FT : Top US antitrust enforcer pledges crackdown on private equity deals

Top US antitrust enforcer pledges crackdown on private equity deals
Jonathan Kanter fears hollowing out of American economy amid acquisition spree by buyout groups

The top antitrust enforcer in the US has warned the Department of Justice will take a tougher stance on private equity firms rolling up swaths of the American economy as it targets buyout groups that have largely skirted the watchdog’s scrutiny.

“Sometimes [the motive of a private equity firm is] designed to hollow out or roll up an industry and essentially cash out,” Jonathan Kanter, the head of the DoJ’s antitrust unit said in an interview with the Financial Times. “That business model is often very much at odds with the law, and very much at odds with the competition we’re trying to protect.”

Kanter, who joined the DoJ in November, said buyout groups were “an extremely important part of our enforcement programme” and that a fuller assessment of their deals was “top of mind for me, and . . . for the team”.

His decision to target the sector comes as buyout firms such as Blackstone, KKR and Apollo have grown to become diversified conglomerates controlling vast chunks of the US economy, ranging from retail chains to hospitals and data centres.

Private equity groups, which are sitting on trillions of dollars amassed from their investors, announced a record 14,730 deals last year globally worth $1.2tn, nearly double the previous high set in 2007, according to Refinitiv data.

The boom in dealmaking by private equity firms only reflects a portion of the size of the industry, which has in recent years also become a significant provider of capital to acquire or rescue companies.

Historically, private equity companies were seen as buyers of small assets, which were often sold off by large listed corporations that needed to settle antitrust concerns to secure regulatory approval for deals with rivals. But now the largest private equity groups resemble the industrial conglomerates they used to help break apart.

Kanter is one of several progressive officials appointed by Joe Biden to top antitrust roles as the US president seeks to crack down on anti-competitive conduct in the image of “trust buster” Theodore Roosevelt.

The new cohort of antitrust leaders — which includes Lina Khan, chair of the US Federal Trade Commission — believes lax enforcement and an excessive focus on consumer benefits in recent decades has allowed some businesses to dominate large chunks of the US economy.

In one of his first speeches following his appointment, Kanter warned the DoJ would seek to block more anti-competitive deals rather than pursue complex settlements and lamented a “dearth” of lawsuits addressing monopolistic behaviour, counting a 20-year gap between big cases.

If Kanter follows through on his private equity pledge, it would place the buyout industry alongside tech giants as a key target in the new US antitrust landscape.

“Many of the mergers we’re confronting are as a result of [private equity] roll ups,” Kanter said, referring to buyout firms purchasing and then merging several businesses in the same sector.

One area of focus for the agency is “interlocking directorates”, where executives from a buyout group sit on the boards of multiple, competing companies that they own or control. Such governance arrangements could violate a section of the 1914 Clayton antitrust act, Kanter said, adding: “We’re going to enforce that.”

He also said the DoJ would pay closer attention to private equity’s role as a buyer of assets when the agency orders companies that are merging to divest assets to preserve competition. Kanter has said such a solution is often less effective than blocking the deal outright.

“Very often settlement divestitures [involve] private equity firms [often] motivated by either reducing costs at a company, which will make it less competitive, or squeezing out value by concentrating [the] industry in a roll-up,” he said.

He added: “So in many instances, divestitures that were supposed to address a competitive problem have ended up fuelling additional competitive problems.”

However, experts say applying existing antitrust laws to private equity could be challenging given they are largely tailored to bilateral tie-ups. That is often incompatible with the private equity model, which involves building portfolios with a string of companies that relate to each other in a multitude of ways.

“If we’re going to be effective, we cannot just look at each individual deal in a vacuum detached from the private equity firm,” Kanter said.

Antitrust agencies are looking for new ways to increase scrutiny over private equity. For instance, the DoJ and the FTC are in the process of changing pre-merger notification forms to toughen up disclosure requirements. “[We’re] making sure that we get more information upfront to help us understand . . . the full competitive picture,” Kanter said.

The two agencies are also overhauling merger rules in an effort to crack down on unlawful deals with a renewed focus on buyout groups.

“It’s important that we articulate a tractable, legally sound framework in the merger guidelines, but one that’s broad enough and flexible enough to address issues [including] private equity [or] technology,” Kanter said.

