exam pass poses test for business schools
ChatGPT earned a solid grade and outperformed some humans on a Wharton course

Elon Musk has long dismissed the MBA as irrelevant or damaging, but now a company backed by the outspoken tech entrepreneur is threatening to directly undermine the value of the flagship business degree: the artificial intelligence chatbot ChatGPT.

Christian Terwiesch, a professor at the University of Pennsylvania’s Wharton, one of the oldest and most prestigious US business schools, decided to put to the test growing concerns about ChatGPT’s power, and found to his surprise that it could outperform some of the students on his operations management course, a core MBA subject.

In his white paper “Would Chat GPT3 Get a Wharton MBA?” published this week, he concluded: “Chat GPT3 would have received a B to B- grade on the exam. This has important implications for business school education,” citing the need to overhaul exam policies, curriculum design and teaching.

The chatbot, which has been temporarily overwhelmed by a surge in queries in the past few weeks, has sparked concern from many academics including those in business schools that students will use it to cheat in their essays and exams.

“I’m one of the alarmists,” said Prof Jerry Davis at the University of Michigan’s Ross Business School, which has convened a faculty meeting on Monday to discuss its implications. “Our whole enterprise in education is being challenged by this, and it’s only going to get more challenging. Time for a top-to-bottom rethink.”

Francisco Veloso, dean of Imperial College Business School in London, said: “We are having serious discussions and a working group is analysing the implications of ChatGPT and other similar tools that we know our resourceful and inventive students are using, and we will be formulating policies around that soon.”

While stressing that the growing use of AI technology was inevitable and even largely desirable, he called for clear disclosure policies in class on whether students had used ChatGPT, and predicted mitigation measures including “going back to handwritten work, as well as more oral and class — or at least synchronous — discussions.”

Microsoft, the software giant co-founded by Bill Gates, who dropped out of Harvard University without even finishing his undergraduate degree, is currently considering a $10bn investment in OpenAI, the company behind ChatGPT on top of the $1bn it laid out in 2019.

Many are predicting the technology will radically shake up a broader range of activities beyond education, including internet searches and the world of work.

Musk himself, the founder of Tesla and one of the original funders of OpenAI, has argued that MBA graduates lack sufficient critical-thinking skills and focus too much on boardroom meetings and financial performance at the expense of getting close to product and walking the factory floor.

Ironically, Terwiesch concluded that while ChatGPT proved impressively literate and analytical in drafting answers to the questions he gave it on operations management and process analysis, its numeracy skills were far more limited. He did not test it against the full MBA curriculum, which includes marketing, finance, accounting and other subjects.

“I was just overwhelmed by the beauty of the wording — concise, choice of words, structure. It was absolutely brilliant,” he told the FT. “But the math is so horrible. The language and intuition are right, but even relatively simple middle-school math it got so wrong.”

But he stressed that it could quickly improve its answers when given clues, and more broadly the technology offered considerable scope in the future including in drafting and marking tests to free teachers for more valuable student support.

He also suggested an application of ChatGPT that could threaten the many business school alumni who pursue careers as consultants churning out reports and recommendations.

Current students could hone their judgment against the chatbot’s strong performance in “playing the role of that smart consultant (who always has an elegant answer, but oftentimes is wrong),” Terwiesch’s report said.

Kara McWilliams, head of the ETS Product Innovation Labs, which applies AI to learning and assessment and has developed tools to identify AI-generated answers, said: “We really need to embrace advanced technologies in education. Remember when the calculator came into play and there was a big fear about using it? I’m of the mind that AI isn’t going to replace people, but people who use AI are going to replace people.”

She argued that ChatGPT could help faculty with lesson planning, syllabus creation and developing notes for lectures. “They will be able to get a lot of menial higher education tasks off their plates so they can focus on learning. There is a real opportunity for enhanced personalisation.”

Andrew Karolyi, dean of Cornell University’s SC Johnson College of Business, said that while many academics had been taken by surprise by ChatGPT and that codes of conduct and academic integrity statements would need to be updated, “my own hope is that professors will bring up the topic actively in their classrooms to involve the students in framing AI as a valued learning tool.”

