TheChek News Flow

CEO of fast-growing trading platform says rulemakers need to do more to understand digital coins

The chief executive of eToro, the fast-growing equity, derivatives and cryptocurrency trading platform, expects regulators to impose new rules to protect investors in bitcoin and other digital currencies, following actions such as the UK’s clampdown on the crypto exchange Binance.

“We are seeing a significant increase in the interest of retail investors and traders in the crypto market,” Yoni Assia told the Financial Times. “As a part of that growth we should expect also regulators to carefully look at this growing business of retail investors in the crypto markets.”

His comments are a sign of the recognition within the crypto industry that policymakers are poised to act against a sector that regulators had initially been slow to police.

But Assia added that regulators needed to learn more about digital currencies as they set new rules. “The most important thing for regulators is to understand crypto, and understand that it is here to stay,” he said.

Assia’s company has been dubbed “Israel’s Robinhood” in a nod to another fast-growing trading platform that has attracted a new generation of retail investors in the US. Almost 70 per cent of eToro’s users, however, are in Europe and — although it is planning to go public in the US in coming weeks through a merger with a special purpose acquisition company (Spac) — only 9 per cent of its users are in the US, where it does not yet offer direct stock trading but has cryptocurrency and crypto “copy trading” services.

The drumbeat for more regulation of cryptocurrencies such as bitcoin has grown this year as their value has soared to $1.5tn amid price extreme volatility, and amid further examples of their use in illicit activities such as money laundering and fraud.

The UK’s Financial Conduct Authority barred Binance from offering cryptocurrency exchange and other regulated services in Britain this week. US financial authorities are also preparing to take a more active role in regulating the market, the FT reported last month.

“We also want to make sure that we communicate well the risks of investing in high-risk assets,” Assia said. “There’s no doubt an asset that went up 100 per cent can very easily go down 50 per cent. There’s no doubt that if something went up 1,000 per cent it’s very volatile, and you should understand that as part of your portfolio allocation.”

EToro was founded in 2007 and has offered bitcoin trading since 2013. It said in a regulatory filing in March that crypto assets accounted for 16 per cent of revenues last year.

The growth of easy-to-use trading platforms and interest in cryptocurrencies and so-called meme stocks have lured a younger generation to learn about investing.

The number of funded accounts at eToro increased by about 500,000 in the first three months of the year, more growth than it experienced for each of the past two years, taking the total to 1.5m. The number of registered users at eToro rose by 3m in the first quarter to 20.6m. That compared with 5m new registrations in the whole of 2020.

The company said on Tuesday that total trading commissions in the first quarter were $347m, a 141 per cent year-on-year increase. Net trading income was also up 72 per cent to $269m. Net profit was down more than 90 per cent over the same period, to $5m, which the platform attributed to heavy spending on marketing.

The deal to go public via a Spac values eToro at $10.4bn, though shareholders in the vehicle are yet to vote on the deal.

The airline plans to buy 270 Boeing and Airbus planes as well as retrofitting some of its existing narrowbody fleet

United Airlines Holdings Inc. UAL -2.58% is making its largest ever plane order, adding Boeing and Airbus jets to fuel its post-pandemic growth plans.

The Chicago-based airline said Tuesday that it will purchase 200 of Boeing Co. BA -3.39% ’s 737 MAX jets and 70 larger Airbus EADSY -2.24% SE A321neos, a deal valued at more than $30 billion at list prices before customary discounts. United is looking to replace most of its 50-seat jets and other smaller, older aircraft with these larger planes that can carry more passengers and allow it to sell more premium seats.

The order—the largest by a U.S. airline since American Airlines Group Inc. AAL -3.74% ordered 460 new aircraft from Boeing and Airbus in 2011—is the latest sign of U.S. airlines’ growing confidence that travel is on course to snap back after being decimated by the coronavirus pandemic last year.

United lost more than $7 billion last year and accepted billions of dollars in government aid to continue paying workers. Now the airline expects to make money in July on an adjusted pretax basis, which would be its first profitable month since January 2020, the airline said in a separate filing Monday.

A year ago, airlines were parking planes in deserts and hunkering down for protracted pullback in travel. While many business travelers have yet to return and many lucrative international routes have yet to reopen, airline executives have said in recent months that the fast rebound in domestic leisure travel has given them confidence to restart hiring plans and start adding to their fleets.

United began laying the groundwork for its order last summer, when executives met in a United Club at Chicago’s O’Hare International Airport, according to United Chief Executive Scott Kirby. Though the airport was still largely empty at the time, the executives began discussing how to position United to emerge from the pandemic. They decided, for example, not to permanently retire any aircraft types as some rivals had done.

“In a way, my what a difference a year makes. But in another way, this is about where we expected to be,” Mr. Kirby said.