FT : Defiant Chinese netizens skirt lockdown censorship using blockchain

Defiant Chinese netizens skirt lockdown censorship using blockchain
Growing popularity of decentralised ledger technology presents fresh challenge for country’s censors

In late April, Shanghai’s Tongji University students found rotting pork inside a meal box delivered several weeks into the city’s Omicron outbreak.

The maggot-infested meal struck a chord with the disgruntled Shanghai public weeks into an indefinite lockdown without access to basic food and medical supplies.

One student penned an angry response that quickly became a symbol of silent resistance, spreading across social media platforms. Censors deleted reposts of his outburst on the microblogging site Weibo, but the expletive-laden message was immortalised online after being turned into a small piece of digital art preserved on the blockchain.

The incident spawned a series of non-fungible tokens, a form of digital artwork, which have spread during the Shanghai lockdown as a way to preserve criticism of the city’s Omicron outbreak beyond the reach of censors.

China’s censors have been at the forefront of the information battle during the country’s worst coronavirus outbreak in two years. They have systematically erased critical articles and posts on mainstream social media sites about the heavy burden of the strict lockdown measures.

But the growing popularity of blockchain technology has presented a fresh challenge to the country’s censorship regime. Once data is sent to a blockchain network, it cannot be deleted or altered by higher authorities.

The country’s internet police worked in a frenzy to erase the viral “Voice of April” video from domestic social media, a six-minute protest video documenting the suffering experienced by people in Shanghai cooped up at home.

Just as the video was taken down from Weibo and the messaging app WeChat, tech-savvy netizens uploaded snapshots of the video to the blockchain, casting them into NFTs.

“Censors cannot delete information from the blockchain,” said Barney Tan, head of the school of information systems and technology management at UNSW Sydney.

One Chinese blockchain enthusiast said the technology has become more user-friendly in the past few years, making it easier to upload and read articles on the decentralised database.

“People have been posting critical articles on the blockchain, so the government cannot delete them. It’s happening more now because blockchain technology is getting better,” the person added, who did not want to be named because of the sensitivity of the issue.

But Tan noted that even though censors cannot scrub out information from the blockchain, “they can still block access to it” by preventing people from sharing links on social media.

Chinese citizens have found creative ways to adapt to online life under censorship. The blockchain enthusiast noted that in many of his WeChat groups, friends were sharing censored articles flipped upside down to avoid algorithmic screening.

However, censors are typically only one step behind, quickly discovering the attempts to avoid censorship and ensuring that new leaks of sensitive information do not spark wider online protests.

The goal is to prevent critical posts “from becoming viral or politically mobilised,” explained Rogier Creemers, an expert on China’s digital technology at Leiden University.

Liu Lipeng, who used to work as a censor for Weibo before moving to the US, said censors do not solely rely on deleting posts. “Now they also spread fear” to stop sensitive information leaking online, he said.

In Shanghai, which is now in its eighth week of lockdown, residents have recorded videos of pandemic workers warning them against spreading “false rumours” about life under lockdown.

Liu said the measures had stifled public discussion in Shanghai. China’s censorship has been more effective during the financial city’s current lockdown than during the initial outbreak in Wuhan two years ago, Liu added. He noted that several prominent critics and whistleblowers emerged during the early months of the lockdown, including writer Fang Fang and doctors Ai Fen and Li Wenliang.

“In Shanghai, no one dares to speak up publicly,” Liu said.

This month, a leaked article from a prominent Shanghai law scholar condemning the city’s lockdown policies as unconstitutional appeared to break the silence.

Professor Tong Zhiwei from Shanghai’s East China University of Political Science and Law warned that the city’s lockdown measures would lead to “some kind of legal disaster”. 

“Pandemic protection needs to be balanced with ensuring people’s rights and freedoms,” he wrote, casting doubt on the legality of some of the city’s heavy-handed measures, including forcing residents living in the same apartment block as a positive Covid-19 case to move into centralised quarantine facilities.

Tong’s article circulated on Weibo and WeChat for several hours before censors deleted it. But by that time, it had already been permanently etched into the blockchain.

The article is still visible to people in China with the technological knowhow and time to find it. But experts said that from a censorship perspective, in an age where people are inundated with information, it is enough that the sensitive information has been banished to an inaccessible corner of the internet.

“The information control system is never going to work perfectly. But in China, it works well enough to limit information to a small number of computer nerds,” said Creemers.