“One thing we all know for sure is that ChatGPT is not going away,” he said. “If anything, these AI techniques will continue to get better and better. Faculty and university administrators need to invest to educate themselves.”

ChatGPT replied to the FT that it was “unlikely” to kill the MBA.

“While AI and machine learning can automate certain tasks and make them more efficient, they do not yet have the ability to fully replicate the complex decision-making and critical-thinking skills that are developed through MBA programs,” it said. “Additionally, MBA programs provide networking opportunities and access to industry professionals that cannot be replicated by technology.”

FT : Cosmetics group Natura embarks on makeover

Cosmetics group Natura embarks on makeover
Body Shop and Avon owner is concentrating on revamping its brands during consumer spending squeeze

Only a few years ago, Natura &Co was a rare case of a Latin American business pursuing truly global ambitions.

The Brazilian cosmetics maker, which prides itself as a standard-bearer for sustainability, embarked on an international drive in the last decade through acquisitions that took it into Australia, Europe and Asia.

Its all-stock purchase of door-to-door seller Avon for $2bn in 2019 turned Natura into the world’s fourth largest pure-play beauty group, with a stable of four brands including The Body Shop.

But the heady days of empire building are over. Following a drawn-out share price plunge during the latter half of the pandemic and with its accounts in the red, the São Paulo-headquartered company is in for an overhaul.

Hit by squeezed consumer spending and the conflict in Ukraine, the priority now is to improve the bottom line, according to its chief executive.

“The focus is more on margins and cash flow generation rather than growth in sales,” said Fábio Barbosa, a former banker who took over last year.

Alongside a corporate reorganisation, management is reviewing Natura’s business model and presence in underperforming markets.

“Expansion programmes, geographies that you might have had in the past, we are not bringing to the table anymore,” Barbosa told the Financial Times in an interview.

Established in 1969 as a small cosmetics shop on an upmarket street in São Paulo, Natura was a pioneer of direct selling in South America, similar to one-time competitor Avon.

The company is also widely recognised for its social and environmental credentials. For more than 20 years, its eponymous brand has sourced ingredients for soaps, moisturisers and shampoos from the Amazon, where it helps preserve vast tracts of land by working with local communities.

Investors will want to see purpose once again matched with profitability. Natura’s stock has fallen 80 per cent from a peak a year-and-a-half ago, wiping about $12.5bn off its market capitalisation. Today it is valued at just R$16.9bn ($3.2bn). 

As retailers shuttered stores during the coronavirus pandemic, the personal care conglomerate initially benefited due to its direct sales and a push into ecommerce, but turnover has since shrunk.

Natura’s activities have held up fairly well in Latin America, where rivals include O Boticário. Most of the problems are concentrated elsewhere and often due to external factors, according to Itaú BBA analyst Thiago Macruz.

“What is the challenge here? The global operations are struggling a lot,” he explained. “There were some significant curveballs thrown their way”. 

At Avon, sales have been affected by the conflict between Russia and Ukraine (Natura does not own the brand in North America). Meanwhile, The Body Shop’s large store portfolio across Europe has suffered as inflation on the continent eroded disposable incomes.

This contributed to a third consecutive quarter of losses last year that took Natura’s nine-month deficit to almost R$2bn ($380mn), while revenues fell 9 per cent in constant currency terms to R$26bn ($5bn) during the period.

Financial targets have been scrapped, including cost savings that were to be gained as a result of the merger with Avon.

Management is now betting that the group’s smallest business, which has proven a bright spot amid the difficulties, will provide an important element of the turnround.

A premium cosmetics marque originally from Australia that Natura bought a decade ago, Aesop is an exception to the emphasis away from expansion. Recently it opened its first stores in China, the main growth market for luxury goods globally.

“Aesop has always been very consistent,” said Vinícius Strano, an analyst at UBS. “It’s the only brand that held up while Natura, Avon and The Body Shop were deteriorating.”

A spin-off or stock market listing is under consideration for the unit, which analysts at Itaú have estimated could be worth R$8bn.

