TheChek News Flow

Stocks fell anew Monday and the dollar climbed as high inflation, monetary tightening and the prospect of an economic slowdown spurred another bout of risk aversion. An Asia-Pacific equity gauge shed 1.5%, U.S. and European futures retreated and sovereign debt was under pressure -- providing little respite for investors after the fifth straight weekly decline in global shares and bonds. In China, the yuan held a drop amid data showing stagnating imports and the slowest export growth in dollar terms since 2020, underlining the economic toll of Covid lockdowns. Premier Li Keqiang warnedabout the employment situation as Beijing and Shanghai tightened virus curbs. Oil hovered around $110 per barrel. Crude is being buffeted by the demand hit from China’s outbreak and supply risks linked to Russia’s war in Ukraine. Stocks fell anew Monday and the dollar climbed as high inflation, monetary tightening and the prospect of an economic slowdown spurred another bout of risk aversion. An Asia-Pacific equity gauge shed 1.5%, U.S. and European futuresretreated and sovereign debt was under pressure -- providing little respite for investors after the fifth straight weekly decline in global shares and bonds. In China, the yuan held a drop amid data showing stagnating imports and the slowest export growth in dollar terms since 2020, underlining the economic toll of Covid lockdowns. Premier Li Keqiang warnedabout the employment situation as Beijing and Shanghai tightened virus curbs.

Oil hovered around $110 per barrel. Crude is being buffeted by the demand hit from China’s outbreak and supply risks linked to Russia’s war in Ukraine. Treasury yields were in sight of levels last seen in 2018, while Australian bonds extended a selloff. Inflation data this week from the U.S. and elsewhere could drive bond-market swings.

Nikkei -2.27% Hang Seng -3.81% CSI -0.65% Shanghai +0.00% Shenzen +0.41%

Eur$ 1.0510 CNH 6.7487 CNY 6.7092 JPY 130.98 GBP 1.2282 CHF 0.9923 RUB 67.9552 TRY 14.9605 WTI$ 110 +0.30% Gold 1,874 -0.55% BTC 33,657 -1.67% ETH 2,462.45 -3.07%

S&P -1.11% Nasdaq -0.94% EuroStoxx -1.41% FTSE -0.69% Dax -1.32% SMI

Macro :

- Outlook for European Profit Growth Too Optimistic, Citi Says

- Famous Volatility ETFs Are Back After a Wild Week on Wall Street

- Paris Olympics Plan Has Eiffel Tower Volleyball, Seine Swimming

- David Tepper Tells CNBC the Fed Erred Taking 75bps Off the Table

- Russia Can’t Shake Default Risk After Last-Minute Bond Payment

Keep an eye on :