“From the perspective of regime integrity and stability, the censors have reached their goal,” he added.

>>> US Close Dow -3.57% S&P -4.04% Nasdaq -4.73% Russell -3.56%

Closing Stock Market Summary

Each of the major indices fell more than 3.5% on Wednesday in an orderly retreat fueled by profit-margin concerns. The Nasdaq Composite (-4.7%) and S&P 500 (-4.0%) were hit the hardest, followed by the Dow Jones Industrial Average (-3.6%) and Russell 2000 (-3.6%). 

Target (TGT 161.61, -53.68, -24.9%) was the main culprit today, as shares dropped 25% after the company missed EPS estimates amid elevated cost pressures that it expects to persist in future quarters.

That was reminiscent of Walmart (WMT 122.43, -8.92, -6.8%) yesterday, eliciting a belief that if these high-profile consumer companies are struggling in the inflationary environment, then the pain could be more widespread and possibly lead to decreased consumer demand down the road. 

As such, the S&P 500 consumer discretionary (-6.6%) and consumer staples (-6.4%) sectors were by fear the weakest performers, bearing losses of over 6.0%. The information technology sector (-4.7%) was another important laggard since it is the most heavily-weighted sector in the market. 

The defensive-oriented utilities sector (-1.0%), which traded higher intraday, eventually turned lower as there remained a dearth of buying interest into the close. Buyers were largely on strike amid the inflation-induced growth concerns while investors braced for further downside as shown by the 18.6% pop in the CBOE Volatility Index (30.96, +4.86).  

Higher costs, and affordability issues, also presumably contributed to a 3.2% m/m decline in building permits for April and an 11.0% drop in the weekly MBA Mortgage Applications Index. On a related note, the EIA reported an unexpected draw in weekly crude inventories, but oil prices still fell 2.6%, or $2.86, to $109.35/bbl amid de-risking and profit-taking efforts. 

In other earnings news, Lowe's (LOW 183.82, -9.99, -5.2%) fell in sympathy with Target and the broader retail space despite beating EPS estimates. TJX Cos. (TJX 60.19, +4.01, +7.1%) was an individual bright spot, reassuring investors that its profit margins are healthy with an improved pre-tax margin outlook for FY23.

The inflation narrative, of course, maintained rate-hike expectations, which nudged the fed-funds-sensitive 2-yr yield higher by one basis point to 2.68%. The 10-yr yield fell eight basis points to 2.89% amid growth concerns (which were put on hold yesterday) and safe-haven interest. The U.S. Dollar Index rose 0.5% to 103.90.

Reviewing Wednesday's economic data:

  • Total housing starts declined 0.2% month-over-month in April to a seasonally adjusted annual rate of 1.724 million units (consensus 1.775 million). Building permits decreased 3.2% month-over-month to 1.819 million (consensus 1.820 million).
    • The key takeaway from the report is that building permits -- a leading indicator -- were down month-over-month for single-family units in every region, underscoring the hesitancy on the part of builders to construct new units in the face of high costs for labor and materials and rising mortgage rates that have created affordability and demand pressures for buyers.
  • The weekly MBA Mortgage Applications Index dropped 11.0% following a 2.0% increase in the prior week.

Looking ahead, investors will receive weekly Initial Claims and Continuing Claims, Existing Home Sales for April, the Philadelphia Fed Index for May, and the Conference Board's Leading Economic Index for April on Thursday. 

  • Dow Jones Industrial Average -13.3% YTD
  • S&P 500 -17.7% YTD
  • Russell 2000 -21.0% YTD
  • Nasdaq Composite -27.0% YTD

>>> US After Hours Summary: CSCO -12.1% drops on earnings/guidance, taking down

After Hours Summary: CSCO -12.1% drops on earnings/guidance, taking down JNPR -6.2%, CIEN -6.2%, ANET -5.4%, AVGO -3.5%; SNPS +3.5% higher on earnings

After Hours Gainers:

Companies trading higher in after hours in reaction to earnings/guidance: SNPS +3.5%

Companies trading higher in after hours in reaction to news: AUR +5.6% (AUR expands autonomous commercial linehaul trucking pilot with FDX), IRT +3.5% (authorizes $250 mln share repurchase program; increases dividend), DMTK +2.3% (presents new research differentiating atopic dermatitis and psoriasis), SMR +1.9% (signs MOU with Associated Electric to explore SMR deployment), GD +0.1% (awarded $310 mln Navy contract)