Cash proceeds from any deal would go towards funding Aesop and could also chip away at Natura’s significant borrowings. Group-wide net debt of R$8.8bn has risen to a ratio of 2.85 times earnings before interest, tax, depreciation and amortisation.

Another pillar of the plan is a restructure of the holding company. Barbosa said this was already bearing fruit, with central function overheads slashed by at least 40 per cent. Decision-making is also being devolved from the centre down to executives running each of the four divisions.

“It is much better to delegate, for each unit to have their own reaction to the market realities where they live,” the chief executive added. “It’s the flexibility that we gave to the business units to react. They have more autonomy to make decisions with accountability.”

Whether this will be enough to revive a pair of names regarded by some analysts and consumers as old and tired will be the test.

Natura acquired The Body Shop, a British ethical retailer famous for its stance against animal testing, from L’Oréal in 2017 at an enterprise value of €1bn. The aim is a “rejuvenation” of the business, founded in the 1970s by the late campaigner Anita Roddick, while shifting it away from discounts in order to boost margins.

“We want it to go back to the connection that this company always had with society, or even being a bit ahead of society,” said Barbosa. A new store format is being rolled out, initially in the UK where there are 207 stores, with fewer products and refilling stations that avoid packaging.

The revamped premises had already registered an increase in sales, said Barbosa.

While many big corporations have abandoned Russia following its invasion of Ukraine, Avon has stayed put, maintaining a “self-contained unit” that does not import or export. Barbosa defended the decision on the grounds that it offers a source of income for its famous “Avon ladies” — self-employed sales representatives.

Another source of potential gains is through greater integration of Natura and Avon in Latin America. Barbosa, however, is not looking for an “immediate reaction” from equity investors.

“I think the market would like to see the results rather than the thinking,” he said. “The share price will react once we see the results improving”.

FT : Pandemic-hit Rolls-Royce hopes for clearer skies as new boss takes helm

Pandemic-hit Rolls-Royce hopes for clearer skies as new boss takes helm
Erginbilgic expected to deliver ‘hard-headed analysis’ of British aero-engineer as investors demand better performance

Rolls-Royce has faced its fair share of turbulence over the past two years as the British aerospace engineer came close to collapse during the Covid-19 pandemic. More upheaval is on the horizon with the arrival of new chief executive Tufan Erginbilgic.

Investors and analysts expect the 63-year-old oil industry veteran, who took over from Warren East at the start of January, to launch a strategic review alongside the company’s full-year results next month.

Rolls-Royce, whose civil engines power some of the world’s biggest jets for Airbus and Boeing, took a big financial hit from the grounding of flights during the pandemic. East embarked on a sweeping restructuring programme, including 9,000 job losses, to save £1.3bn in costs, and had to shore up the group’s balance sheet with £7.3bn of new equity and debt.

Progress has been made. The company has repaid £2bn of debt, with about £4bn of drawn debt outstanding. It is on course to have met its financial targets for last year, including generating “modestly positive” free cash flow and mid-single-digit underlying revenue growth, but it remains a long way from firing on all cylinders.

Investors want Erginbilgic, who earned a reputation as a seasoned operator with a focus on performance and driving down costs in his previous jobs at oil group BP, to attempt the same at Rolls-Royce. Improving the performance of the civil aerospace division, which still generates 40 per cent of the group’s underlying revenues, is key.

Clear priorities are reducing the losses when the company makes and sells an engine, as well as ensuring that costs taken out during the restructuring do not creep back in once volumes return as the industry’s recovery gathers pace.

The Turkish-British national has already visited Rolls-Royce’s main operations in Derby in the UK, Indianapolis in the US and Friedrichshafen in Germany, according to people familiar with the situation. A meeting with union representatives in Derby is scheduled for late January.

“He has certainly brought a sense of urgency with him,” said one of the people.

He is not afraid to stir things up at the 117-year-old company, either, demonstrated by his invite to longtime bear of the stock — analyst David Perry of JPMorgan — to deliver a presentation to the company’s senior leadership earlier this month, according to people with knowledge of the matter.

Rolls-Royce declined to comment, as did Perry when approached by the Financial Times.