- ALM SM : Almirall 1Q Normalized Net Income EU20.5M Vs. EU42.2M Y/y

- MT NA : Steel Shares Retreat With Iron Ore on China Property Fears

- ATL IM : Benettons, Blackstone to Bid for Atlantia in Late Summer: Rtrs

- BAVA DC : Bavarian Nordic 1Q Revenue Meets Estimates

- BMW GY : German Transport Minister Plans Major E-Car Subsidy Program: HB

- CAPC LN : Capco, Shaftesbury in Advanced Talks for All-Share Merger: Sky

- CELL IM : Esprinet Makes Non-Binding Offer for Cellularline

- CLVS US : Clovis Oncology Sinks as HC Wainwright Cuts on FDA Feedback

- DIA IM : DiaSorin’s 1Q Strong on Covid Testing Windfall, Analysts Say

- DSM NA : OMV Participates in Second Phase of Bidding Process for DSM

- DWS GY : SNCF Moves Ahead With Sale of Locomotive Firm Akiem: Les Echos

- EureKING : EureKING Health-Care SPAC Seeks EU150m in Paris Listing

- ENX FP : Euronext April Total Cash Market Transaction Value M/M -42%

- HOT GY : Hochtief Maintains FY Adjusted Net Forecast

- HYQ GY : Hypoport 1Q Ebit EU16.9M

- IFX GY : Infineon Sees FY Revenue EU13B to EU14B, Saw About EU13B

- JPM US : Dimon Pay Should Be Rejected by JPMorgan Investors, Adviser Says

- MBG GY : German Transport Minister Plans Major E-Car Subsidy Program: HB

- MCLS LN : Morrisons Files Improvised Offer With McColl’s Lenders: Sky

- OMV AV : OMV Participates in Second Phase of Bidding Process for DSM

- PNL NA : PostNL Cuts FY Normalized Ebit Forecast, Misses Estimates

- RIVN US : Ford to Sell 8 Million Rivian Shares as Lockup Expires: CNBC

- SFQ GY : SAF-Holland Names Wilfried Trepels Interim CFO

- SZG GY : Steel Shares Retreat With Iron Ore on China Property Fears

- SIKA SW : Sika to Divest Shotcrete Equipment Unit to Normet; No Terms

- TEF SM : Telefonica Agrees to Buy BE-terna Group for Up to EU350m EV

- UCG IM : UniCredit, ING, CredAg's $5 Billion Russia Charges Buy Comfort

- VALMT FH : Valmet Says Fire Damaged Paper Machine Plant in Finland Saturday

With troubled economy and elections ahead, incomers are an easy target for politicians

As Turkey enjoyed a national holiday last week, a video swept the country’s social media. The fictional narrative presented a dystopian vision of Istanbul in 2043, the city dilapidated and dangerous. A young Turkish man, an aspiring doctor relegated to the role of hospital cleaner owing to competition from migrants, complained to his parents that speaking Turkish was forbidden at work because the staff and patients only spoke Arabic.

The film, entitled Silent Invasion and commissioned and funded by far-right politician Ümit Özdağ, attracted 2mn views on YouTube within a day of its release.

While Europe’s attention has been on the millions of refugees forced from their homes by Vladimir Putin’s assault on Ukraine, tension is intensifying in Turkey over those fleeing a longer-running conflict: the war in Syria, now in its 12th year.

Turkey, a nation of 84mn, hosts the world’s largest refugee population — with 3.7mn Syrians and several hundred thousand people from Afghanistan. Their presence has long been a source of simmering tension. But with deep problems in the Turkish economy and parliamentary and presidential elections due before June 2023, some experts worry the situation is approaching boiling point.

“It could lead to violence between host communities and Syrians,” said Omar Kadkoy, a migration policy analyst at the Ankara-based think-tank Tepav, who is himself originally from Syria. He describes the current atmosphere for refugees in Turkey as “hostile” and “stressful”.

It is no coincidence that the fears over refugees are mounting against the backdrop of a troubled economy. Inflation in Turkey reached an official rate of 70 per cent in April. The forthcoming elections have added to the charged atmosphere — and refugees have presented an easy target for politicians jostling for votes.

Among them is Özdağ, a former member of several rightwing parties who has attracted attention with his harsh language towards migrants and social media posts targeting individual refugees. Last year Özdağ founded his own party and has put a promise to send back all refugees — by force if necessary — at the heart of its pitch.

Although his Victory Party is unlikely to win many votes, such anti-migrant rhetoric appears to be influencing the political mainstream. Turkey’s big parties have all made some form of pledge to send Syrians back to their country. But all their proposals are considered by experts to be not only unethical but unrealistic.

Kemal Kılıçdaroğlu, leader of the largest opposition party, claims all of Turkey’s Syrian refugees will “voluntarily” return if his Republican People’s party (CHP) comes to power. He says he will secure guarantees from Syria’s president Bashar al-Assad, the dictator from whom the refugees fled, to ensure the returnees’ safety — an idea many analysts see as a dangerous fantasy.

Meanwhile, President Recep Tayyip Erdoğan, who as recently as March was defending his policy of hosting “our Syrian brothers and sisters”, last week announced a plan to build 100,000 homes in northern Syria that he said would convince 1mn people to go back.

