Tencent and Alibaba pledge to open up apps to competitors
Tech rivals say they will comply with Beijing’s orders to give access to ‘walled gardens’
China’s two largest tech companies promised to open up their digital empires on Monday, a move that may reshape online life for hundreds of millions of users.
For the past eight years, Tencent and Alibaba have carved China’s internet into two rival camps, replicating each other’s services and blocking all interoperability between their platforms.
Tencent’s payment systems cannot be used on Alibaba’s sites and vice versa. Links to Alibaba’s online shopping sites cannot be posted on Tencent’s messaging app WeChat. Short videos from ByteDance, the owner of TikTok and its Chinese sister app Douyin, also cannot be posted on WeChat.
But after being summoned to a meeting with the Ministry of Industry and Information Technology (MIIT) last week, both companies said on Monday they will allow competitors to access their “walled gardens”. The meeting was also attended by ByteDance, Baidu, NetEase, Huawei and Xiaomi.
“We resolutely support the decision of the Ministry of Industry and Information Technology and [will] implement it in phases,” said Tencent.
Alibaba said it “will fully comply” with the ministry’s demands to end the widespread practice among large internet giants of blocking consumers from links to other web services within their apps.
Under pressure from regulators, China’s Big Tech companies have already started to work more closely this year, and analysts said they were likely to accelerate their efforts to be compliant.
“The companies won’t drag their feet implementing the new rules. The compliance process will be quick,” said Li Chengdong founder of Dolphin, a technology-focused think-tank in Beijing. “The platforms are very cautious given the strict regulatory climate. They don’t have any means to fight against the regulators.”
Changes to the platforms should begin in the coming weeks, analysts said. In Hong Kong, Tencent shares fell 2.45 per cent, while Alibaba shares fell by slightly more than 4 per cent. Alibaba’s shares may also have been affected by a Financial Times report that Beijing wants to break up Alipay, the payments superapp owned by its sister company Ant.
Analysts said the forced opening up was widely anticipated and had been priced into the company’s share prices since earlier this year.
Ke Yan, an analyst with DZT Research who writes on the Smartkarma platform, suggested that the forced opening would hurt Tencent more, because its messaging app WeChat was such a powerful driver of online traffic.
But Dolphin’s Li questioned whether it would actually change consumer behaviour. “If I want to buy things online, I’ll go to Taobao or Pinduoduo. Just because I can access Taobao from WeChat, doesn’t make me more likely to use Taobao,” he said.
Wong Kok Hoi, chief investment officer at APS Asset Management, said the move may eventually force tech companies to reconsider their strategy of buying up stakes in a vast swath of start-ups in order to build closed ecosystems.
“You will not be able to make monopolistic profits, and more competition means lower profit margins and less business,” Wong said.
Angela Zhang, an associate professor of law at Hong Kong University, said MIIT, which led this regulatory change lacks the authority to enforce anti-monopoly and competition laws.
But Zhang said MIIT’s intervention could prompt action by the powerful State Administration for Market Regulation, explaining why the tech companies have been so quick to signal their compliance.
Elon Musk’s SpaceX Seeks Next Space Milestone With Launch This Week
Flight expected to send four civilians to an orbit about 360 miles from Earth for at least three days
Elon Musk’s SpaceX is aiming to cement its position as a leading space enterprise with a mission this week that seeks to deliver four civilians to orbit for several days and then return them to Earth.
The Inspiration4 flight, which could launch as soon as Wednesday, is a more ambitious and technically difficult one than those conducted over the summer by space companies founded by Jeff Bezos and Richard Branson, according to industry executives and consultants. It is the first taking only commercial astronauts, or those flying without government backing, to orbit, SpaceX has said.
Space Exploration Technologies Corp., the formal name for the company led by Mr. Musk and President Gwynne Shotwell, has outflanked rivals by pushing to rapidly develop its space hardware and prove that it works, people familiar with the company say.