In his latest analysis of the company, published at the start of January, Perry predicted that Erginbilgic would offer a “hard-headed analysis” of Rolls-Royce’s “current strategy and financial position”.

According to Perry, the company’s situation was one where the recovery in engine flying hours — a key metric and generator of cash flow as Rolls-Royce is paid by the hours that its engines are in the air — had been much slower than expected, free cash flow was also weaker than expected and its balance sheet remained strained.

“We think he will prepare investors for either further restructuring or measures to improve the balance sheet,” said Perry in the note, adding: “In short, we believe near-term pain will be needed to achieve long-term gain.” 

Simon Skinner, head of European investments at Orbis, which bought into Rolls-Royce shares in 2015, said Erginbilgic’s priority “has to be to get the company back on to a firm financial footing”. 

He believes the company could be “much more commercially sharper” and needs to make sure it receives “appropriate value for its services”. Rolls-Royce, he added, had “prioritised customer service over company profitability” and needed to find a “better balance”.

The company, which has taken out costs from its civil aerospace division, also needs to ensure they stay out as engine flying hours rise with the opening up of travel.


Large-engine flying hours have been recovering steadily but were still just 65 per cent of pre-pandemic 2019 levels in the four months to the end of October, Rolls-Royce said at the time.

The recent lifting of Covid-19 restrictions in China, however, and the reopening of Chinese airline flights, as well as those in and out of the country, will help boost flying hours.

“As China unlocks, there will be a significant snapback of air travel demand. For Rolls-Royce, China and proxy-China represented just over a quarter of total engine flight hours in 2019, pre-Covid,” said Charlotte Keyworth, analyst at Barclays.

“There is a 70 per cent correlation between engine flying hours and the company’s share price, so this unlock is significant.”

Given the difficulties that Airbus and Boeing are having in ramping up production of new aircraft amid supply chain constraints, analysts also expect that a significant number of aircraft currently in storage will be returned to service, generating revenues for Rolls-Royce. Some of these will be Rolls-Royce powered widebody aircraft such as A330s.

“Except for long-haul, civil aerospace is trending towards long-run growth again but in a difficult macroeconomic environment. A lot of the long-haul recovery is still to happen and Rolls-Royce is the purest way of pursuing that,” said Nick Cunningham of Agency Partners.

Any strategic review launched by Erginbilgic will have to consider how to position Rolls-Royce for a net zero world.

Under East, the company has invested in new business areas of electric aircraft and small modular nuclear reactors to underline the fact that the company should be seen as more than a maker of fossil-fuel burning engines. While investors believe they represent potential growth markets, they want Erginbilgic to focus on those that will make money for the company.

No imminent decision is expected on whether to divest the company’s Power Systems business whose engines propel ships and trains. Rather, the focus is expected to be on improving its operational performance first.

Other strategic questions such as finding an industrial partner for the next-generation propulsion system are also expected to be tackled at a later date.

Orbis’ Skinner admitted that “it’s been pretty bumpy” over the past seven years as a shareholder but insists that patience will be rewarded and that “decent returns” are possible. Despite the challenges, Erginbilgic’s tenure may also benefit from timing given the reopening of China.

“He could just be fantastically lucky with the market in civil aerospace,” said one industry watcher.

FT : Brazil and Argentina to start preparations for a common currency

Brazil and Argentina to start preparations for a common currency
Other Latin American nations will be invited to join plan which could create world’s second-largest currency union

Brazil and Argentina will this week announce that they are starting preparatory work on a common currency, in a move which could eventually create the world’s second-largest currency bloc.

South America’s two biggest economies will discuss the plan at a summit in Buenos Aires this week and will invite other Latin American nations to join.

The initial focus will be on how a new currency, which Brazil suggests calling the “sur” (south), could boost regional trade and reduce reliance on the US dollar, officials told the Financial Times. It would at first run in parallel with the Brazilian real and Argentine peso.

“There will be . . . a decision to start studying the parameters needed for a common currency, which includes everything from fiscal issues to the size of the economy and the role of central banks,” Argentina’s economy minister Sergio Massa told the Financial Times.

“It would be a study of mechanisms for trade integration,” he added. “I don’t want to create any false expectations . . . it’s the first step on a long road which Latin America must travel.”