However, Nigar Göksel, Turkey project director at conflict prevention organisation International Crisis Group, points out that there are dim prospects for those returning to Syria. She draws a contrast with the employment opportunities, free healthcare and schooling available in Turkey, adding: “Who voluntarily leaves a place where they have basic needs met to a place where they would likely not?”

Pledging to send Syrians back is “really not a solution,” Göksel says, adding: “It just raises hopes among the populace that are not likely to be met.”

Where does all this leave the EU, which many in Turkey accuse of treating their country as a “depot” for refugees after signing a €6bn deal to halt the flow of migrants to Europe with Erdoğan’s government in 2016?

Kadkoy argues the bloc needs to pay more attention to what is happening in the country — and urgently speed up the dispersal of a fresh €3bn funding round announced last year.

Though the EU has strengthened its borders in recent years, Kadkoy believes some people could still risk using smugglers to help them make the dangerous journey across the Aegean Sea, as hundreds of thousands did in 2015.

“The conditions are placing Syrians between a rock and a hard place,” he says. “The majority don’t want to return to Syria. The feeling of them being rejected in Turkey is growing. So they might try and find a safe destination — and for most Syrians that’s going to be Europe.”

Buyout firms and venture capitalists are pouring billions of dollars into mental-health clinics and therapy startups

Psychiatrists and psychologists once ran their own practices. Now the local therapist office could be controlled by a buyout king.

Venture capitalists and private-equity firms are pouring billions of dollars into mental-health businesses, including psychology offices, psychiatric facilities, telehealth platforms for online therapy, new drugs, meditation apps and other digital tools. Nine mental-health startups have reached private valuations exceeding $1 billion last year, including Cerebral Inc. and BetterUp Inc.

Demand for these services is rising as more people deal with grief, anxiety and loneliness amid lockdowns and the rising death toll of the Covid-19 pandemic, making the sector ripe for investment, according to bankers, consultants and investors. They say the sector has become more attractive because health plans and insurers are paying higher rates than in the past for mental-health care, and virtual platforms have made it easier for clinicians to provide remote care.

“Since Covid, the need has gone through the roof,” said Kevin Taggart, managing partner at Mertz Taggart, a mergers-and-acquisitions firm focused on the behavioral-health sector. “Every mental-health company we are working for is busy. A lot of them have wait lists.”

In the first year of the pandemic, prevalence of anxiety and depression increased by 25%, the World Health Organization said in March. About one-third of Americans are reporting symptoms of anxiety or depression, according to the Centers for Disease Control and Prevention.

The number of behavioral-health acquisitions jumped more than 35% to 153 in 2021 versus the previous year, and of those, 123 involved private-equity firms, according to Mertz Taggart. In the first quarter of this year, there were 41 acquisitions, of which 30 involved PE firms.

The push into mental health carries risks. A rush of private-equity firms could send prices for practices higher, reducing potential profits. A risk for patients and clinicians is that new owners could focus on profits rather than outcomes, perhaps by pressuring clinicians to see more patients than they can handle. If care becomes less personal and private, patient care might also suffer.

Online mental-health company Cerebral and other telehealth startups have begun to face scrutiny over their prescribing practices. The Wall Street Journal has reported that some of Cerebral’s nurse practitioners said they felt pressure to prescribe stimulants. This past week, Cerebral said it would pause prescribing controlled substances such as Adderall to treat ADHD in new patients. Last year, Cerebral logged a $4.8 billion valuation.

Investors poured $5.5 billion into mental-health technology startups globally last year, up 139% from 2020, according to a report by CB Insights, an analytics firm. Of that, $4.5 billion was spent on U.S. firms. They range from platforms like SonderMind that match people with clinicians to meditation apps like Calm.

Venture firm General Catalyst has invested in 10 such companies recently, including SonderMind, which raised $150 million last year. General Catalyst last month led a $50 million funding round for Eleanor Health, which provides virtual and in-person mental-health and addiction care.