Mr. Musk founded SpaceX in 2002, investing his own funds with a goal of eventually taking people to Mars. Along the way, the company won contracts from the National Aeronautics and Space Administration, gaining agency support during the company’s early years.
Now, nearly two decades after its founding, SpaceX has helped to reinvigorate the country’s space ambitions by orchestrating high-profile launches. Last year, the company blasted two NASA astronauts into orbit, where they docked at the International Space Station. It was the first launch with humans from the U.S. in almost a decade.
“One of the big ways SpaceX shook things up was by bringing a venture capital frame of reference to launch and innovating with a much higher risk tolerance than you would see from large, publicly traded companies,” said Carissa Christensen, chief executive of BryceTech, a data and engineering firm focused in part on space. “I think SpaceX got people’s attention by blending visionary narrative with engineering innovation.”
SpaceX has faced its share of challenges as it built its operations, including explosions, in 2015 and the following year, of Falcon 9 rockets. For a two-year stretch beginning in the middle of 2007, the company repeatedly faced cash squeezes, Mr. Musk has said.
This week, SpaceX will use its Falcon 9 and its Crew Dragon capsule—the same hardware NASA has tapped for astronaut missions—to take four people to orbit.
Jared Isaacman, the Shift4 Payments Inc. chief executive who will lead the Inspiration4 flight, said his team is confident in SpaceX’s technology and the training it has put him and fellow crew members through. That regimen has included using simulators to mimic the flight and preparing for everything from a normal mission to emergencies, he said.
Elon Musk’s proposed SpaceX expansion in South Texas is dividing Brownsville area residents. Some in the small border town believe the aerospace company could be the economically depressed region’s ticket to development, jobs and education. Others say it’s a threat to the community and the local environment. Photo: Adele Morgan
The businessman paid SpaceX an undisclosed sum for the mission, which includes a charitable component and research tasks for crew members.
Mr. Isaacman said Mr. Musk, other than for the announcement of the mission, hasn’t talked about the Inspiration4 flight during their conversations.
“This mission is a stepping stone. You have to clear this obstacle in order to do many more, you know, that are bigger and grander, and get us to the moon, Mars and beyond,” he said.
SpaceX executives weren’t available for comment.
The company, valued at more than $74 billion last April according to Pitchbook, stands out in an expanding space sector that has drawn billions of dollars in fresh investment in recent years. Based in Hawthorne, Calif., SpaceX is developing a satellite-based broadband internet service and building a moon lander for NASA, in addition to orchestrating launches.
SpaceX’s ability to develop rockets that can be used multiple times has lowered the cost of flying to space, analysts and space executives have said.
Reusable space vehicles weren’t new when SpaceX and competitors began pursuing them. NASA’s fleet of shuttles that could be flown multiple times were launched 135 times until the last flight ended in 2011, according to the agency.
“The revolutionary development from SpaceX wasn’t necessarily the technology, it was really operational. They demonstrated how you can reuse a rocket without incurring the tremendous cost of taking the whole thing apart” after a mission, said Andrew Aldrin, director of the Aldrin Space Institute at the Florida Institute of Technology.
So far this year, the company has conducted 24 of the 41 licensed launches in the U.S., according to the Federal Aviation Administration. Last year, it orchestrated 25 out of the 39 launches. More are on tap, including missions for NASA and four contracted by Axiom Space Inc., a company behind a range of commercial-space projects.
Competitors are working on their own efforts to launch humans, but SpaceX has been able to pursue more ambitious flights. For this week’s flight, Inspiration4 crew members are slated to fly almost 360 miles from Earth and travel around the planet for at least three days before splashing back down off the coast of Florida.
The mission is scheduled to launch a little more than a month after Boeing Co. , along with NASA, postponed a test flight of its own spacecraft—that is meant to ferry astronauts to the space station—due to stuck valves in the vehicle’s propulsion system. Boeing had no comment.