After Hours Losers:

Companies trading lower in after hours in reaction to earnings/guidance: CSCO -12.1%, BBWI -5.8%

Companies trading lower in after hours in reaction to news: ENTA -17.3% (reports top-line data from RSVP study of EDP-938; study did not meet primary endpoint), JNPR -6.2% (in sympathy with CSCO earnings/guidance), CIEN -6.2% (in sympathy with CSCO earnings/guidance), ANET -5.4% (in sympathy with CSCO earnings/guidance), GMED -5% (first surgeries performed with the Excelsius3D imaging platform performed), AVGO -3.5% (in sympathy with CSCO earnings/guidance), EXTR -3.2% (in sympathy with CSCO earnings/guidance), UAA -2.3% (CEO to step down), BB -2.2% (provides its long-term financial goals), HCI -2.2% (announces $150 mln convertible offering). VUZI -2.2% (signs agreements with Atomistic SAS to deliver microLED microdisplay for AR glasses), AEM -2.1% (announces additional investment in Cartier Resources), DISH -1.3% (T and DISH announce Internet Distribution Agreement), LITE -1.2% (in sympathy with CSCO earnings/guidance), NOK -0.7% (in sympathy with CSCO earnings/guidance), FDX -0.4% (AUR expands autonomous commercial linehaul trucking pilot with FDX), NTR -0.4% (evaluating Louisiana site as location to build $2 bln clean ammonia facility), T -0.4% (T and DISH announce Internet Distribution Agreement), TSLA -0.3% (NHTSA has opened a special investigation on a crash in CA, according to Reuters), PKG -0.2% (increases dividend), OCN -0.1% (names new CFO)

FT : Twitter deal leaves Elon Musk with no easy way out

Twitter deal leaves Elon Musk with no easy way out
Strength of $44bn agreement comes into focus as Tesla chief executive appears to have second thoughts

Since the financial crisis, corporate lawyers have aspired to build the ultimate ironclad merger contract that keeps buyers with cold feet from backing out.

The “bulletproof” modern deal agreement now faces one of its biggest tests, as Elon Musk, the Tesla boss and richest person in the world, openly entertains the possibility of ditching his $44bn deal for Twitter.

Musk tweeted earlier this week that the “deal cannot move forward” until the social media platform provides detailed data about fake accounts, a request that Twitter seems unlikely to meet. Twitter’s board, meanwhile, has stated its commitment “to completing the transaction on the agreed price and terms as promptly as practicable”.

Simply abandoning the deal is not an option. Musk and Twitter have both signed the merger agreement, which states “the parties . . . will use their respective reasonable best efforts to consummate and make effective the transactions contemplated by this agreement”.

With tech stocks falling — dragging down the price of the Tesla shares that form the basis of Musk’s fortune and collateral for a margin loan to buy Twitter — all eyes are on the mercurial billionaire’s next move.

Can Musk walk away for $1bn?
The agreement includes a $1bn “reverse termination fee” that Musk would owe if he withdraws from the merger agreement. However, if all other closing conditions are met, and the only thing left is for Musk to show up at the closing with his $27.25bn in equity, Twitter can seek to make Musk close the deal. This legal concept, known as “specific performance”, has become a common feature in leveraged buyouts since the financial crisis.

In 2007 and 2008, leveraged buyouts typically included a reverse termination fee that often allowed a firm backing the acquisition to pay a modest 2 to 3 per cent of a deal’s value to get out. Sellers believed at the time that private equity groups would follow through and close their transactions in order to maintain their reputations. But some did pull the plug on those agreements, leading to several court fights involving prominent firms such as Cerberus, Blackstone and Apollo.

Since that era, sellers have implemented much higher termination fees as well as specific performance clauses that effectively require buyers to close. Most recently, a Delaware court in 2021 ordered private equity firm Kohlberg & Co to close the buyout of a cake decorations business called DecoPac.

Kohlberg had argued that it was allowed out of the deal because DecoPac business had suffered a “material adverse effect” when the pandemic struck between signing and closing. The court rejected that argument and ruled DecoPac could force Kohlberg to close — which it did.

Can Musk sue his way out of the deal?
Should Musk choose to go to court, he might claim that Twitter misrepresented the state of its business by estimating in regulatory filings that bots comprise 5 per cent or less of its users base.