Growing interest from investors and payers has attracted more entrepreneurs, said Holly Maloney, a managing director at General Catalyst. “It’s a flywheel,” she said. “People want to start companies where they know there’s interest in funding them.”

Ms. Maloney said one of the big questions will be if startups can get insurers to reimburse for their services. “We are excited to see innovation, and we will need to see how the payer mind-set evolves,” she said.

The Mental Health Parity and Addiction Equity Act of 2008, a federal law that requires the same benefits for mental health as for other medical problems, laid the legal groundwork for insurers and health plans to cover services. But many plans don’t have enough in-network therapists to meet the needs of their members, creating an opportunity, investors say.

SonderMind Chief Executive Officer Mark Frank said the company offers in-person or virtual care from local therapists, and one of its main selling points to customers and investors is that its clinicians are in-network with most insurers in the states where the company operates. He said employers are driving the change. “It took employers starting to bang the table and say, ‘We want this benefit covered,’ ” he said.

Employers and investors began paying more attention to mental health during the pandemic because people were seeing the fallout up close and personal. “We’re seeing it in our kids. We’re seeing it in our co-workers,” Mr. Frank said.

Successful recent investments in the sector also have ignited interest. Mr. Taggart said Summit Partners, a private-equity firm in Boston, approached his M&A firm back in 2017 looking to buy small psychiatry and psychology offices. At the time, the idea appeared risky. “I thought, ‘How are you going to manage all these?’ ”

Summit backed LifeStance, helping it to grow and become one of the country’s largest outpatient mental-health companies. In May 2020, TPG Inc. and its investors purchased a majority stake in LifeStance, valuing the company at over $1 billion. LifeStance went public last year.

Earlier this year, Kelso & Company sold Refresh Mental Health, another operator of clinics, to UnitedHealth Group Inc.’s Optum unit. Financial terms weren’t disclosed.

Many private-equity firms have experience buying and building medical, dental and veterinary practices, and they see similarities in mental health. They say they can build large networks and help alleviate administrative, technology and other burdens that therapists face. They say patients have an easier time getting appointments.

Eileen O’Grady, research manager at Private Equity Stakeholder Project, a watchdog group, says that adding staff or facilities doesn’t necessarily mean patients are receiving better care. “The private-equity business model is at odds with the goal of providing quality healthcare,” she said, since such investors are looking to generate cash and rapid returns.

Private-equity firms investing in the sector, including KKR & Co., say they can invest in systems to protect patient privacy in ways that single practitioner offices can’t, and that they don’t sell patient data to third parties or profit from it.

Kelso managing director Hank Mannix said outpatient mental-health facilities have proven to be safe investments because clinicians continued to see patients online throughout the pandemic. He said Refresh increased its number of clinicians during Kelso’s 14-month ownership to more than 3,000, up from roughly 2,100, and expanded the business to 36 states from about 20. “We were definitely very busy during our part of the ownership,” Mr. Mannix said.

KKR started Geode Health last summer to provide outpatient mental-health services. Geode is recruiting psychiatrists and therapists and starting practices around the country. It is also buying existing practices.

Over the next few years, KKR expects to spend between $100 million and $200 million from one of its funds to back Geode. KKR said it eventually will have hundreds of clinicians in Geode’s network, and will offer services in underserved parts of the country.

“Covid has shined a light on existing mental-health issues while also exacerbating them,” said Ali Satvat, who co-heads KKR’s healthcare business. “Demand is huge, but the needs are often not being met.”

KKR has also invested in a company called Brightline, which provides virtual behavioral-health care for children, teens and families, and it operates Blue Sprig Pediatrics, which runs about 150 U.S. centers treating children diagnosed with autism spectrum disorder.

Tim Epple, managing director at Avalere Health, a healthcare advisory and analytics firm, said most acquisition targets in the mental-health space aren’t mature enough to justify cost-cutting strategies that are typical in private equity.