Virgin Galactic Holdings Inc. in July flew Mr. Branson, its billionaire founder, and five others about 54 miles up before returning to ground in a roughly one-hour trip. Blue Origin LLC, founded by Mr. Bezos, launched the former Amazon.com Inc. chief executive and three others to an altitude of 62 miles in a trip that lasted about 10 minutes.
Virgin Galactic had no comment and Blue Origin didn’t respond to a request for comment.
Blue Origin is also developing an orbital launch vehicle, but SpaceX has secured the bragging rights of taking NASA astronauts to orbit first, and possibly private ones as well should this week’s flight go off as planned.
Blackstone Drops $3 Billion Property Deal With Chinese Power Couple
Soho China’s founders had faced criticism over the planned sale
Shares in Chinese commercial-property developer Soho China Ltd. 410 -34.57% tumbled 35% Monday, after Blackstone Inc. BX -0.52% abandoned a $3.3 billion takeover in the face of an unexpectedly long regulatory review.
Soho China is controlled by two high-profile entrepreneurs, Pan Shiyi and his wife Zhang Xin, and the deal’s collapse marks the latest setback for the country’s embattled business leaders.
After the deal was announced in June, the husband-and-wife team faced criticism in China, with assertions online that they were cashing out and moving money abroad, despite Beijing’s aversion to such practices. Soho China didn’t immediately respond to requests for comment.
Soho China’s swish office blocks have helped reshape high-end districts in Beijing and Shanghai, with trophy properties designed by star international architects such as the late Zaha Hadid.
Blackstone’s offer was conditional upon approval by China’s antitrust regulator, the State Administration for Market Regulation. But the U.S. private-equity giant and Soho China said Friday that they hadn’t been able to make sufficient progress on meeting the conditions for the deal within their agreed time frame.
The State Administration for Market Regulation didn’t immediately respond to requests for comment. Blackstone declined to comment further.
“The transaction had caused disquiet in China with several Chinese press and social media posts urging SAMR to block the transaction due to the premise that the deal is unpatriotic,” wrote Arun George, an analyst at Global Equity Research Ltd. who publishes on the Smartkarma platform, adding that “antitrust approval would also not sit well with President Xi Jinping’s recent calls for wealth redistribution.”
President Xi’s plans to promote social equality and distribute wealth more evenly, summarized by the catchphrase “common prosperity,” have marked a turn in official rhetoric and popular sentiment toward business people who have amassed fortunes in recent decades.
Ms. Zhang and Mr. Pan founded Beijing-based Soho China in 1995, and still own a near-54% stake in the business. Ms. Zhang is a former Goldman Sachs banker and the duo set up scholarships to help Chinese students attend Harvard, Yale and the University of Chicago.
The developer attracted attention in 2019, when Bloomberg reported it was considering selling a majority of its commercial property holdings—a plan that critics said showed that it was trying to offload assets in China.
Footage of the couple at the U.S. Open women’s singles final in New York on Saturday circulated online, fanning further anger on Chinese social media.
Blackstone has ramped up investments in China in recent years, particularly in logistics parks and warehouses. The company owns about 6 million square meters of properties in China, according to a June filing, or the equivalent of about 64.6 million square feet.
Chinese leaders had counted on Stephen Schwarzman, Blackstone’s billionaire co-founder, and other Wall Street financiers to act as go-betweens with the Trump administration as tensions over trade rose. The Blackstone leader also founded the Schwarzman Scholars, an international postgraduate award program at Tsinghua University in Beijing.
Real-estate deals in China typically only require a simple regulatory review, lasting about a month, because they are unlikely to result in monopolistic market power. In this case, however, the deal may have been put under a more extensive formal review. Soho China said in early August that its application for a review had been formally accepted. Since then, the regulator hadn’t said anything about the deal in more than a month, suggesting a more thorough review was under way.
Soho China shares closed Monday in Hong Kong at 2.29 Hong Kong dollars a share, the equivalent of about $0.29, and less than half the HK$5-per-share offer price. The takeover had implied a value of about $3.3 billion for all of Soho China’s shares, although the controlling shareholders had planned to retain a 9% stake.