Filing such a lawsuit would be easy enough, but proving that the bot issue justifies ending the deal would be much harder. Under the merger agreement, Musk would have to show that any misrepresentation had a “material adverse effect”, an onerous standard that courts have rarely found to be met. He also explicitly waived doing due diligence on Twitter in his offer to the board.

“It is tough to argue in court that a material adverse event has occurred if you cannot show how it has impacted earnings — and the impact has to be large,” said Gustavo Schwed, a New York University professor and former executive at Providence Equity.

Could Twitter make Musk take the deal if he tries to end it?
Twitter could sue Musk to enforce the agreement, and a person close to the company described the contract as “bulletproof”. Alternatively, it could choose to sue him for damages related to the failed deal. However, under the merger agreement, the amount of damages Musk could pay would be capped at $1bn.

Another option, experts say, is for Twitter to first threaten to force Musk to close and then settle for damages greater than $1bn in order to avoid a messy litigation.

“Twitter could say, ‘Well, we want to get the deal done, and we’re suing to enforce the contract. And you know, in your heart of hearts, Mr Musk, that the court is leaning in our direction, so let’s forget the billion-dollar cap and settle for $2bn,” explained Charles Whitehead, a Cornell law professor and former corporate attorney.

Can the two sides reach a compromise?
Twitter’s board could decide to accept a lower price from Musk to avoid the risk of trying to enforce the existing agreement — and the risk of remaining a standalone public company at a challenging time for tech companies.

In 2021, Tiffany & Co sued LVMH seeking to force the French luxury conglomerate to close a deal that had been struck just before the pandemic. The sides ultimately reached a deal to cut the price slightly, which Tiffany shareholders later approved.

The worry is that Musk’s public sniping on Twitter damages both the company, as well his professional reputation, which he needs to operate Tesla and the rest of his empire.

“Mr Musk might be a little more concerned about the people with whom he might do deals in the future,” added Whitehead, the Cornell Law professor. “If he walks from this deal, it may be harder for him in the future to strike deals for Tesla or on his own behalf. There’s a lot on the line here too.”

FT : Shipping group CMA CGM to take Air France-KLM stake under cargo tie-up

Shipping group CMA CGM to take Air France-KLM stake under cargo tie-up
Container company seeks to expand its reach after business soared during pandemic

CMA CGM, the French shipping group, is set to become a leading shareholder in Air France-KLM and will forge a partnership in air cargo with the carrier, part of a drive to expand its reach after a boom in its business during the pandemic.

The Marseille-based container company, which in recent months has made investments in logistics ventures, port terminals and a parcel delivery group at a time when international shipping prices have been soaring, will take up to 9 per cent of the airline group, the companies said.

The deal will make CMA CGM a top investor in Air France-KLM, which is partly backed by the French and Dutch governments, as the airline emerges from a rocky patch following coronavirus lockdowns that brought most travel to a halt and pushed the company to request bailouts.

The shipping group’s position as a shareholder will depend on the outcome of a looming €4bn capital raising at Air France-KLM, and on whether state investors or shareholders such Delta Air Lines of the US and China Eastern Airlines take part.

A partnership would also set a precedent in the cargo world in which players, including some of CMA CGM’s shipping rivals, have begun to encroach on the airfreight market.

“We think we can be innovators. The existing air-cargo market has not been very innovative for the last 30 to 40 years. The model has been quite stagnant,” Ben Smith, Air France-KLM chief, said in an interview.

The 10-year agreement, which will allow the companies to pool their networks and cross-sell their freight capacity, will help bump up revenues and offer broader services to existing clients, many of which are shared with CMA CGM, Smith added.

Unlisted CMA CGM, the world’s third-biggest container group after MSC of Italy and Denmark’s Maersk, broke into air cargo last year by purchasing four aeroplanes.

It was encouraged by demand from customers asking for “a more express service”, CMA CGM chief Rodolphe Saadé told the Financial Times. Those cargo planes will add to Air France-KLM’s six freight carriers, and the two companies have another combined 12 on order.

The companies expect to capitalise on a strong recovery in airfreight traffic since the height of pandemic lockdowns in 2020, despite Covid-19 variants persisting.

Although CMA CGM initially also requested a French state-backed loan in 2020, which it has since repaid, the company has emerged as one of the big winners globally. It had previously struggled with losses and a large debt load.