“You still have a lot of individual practitioners—small therapy, psychology and psychiatry groups,” he said. “Extreme fragmentation in the market means a lot of opportunity for private equity to build platforms and add more doctors.”

Green Lithium eyes battery market dominated by China as demand grows with electric vehicle sales

Commodity trader Trafigura is set to take a stake in a start up company behind ambitious plans to supply car and battery makers in Europe with lithium from a UK refinery.

As part of the investment, Trafigura, one of the world’s biggest metal traders, would source Green Lithium with feedstock for its planned 50,000 tonne a year plant in the north of England and sell the finished product to customers across Europe.

It would be Trafigura’s first big deal in lithium and comes as Russia’s invasion of Ukraine has highlighted the perils of being too reliant on one country for commodity supplies.

Trafigura estimates that more than 90 per cent of the world’s battery grade lithium is produced from refineries in China, which also processes the vast majority of cobalt and nickel, other key battery materials.

Socrates Economou, head of nickel and cobalt at Trafigura, said there were a lot of large ‘gigafactory’ battery projects under development in Europe and North America. “The question is where are they going to get the raw materials that go into the batteries.”

Most of the lithium used in electric car batteries is currently extracted from brines in Chile and Argentina and from rock dug up in Australia which is then processed in China, often using fossil fuels.

There are currently no commercial refineries in Europe, making the region’s car and battery makers almost totally reliant on China for supply.

“Ninety per cent of Australia’s lithium production . . . is tied up with Chinese refiners because there is no other capacity in the world,” said Economou.

Benchmark Mineral Intelligence, an industry consultant, forecasts 117,000 tonnes of lithium demand for batteries in Europe this year, rising to 250,000 tonnes in 2025 and 600,000 tonnes by 2030. From 2024, battery and car manufacturers in Europe will also face high tariffs if they do not source raw materials locally.

The agreement with Trafigura is a vote of confidence in Green Lithium, which hopes to secure the approvals required for its project by the end of the year. It has yet to disclose the site it has chosen in the North of England but expects to do so soon..

The company, which started work on the project four years ago, raised £1.6mn in seed funding last year from investors and has also secured a £600,000 grant from the UK government.

It produced its first battery grade lithium hydroxide — the product favoured by carmakers — under laboratory conditions last year and is in the process of raising capital to see it through to a final investment decision. It hopes to have the refinery running by the end of 2025.

The company says the plant will use low-carbon refining technology and once at full capacity will produce enough lithium to support the production of 1mn electric vehicles a year. It plans to sell the waste produced when converting lithium-containing spodumene ore into the refined product to the construction industry.

Green Lithium said the project will support 1,000 jobs in the construction phase and 200 once operational.

Chief executive Sean Sargent said Trafigura was the “perfect match” for the company. “It is also willing to make a key equity investment,” he said. Trafigura has not disclosed how much it will invest.

The price of lithium hydroxide has surged 140 per cent this year to more than $65,00 a tonne as electric vehicles sales have risen, according to Benchmark Minerals.

However, the increase is starting to unsettle carmakers. Tesla’s Elon Musk recently said lithium had gone to “insane” levels and was now the “fundamental limiting factor” in the growth of electric vehicles. He also said the company might consider mining or refining lithium.

The conflict has dealt a huge blow to the integration of Russian companies with western stock exchanges

Western sanctions on Russia were designed to isolate the country from the international financial system but the economic offensive has also left international traders who hold shares in Russian companies cut off from their assets.

As Russian forces pushed into Ukraine, the US and the EU unleashed waves of measures against companies and individuals they alleged had close ties to Vladimir Putin’s regime.

Among the first moves were measures to stop Russian companies from raising money on overseas markets, like London or New York.

These prompted an equally forceful response from Putin: capital controls that banned Russia-based institutions from transferring foreign currency abroad. This, in effect, froze their assets inside Russia.