Rolls-Royce and Babcock sell shares in AirTanker to boost balance sheets
Private equity group Equitix to pay £315m for stake in RAF’s fleet of refuelling planes
Rolls-Royce and Babcock International have agreed to sell their shares in AirTanker Holdings, the company that owns the RAF’s fleet of refuelling planes, for £315m as the manufacturers seek to repair their balance sheets.
Private equity group Equitix Investment Management will pay £189m for Rolls-Royce’s 23.1 per cent stake in AirTanker and another £126m for Babcock’s 15.4 per cent share.
The two manufacturers have been looking to raise funds through disposals and said the proceeds would be used to reduce net debt levels.
For Babcock, it is the third disposal in recent months as part of a sweeping restructuring programme under new chief executive David Lockwood designed to streamline Britain’s second-biggest defence contractor.
The deal, if completed, “ensures we will meet our target of generating at least £400m of disposal proceeds this financial year”, said Lockwood.
The company in July revealed an operating loss of £1.64bn from £75.6m a year earlier for the full year to the end of March.
The steep loss was largely due to the previously flagged one-off, non-cash impairments, which were the result of a review of its contract and balance sheet profitability instigated by Lockwood.
Rolls-Royce, whose balance sheet has been battered by the coronavirus pandemic, wants to raise £2bn from disposals.
The FTSE 100 company, which is paid according to the hours flown by aircraft that are fitted with its engines, took a big financial hit from the grounding of flights during the pandemic.
It revealed in August it was in exclusive talks with a consortium led by Bain Capital to sell its Spanish engine business ITP Aero. Analysts have estimated that disposal could raise about €1.6bn.
The Financial Times reported earlier this month that Rolls-Royce’s biggest investor, Causeway Capital Management, had called on incoming chair Anita Frew, to refresh the board as it emerges from the crisis.
Tom Bell, president of Rolls-Royce Defence, said the sale was “another important step towards achieving our group target to generate at least £2bn from disposals, as announced last year, to help rebuild our group balance sheet in support of our medium-term ambition to return to an investment grade credit profile”.
Shares in Babcock rose 3 per cent to 351.69p, while Rolls-Royce shares were trading up 1 per cent to 110.10p by early afternoon in London on Monday.
The rest of AirTanker is still owned by Thales and Airbus. Both Babcock and Rolls-Royce will retain their respective stakes in AirTanker Services, which operates the 14 RAF Voyager aircraft.
The sales are conditional on regulatory approvals, and will require consent from the Ministry of Defence and the US Department of State.
Gapping down
In reaction to earnings/guidance:
- NUVA -5.5% (Q3 guidance)
Other news:
- MDXG -47.3% (reports top-line data from two late-stage musculoskeletal trials)
- DVAX -8% (provides update on its COVID-19 Collaboration with Valneva)
- AVTR -3.7% (to offer for sale in an underwritten offering $750 million of its common stock)
- EJH -3.5% (files for $300 mln mixed securities shelf offering)
- LESL -1.9% (to offer in underwritten secondary offering 13 mln shares of common stock)
- LTRX -1.2% (files for $100 mln common stock offering)
Analyst comments:
- CRWD -1.6% ( downgraded to Neutral from Buy at Goldman)
- CHKP -1.4% (downgraded to Sell from Neutral at Goldman)
- AZUL -0.9% (downgraded to Underperform from Neutral at BofA Securities)
Gapping up
In reaction to earnings/guidance:
- NEGG +6.6%, AMYT +1.2%
Select metals/mining stocks trading higher:
- MT +1.5%, CLF +1%, X +1%, RIO +0.9%, BHP +0.9%, .
Select oil/gas related names showing strength:
- RDS.A +1.5%, OIH +1.4%, SLB +1.1%, BP +1.1%, HAL +1.1%, XLE +0.8%, XOM +0.8%, USO +0.7%, .