Demand for shipping transportation has soared and supply-chain logjams have driven up prices. CMA CGM’s improving finances had pushed it to speed up a plan to transform itself into a broader logistics company, Saadé said.

He added that as an Air France KLM shareholder — the group should receive one board seat — CMA CGM wanted to see the carrier do more deals and pounce on acquisitions.

“In our industry, we are a consolidator and we would very much like, when the timing allows for it, for Air France-KLM to also seize opportunities in the market to grow,” Saadé said.

Smith declined to comment on when the capital raising would take place. Air France-KLM has been looking to do it as soon as possible, partly to repay state aid which is preventing it from acquiring more than 10 per cent of another company under EU rules.

In another example of airline and shipping companies teaming up, CMA CGM’s German rival Lufthansa is working with MSC to bid for Italy’s ITA Airways, the state-owned successor to Alitalia, which Air France-KLM is also interested in, Smith confirmed.

>>> US Gapping down

Gapping down
In reaction to earnings/guidance:

  • TGT -22.8%, NXGN -14.3%, DOCS -12.9% (also authorizes up to $70 mln for share buybacks), TGI -11.4%, LOW -2.6%, DOYU -2%

Other news:

  • EWCZ -7.1% (stock offering)
  • RES -6.1% (CEO to transition to Exec Chairman role)
  • ACRE -5.6% (prices offering of 7 mln shares of common stock for gross proceeds of $104.7 mln)
  • LFLY -5% (launches online cannabis delivery orders)
  • AMWL -3.2% (to shorten earnout period with acquisition of SilverCloud Health)
  • LAB -2.4% (stock offering)
  • ROOT -2.3% (launches Root Insurance in Alabama and Florida)
  • HVT -1.6% (increases dividend)
  • APPS -1.5% (to restate results for JunQ, SepQ and DecQ)

Analyst comments:

  • CENX -4.3% (downgraded to Peer Perform from Outperform at Wolfe Research)
  • DNA -3.6% (downgraded to Underperform from Neutral at BofA Securities)
  • CARR -3.1% (downgraded to Neutral from Buy at BofA Securities)
  • ILPT -1.8% (downgraded to Mkt Perform from Mkt Outperform at JMP Securities)
  • HAFC -1.5% (downgraded to Neutral from Buy at DA Davidson)
  • HOPE -1.1% (downgraded to Neutral from Buy at DA Davidson)

BReaking Views : Zara owner has $10 bln for online shopping spree :Empty trolley


Inditex has a chance to exact revenge on its online rivals. Despite a painful pandemic, the 64 billion euro fast-fashion retailer has amassed a war chest of more than 9 billion euros. Typically such spoils will trickle back to shareholders. For 38-year-old Chair Marta Ortega, buying an ailing online foe like 9 billion euro Zalando might make more sense.

Inflation is taking a heavy toll on Ortega’s Spanish outfit. Since January, the Zara owner’s share price has shed over 25% as investors fret about consumers cutting back on handbags and shoes. Next boss Simon Wolfson voiced similar concerns about discretionary spending on fashion and home decor. Germany’s Zalando went a step further and said its more cost-conscious customers were simply not interested in buying flashy togs.

Hoarding cash is part of Inditex’s crisis-management playbook. The company relies on its surprisingly plump balance sheet to spruce up supply chains, revamp tired stores and open new ones. Excess funds are doled out sparingly to investors via special dividends.

Ortega has reason to be more daring. Thanks to its hyper-efficient operations, the owner of brands like Massimo Dutti and Pull&Bear operates with a 25% EBITDA margin, compared to 19% for rival H&M. Even with the spectre of inflation, sales are forecast to grow 5% a year for the next five years.

Removing a competitor and incorporating its digital savvy could turbocharge that growth once inflation subsides. Zalando’s online retail platform, which specialises in selling cheap clothes and shoes, has grown its top line by an average of 23% annually over the past five years. But now it looks cheap. Since January, Zalando shares have halved. After taking away net cash, Inditex trades at around 9 times its forecast EBITDA for the next 12 months. Zalando, which was trading as high as 30 times forward EBITDA in 2019, is now around the same level, comfortably its lowest valuation since listing eight years ago.

A swoop would still be an about-turn. To date, Inditex’s strategy for growth has been organic, steadily opening new stores in established markets like the United States. A sudden burst of inflation has given its young boss a reason to take a calculated risk.