With the opposing nations at what amounts to economic war, foreign investors with investments in Russia seem “caught between the proverbial rock and a hard place”, says Steven Hill, a partner at law firm K&L Gates.

At the end of 2021, foreign investors held Russian equities worth $86bn, according to data from the Moscow Exchange. But the introduction of sanctions left them with an uneasy choice: divest from the Russian market, as some of the measures required; or — where permitted — hold on to their assets but face uncertainty over whether they could take control of them again.

Investors are already counting the cost to their portfolios. Russia’s biggest corporate names, such as Gazprom, VTB, and TCS Group, have been left holding assets worth a fraction of what they were in early February.

Moreover, the war in Ukraine is a huge blow to the integration in recent years of Russian companies with western stock exchanges — mostly the London Stock Exchange, but also the New York Stock Exchange and Nasdaq.

Shares in the companies are often traded on overseas markets as depositary receipts, a type of bank certificate that securitises the ownership of shares.

During the past two decades, London has been the predominant market for Russian companies to raise money outside Moscow. Thirty-nine Russian companies have listed in London and raised $44bn since 2005, according to financial data researcher FactSet.

This trend slowed in 2014, after the peak of the commodities boom and the imposition of initial sanctions against Russia in response to its annexation of Crimea that year. Now, though, the war in Ukraine has dealt an all but terminal blow to the relationship.

When Ukraine was invaded. shares in Russian companies became immediately toxic and western sanctions give international shareholders little time to divest. Meanwhile, banks were not only wary of breaking sanctions, but also worried that counterparts would not be able to settle their deals, or would be badly hit by volatile foreign exchange rates.

Faced with uncertainty and regulatory requirements to maintain an orderly market, many exchanges suspended the shares of Russian-incorporated companies.

London, home to the biggest cluster of Russian companies, suspended 28 companies. Index compilers like FTSE Russell, S&P Dow Jones, and MSCI, whose benchmarks are widely followed by fund managers, removed affected stocks from their indices at a price of zero.

At the same time, the Moscow Exchange shut for nearly a month when the war began.

When it reopened, investors found a very different market. Foreign investors’ access was restricted. Activity had greatly declined, making it harder to sell large blocks of shares. On the day the exchange restarted operations, private investors accounted for nearly 60 per cent of the total volume of trades, according to an exchange statement reported by Russian news agency Interfax.

The few other windows open to western investors have continued to close.

For example, depositary receipts had been able to represent shares listed in Russia as their receipt issuers held the underlying shares in the local market. As banks worked through the implications of the sanctions, some, including BNY Mellon, then allowed holders of Russian receipts to convert them into local shares in nearly 20 Russian firms. That would at least allow fund managers to hold the shares locally, even if they were difficult to trade.

However, Russia moved swiftly to clamp down on the practice, passing laws to formally delist and terminate most overseas depositary receipts. To prevent a rush, the central bank of Russia then limited the number of shares that depositary banks could convert, defending its move as in the interests of financial stability.

Or as the central bank put it: “Such practice may result in a disproportionate increase in the supply of local stocks in the market, which may have a significant impact on price and provoke a drop in stock prices.”

Russian companies could apply to the central bank for permission to keep their depositary receipt programmes but only a few have been successful. Gazprom, once among the most actively traded shares on the LSE, is terminating its London and Singapore receipts in May after its application was rejected.

The restrictions may not be permanent. At the end of April, Russia’s deputy central bank governor, Alexey Zabotkin, indicated in a news conference that Russia will slowly ease capital controls when the market stabilises.

And the shares, and the associated cash, have not disappeared.

Euroclear, the Belgium-based central securities depository, has said its balance sheet increased by 80 per cent in the first quarter, year-on-year, to nearly €23bn. This, it says, is because it has been accumulating coupons, dividends and redemptions from Russian companies but has been unable to pass them on to sanctioned parties.

Even so, few are taking many chances with what’s left.

K&L Gates, for example, advises clients to take urgent steps to preserve information about their investments, in case sanctions result in a devalued, or even lost investment — and the matter goes to arbitration.