Other news:
- HEPA +17.5% (schedules conference call to review data from Phase 2a ‘AMBITION' clinical trial of CRV431 in NASH )
- ADAP +14.2% (announces updated data from its Phase 1 SURPASS trial in multiple solid tumors to be presented in a digital poster at the upcoming European Society for Medical Oncology annual meeting)
- MIRM +4.7% (submits European Marketing Authorization Application for maralixibat in alagille syndrome supported by new positive results from natural history study comparison)
- DDI +3.8% (Shareholder B. Riley Financial (RILY) announced intention to purchase additional shares)
- SIGA +3.8% (receives BARDA exercise of procurement option valued at $112.5 mln for oral TPOXX)
- GSM +3.7% (files for 91,708,179 ordinary stock offering by selling shareholder)
- HCM +3% (receives breakthrough therapy designation in China for Amdizalisib)
- CYTK +2.6% (reports results from REDWOOD-HCM and GALACTIC-HF presented in late breaking clinical trial session at the HFSA Annual Scientific Meeting)
- CPG +2.4% (increases dividend and provides preliminary 2022 budget)
- LMPX +2.3% (to purchase an 85% interest in the Alan Jay Automotive Network; expects to be accretive to adj. EBITDA in 2022)
- SPRT +1.6% (follow-up to special meeting vote on merger)
- RDHL +1.5% (accelerates ongoing U.S. Phase 2/3 COVID-19 study of once-daily oral RHB-107 in Non-hospitalized patients with South African approval)
- REPH +1.4% (files for 9,302,718 share common stock offering by selling shareholders)
- ASPN +1% (files for 3,462,124 share common stock offering by selling shareholder) .
Analyst comments:
- DELL +2.1% (upgraded to Conviction Buy from Buy at Goldman )
- CG +1.3% (upgraded to Outperform from Market Perform at BMO Capital Markets)
Brevan Howard to ‘significantly expand’ crypto asset push
Hedge fund appoints Colleen Sullivan to run new unit focused on digital assets
Hedge fund Brevan Howard will “significantly expand” its foray into digital assets with the launch of a new unit focused on the industry, in the latest sign of how traditional financial companies are racing into the sector.
The European hedge fund, one of the largest in the world, said on Monday that it had set up a new unit dubbed BH Digital, which will manage cryptocurrencies and digital assets. It has appointed Colleen Sullivan, chief executive and co-founder of specialist cryptocurrency and blockchain technology firm CMT Digital, as head of the division.
Brevan Howard’s push deeper into crypto comes as big financial companies such as Goldman Sachs and Bank of New York Mellon and a number of hedge funds such as Marshall Wace and Renaissance Capital have sought to tap into the sector. The influx of blue-chip names highlights a growing appetite for digital assets among professional investors, which is putting banks under pressure to offer services around digital assets.
“Brevan Howard’s belief in the huge diversity of opportunities within the digital asset space and the significance of this to long-term macro investors is the reason we are delighted to welcome Colleen to the firm,” said Aron Landy, chief executive of the fund.
Traditional Wall Street firms have been rushing to create a strategy around cryptocurrencies as the size of the market boomed in the past 18 months. A survey in June showed that hedge funds intend to significantly increase their exposure to cryptocurrencies, but investors from traditional markets are facing stiff competition from digital asset specialists.
Brevan announced earlier this year that it would invest in cryptocurrencies through its main Master fund and it created a specialist vehicle for digital assets. The move to set up a dedicated unit for digital assets signals that the fund’s push into cryptocurrencies and its underlying technology has picked up pace.
Chicago-based Sullivan will be tasked with turning BH Digital into a key player for servicing professional investors in digital assets and crypto trading, as well as leading the fund’s “private and venture investment activities in crypto”. She will also chair the investment committee for a new vehicle that will focus on “highly compelling and disruptive technologies”.
Sullivan’s hire “underscores the firm’s commitment to rapidly expanding its platform and offerings in cryptocurrencies and digital assets”, Landy said.