Combined with orders already on its books, United has 500 new narrow-body planes set to arrive in the coming years—a rapid influx of jets that will help it increase flying by 4% to 6% annually, Chief Commercial Officer Andrew Nocella said. United said that about 200 of the new planes will represent new growth while 300 will replace aircraft that are due to retire, including about two-thirds of its 50-seat jets.

United’s move follows recent jet orders from carriers including Southwest Airlines Co. and Alaska Air Group Inc. The recovery has helped Boeing clear most of its inventory of unclaimed MAX jets. United had previously unveiled plans to buy an additional 25 MAX jets and to accelerate delivery of dozens more to meet near-term demand, but the carrier said the orders unveiled Tuesday are part of a more detailed post-pandemic strategy.

United said Tuesday that all of the planes will be outfitted with such amenities as larger overhead bins and screens in seat backs. Some airlines had been shifting away from those entertainment systems in favor of allowing passengers to stream movies and TV shows only on their own devices, but United said it now believes the screens will be a selling point with customers. United also plans to retrofit all of its mainline narrow-body aircraft with matching interiors, including screens, by 2025.

United said the new planes would help it add almost 30% more seats per domestic flight and 75% more premium seats in first class or with extra legroom.

The airline’s plans to expand domestic hubs in Chicago, Houston and Denver and to boost international flying are a bet on travel at a time when the outlook is still uncertain. The business travelers who would typically fill the more expensive premium seats have yet to return and travel patterns could remain in flux for years, analysts say.

“Everything we see every week makes us even more certain that business travel and international travel are ultimately going to come back,” Mr. Kirby said. “Some of them will be different, but they are ultimately going to come back at 100%.”

Analysts have long expected United to detail its plans to refresh its fleet. “The company has significant chunks of aircraft in its fleet that are old enough to legally drink,” Evercore ISI analyst Duane Pfennigwerth wrote Monday.

Though United split its order among the two major plane makers, the company’s move is a boost for Boeing’s 737 MAX. The aircraft had been grounded for nearly two years following a pair of fatal crashes, in late 2018 and early 2019, that took 346 lives. Boeing at one time halted production of the plane and some customers walked away from their orders as the pandemic worsened, providing an opening for rival Airbus to take market share.

United’s deal to purchase 150 Boeing 737 MAX 10 jets as part of the order announced Tuesday also bolsters that model, the largest variant of the single-aisle workhorse aircraft. Orders for MAX 10 jets have lagged behind the smaller MAX 8. The 737 MAX 10 recently took its maiden flight as Boeing conducts tests and works toward regulatory approval for the new jet.

Worries over Aduhelm’s price and reimbursement have sparked a selloff in Biogen—and given investors a fresh opportunity

American taxpayers are set to foot most of the bill for Biogen’s BIIB -2.20% new treatment for Alzheimer’s disease, and investors are nervous.

The Food and Drug Administration approved Aduhelm earlier this month despite significant controversy; several prominent experts have blasted regulators for allowing the sale of an ineffective drug.

Those arguments didn’t persuade the FDA, but the spat raises the question over how Medicare will pay for the medication, which carries an annual sticker price of $56,000 before rebates or discounts. Investors are pricing in some doubt that Aduhelm will ever live up its blockbuster expectations: Biogen shares have risen 30% over the past month, but have shed nearly 20% since June 10.

There are good reasons for skepticism. While Medicare typically pays for all approved drugs, a Biden administration official said that the government “can’t afford to treat this as business as usual.” And the price of Aduhelm is merely one line item in a list of necessary expenses for patients receiving it. Others are brain-imaging tests, infusion costs and a parade of doctor visits to assess disease progression.

What is more, Biogen could face competition sooner than Wall Street had expected. Rival drugmaker Eli Lilly said last week it plans to file for regulatory approval for its own Alzheimer’s treatment; that drug could conceivably reach the market as soon as the end of next year. Lilly’s donanemab is similar to Aduhelm but potentially more effective.

But the reality is that Alzheimer’s is quite possibly the largest unmet medical need in the U.S. As such, there is significant demand among patients, caregivers and even physicians for a drug that has even a small chance of slowing the disease’s progression. The imprimatur of the FDA will carry weight with many doctors regardless of any controversy.

Medicare administrators may limit access to certain patients in earlier stages of the disease, but Biogen, and eventually competitors like Lilly, won’t have much trouble finding takers. Besides, the rollout for central-nervous-system drugs is usually slow, even for those that are eventual blockbusters. The lengthy patient onboarding process means that Aduhelm won’t be an exception, even if Medicare doesn’t limit access. Analysts at Truist Securities expect annual sales of Aduhelm to reach about $12 billion at their peak. That won’t be until 2031, though.

Meanwhile, the recent selloff means Biogen shareholders have the benefit of lowered expectations. The stock trades at less than 14 times last year’s earnings—not a demanding price for arguably the best long-run growth story among all large drugmakers.

Today’s trepidation is the source of tomorrow’s opportunity.