Initially a bilateral project, the initiative would be offered to other nations in Latin America. “It is Argentina and Brazil inviting the rest of the region,” the Argentine minister said.

A currency union that covered all of Latin America would represent about 5 per cent of global GDP, the FT estimates. The world’s largest currency union, the euro, encompasses about 14 per cent of global GDP when measured in dollar terms.

Other currency blocs include the CFA franc which is used by some African countries and pegged to the euro, and the East Caribbean dollar. However these encompass a much smaller slice of global economic output.

The project is likely to take many years to come to fruition; Massa noted that it took Europe 35 years to create the euro.

An official announcement is expected during Brazilian president Luiz Inácio Lula da Silva’s visit to Argentina that starts on Sunday night, the veteran leftist’s first foreign trip since taking power on January 1.

Brazil and Argentina have discussed a common currency in the past few years but talks foundered on the opposition of Brazil’s central bank to the idea, one official close to the discussions said. Now that the two countries are both governed by leftwing leaders, there is greater political backing.

A Brazilian finance ministry spokesman said he did not have information about a working group on a common currency. He noted that finance minister Fernando Haddad had co-authored an article last year, before he took his current job, proposing a south American digital common currency.

Trade is flourishing between Brazil and Argentina, reaching $26.4bn in the first 11 months of last year, up nearly 21 per cent on the same period in 2021. The two nations are the driving force behind the Mercosur regional trade bloc, which includes Paraguay and Uruguay.

The attractions of a new common currency are most obvious for Argentina, where annual inflation is approaching 100 per cent as the central bank prints money to fund spending. During President Alberto Fernández’s first three years in office, the amount of money in public circulation has quadrupled, according to central bank data, and the largest denomination peso bill is worth less than $3 on the widely used parallel exchange rate.

However, there will be concern in Brazil about the idea of hitching Latin America’s biggest economy to that of its perennially volatile neighbour. Argentina has been largely cut off from international debt markets since its 2020 default and still owes more than $40bn to the IMF from a 2018 bailout.

Lula will stay in Argentina for a summit on Tuesday of the 33-nation Community of Latin American and Caribbean States (CELAC), which will bring together the region’s new crop of leftwing leaders for the first time since a wave of elections last year reversed a rightwing trend.

Colombia’s president Gustavo Petro was likely to attend, officials said, along with Chile’s Gabriel Boric and other more controversial figures such as Venezuela’s revolutionary socialist president Nicolás Maduro and Cuban leader Miguel Díaz-Canel. Mexico’s president Andrés Manuel López Obrador generally shuns overseas travel and is not scheduled to participate. Protests against Maduro’s attendance are expected in Buenos Aires on Sunday.

Argentina’s foreign minister Santiago Cafiero said the summit would also make commitments on greater regional integration, the defence of democracy and the fight against climate change.

Above all, he told the Financial Times, the region needed to discuss what sort of economic development it wanted at a time when the world was hungry for Latin America’s food, oil and minerals.

“Is the region going to supply this in a way which turns its economy [solely] into a raw material producer or is it going to supply it in a way which creates social justice [by adding value]?,” he said.

Alfredo Serrano, a Spanish economist who runs the Celag regional political think-tank in Buenos Aires, said the summit would discuss how to strengthen regional value chains to take advantage of regional opportunities, as well as making progress on a currency union.

“The monetary and foreign exchange mechanisms are crucial,” he said. “There are possibilities today in Latin America, given its strong economies, to find instruments which substitute dependence on the dollar. That will be a very important step forward.”

Manuel Canelas, a political scientist and former Bolivian government minister, said that CELAC, founded in 2010 to help Latin American and Caribbean governments co-ordinate policy without the US or Canada, was the only such pan-regional integration body which had survived over the past decade as others fell by the wayside.

However, Latin America’s leftist presidents now face more difficult global economic conditions, trickier domestic politics with many coalition governments, and less enthusiasm from citizens for regional integration.

“Because of this, all the steps towards integration will certainly be more cautious . . . and will have to be focused directly on delivering results and showing why they are useful”, he cautioned.