“Protecting foreign investment in Russia is likely to be a challenging exercise for the foreseeable future,” it warns.

The app now has 100mn more users than Twitter and its user base is growing faster than Facebook’s

Social media investors can be as faddish as teenagers. When Snapchat was released a decade or so ago it was dismissed as little more than a sexting app. Popularity with users then prompted the biggest tech market listing since Facebook. Within months it was written off as a Wall Street flop. Now it is back in demand. Its return has lessons for Elon Musk’s impending ownership of Twitter.

Wind back a few years and it was not clear that Snapchat’s parent company, Snap, would survive. Instagram had taken its best features and turned them into a glossy app with a billion users. By early 2019, Snap was leaking money. Shares traded below the price they had listed at two years earlier and bets against the company were mounting. By my estimate, it had about three years to turn things round before it ran out of cash.

Three years on and the company has managed to do just that. It has improved its digital advertising business and shored up its finances. Focusing on small groups and private messages has helped it to reach 100mn more users than Twitter. Its user base is growing faster than Facebook’s. 

Most important of all, it has regained its popularity with a young audience. If you are not a habitual Snapchat user this may surprise you but in the US, Snapchat has more Gen Z users in their teens and early 20s than TikTok, Twitter, Facebook or Instagram, according to data from eMarketer. That pipeline is prized by the digital advertising industry that social media companies rely on.

The generation that grew up online seems to value privacy over constant public displays of popularity

The generation that grew up online seems to value privacy over constant public displays of popularity. I see the same change happening in my own (much older) social media networks. Private groups on Telegram and WhatsApp are flourishing. Only a handful of friends still update public posts on Facebook or Instagram.

Evan Spiegel, co-founder of Snap along with Bobby Murphy, is now in his early 30s. That means he is also too old for the Gen Z age bracket. But when I asked why he thought Snapchat had retained a young audience, he pointed to private messages.

“Bobby and I grew up with social media,” he said. “I think the fact you can communicate on Snapchat with friends you care about, without worrying about competing for public likes and comments, means there is a whole new avenue for self-expression.”

By now, everybody knows that social media networks can make people feel terrible about themselves. Large forums can devolve into arguments and public posts can act as a highlight reel, giving followers the false impression that everyone but them is leading a perfect life. TikTok has found success in looser, less polished videos. But the intended audience is strangers, not friends.

This is bad news for companies that want users to interact with as many people they know as possible. In 2019, Facebook founder Mark Zuckerberg declared that the future lay in private services. But his company, Meta, has not managed to turn its private messaging app WhatsApp into a source of significant revenue. Twitter is testing a feature called Circles, in which users share tweets with a select group. But racking up a big follower count is still the measure of success on the platform.

Snap’s popularity is not just down to private messages. It has fixed its Android app, sold just under $5bn of convertible debt to create a cushion of cash and produced new ideas to keep users engaged. An interview with Snapchat account holders in their teens and early 20s last year found they liked the app for all sorts of reasons, including messaging friends, keeping an eye on their exes via the Map function and looking at their own saved photos.

Not everything has changed. Snap still insists on calling itself a camera company when it is best known for its social media app. It is still fixated on hardware, recently releasing a little yellow drone called Pixy. And it is still making a loss, though it is forecast to report positive net income this year. Like all social media companies, it has not found a substantial way to make money beyond digital advertising.

But Spiegel, whose leaked fraternity emails, which he has apologised for, showed he was once, as TechCrunch put it, “kind of an ass”, has grown up. So has his company.

As investor attention fell away, Snap has developed its business while betting on a future of augmented reality. It engages in commercial deals while investing in wilder ones. This year, it bought French start-up NextMind, which works on tech that lets users control virtual images with the power of thought.

Perhaps the biggest takeaway from Snap’s turnround is the benefit of experimentation without the heat of high investor expectations. By taking Twitter private, Musk may be able to do the same.