China, India, eastern Europe and emerging nations raise objections; tax havens intransigent

Negotiators in Paris are battling to persuade holdout nations to sign up to a global deal on corporate taxation this week as they become increasingly concerned that the compromises needed to get countries on board will water down the final agreement.

China, India, eastern European countries and developing nations have all raised objections to the deal struck by the G7 group of leading economies this month. The talks at the OECD are seeking to find carve-outs to bring them on board.

Tax havens and investment hubs such as Ireland, Switzerland and Barbados are widely expected to refuse to sign up to the deal, according to some of those involved. The details of the proposals will be discussed by finance ministers from the G20 group of countries at a summit in Venice next month.

Those with knowledge of the process have become more hopeful about getting a deal, and especially about China agreeing to participate, but warned that time was short.

One negotiator told the Financial Times: “I think it will not fail . . . there are still some uncertainties, but we are not far from a deal.”

Another person close to the negotiations, who last week had been worried about China’s involvement, said signs were now more positive but warned the talks could be the final chance to get a global agreement that would stop decades of disputes about the global tax regime.

The European official said: “If we can’t get an agreement at the G20 then the chances are that we’ll have to start over for another 20 years of talks on this issue.”

He said there was a risk of diluting the deal so much that it became meaningless and flagged the high stakes involved: “If we can get a deal then it’ll be a big win that shows that international diplomacy on the biggest issues is possible.”

A third official said China was still the main sticking point but there was more optimism among negotiators than a few weeks ago.

China and many eastern European countries complain that the deal would disrupt existing tax arrangements which offer manufacturers investment incentives through corporation tax to build factories and machinery by having an effective tax rate lower than the proposed global minimum of 15 per cent.

None of these countries are considered tax havens, in which multinationals channel footloose profits to take advantage of low tax rates. Eastern European nations have won an exemption for manufacturing factories, those close to the negotiations said.

Negotiators are seeking to ensure that China could also benefit from this, but it has not been made clear whether the world’s second-largest economy would agree to the wider deal in exchange. “No one really knows what the Chinese position is,” the European official said. “They are playing for time and are leaving all their options open.”

Developing countries are unhappy that the deal will not let them raise more tax from the largest multinationals, and that they will get the right to tax only a small proportion of companies’ profits based on sales.

The G24 group of poor developing countries has asked for a much larger share of profits to be covered by the deal and have threatened to persist with their own digital taxes.

They have been offered a compromise in which the threshold for companies covered by the global arrangement would be lowered from $20bn of turnover to $10bn after seven years. If they reject this, “it would be a lost opportunity for them”, said one person representing advanced economies.

Developing countries also want to increase the proposed global minimum tax rate of “at least 15 per cent”.

In an online conference on Monday Mathew Gbonjubola, Nigeria’s ambassador to the OECD, said setting the global minimum at that level “would not do much to benefit countries in Africa” and was “likely to continually promote [tax] base erosion from African countries”.

But when asked whether developing countries were likely to turn down the deal, Gbonjubola said “political pressures” made that a difficult decision. “Each jurisdiction needs to state clearly whether it is for what it is on the table or against it and there’s no third option,” he said.

The London-listed owner of Regus has been holding secret talks about a takeover offer from CC Capital, Sky News learns.

IWG, the world's largest serviced office group and rival to WeWork, has been in secret talks about a potential takeover offer that could value the company at more than £4bn.

Sky News has learnt that CC Capital, a New York-based private equity firm, has held discussions with Regus-owner IWG about a prospective bid in the last month.

It was unclear on Monday evening whether the talks were still ongoing.

One property industry source said that any offer would need to be lodged at a "very significant" premium to IWG's current share price to stand a chance of being recommended by the company's board.

On Monday, shares in the company closed down 2.3% on the day at 300.2p, giving it a market capitalisation of about £3.1bn.

Factoring in a conventional private equity premium implies that a successful offer would need to be worth at least £4bn.

CC Capital is said by bankers to have enlisted advisors from banks to work on its prospective bid.

The takeover interest in IWG, which trades under brands including Regus, Spaces and The Clubhouse, comes during a period of uncertainty over future demand for long-term and temporary office space after the pandemic.

Many companies are announcing permanent shifts to hybrid working, with employees allowed to base themselves at home or other non-office locations for at least part of the time.

Earlier this month, IWG warned the City that underlying earnings this year would be well below their 2020 level, and said the "overall improvement in occupancy across the whole group has been lower than previously anticipated as a result of the prolonged impact of COVID-19".

It said, however, that it expected a strong recovery in its performance next year.

In recent years, IWG has adopted a franchise model which has seen it sell assets in countries including Japan and license its brands to new operators.

The new business model was the brainchild of IWG's founder Mark Dixon, who remains chief executive and the company's biggest individual shareholder.

Its talks with CC Capital are the latest example of a large London-listed company attracting interest from private equity suitors.

Earlier this month, Sky News revealed that Clayton Dubilier & Rice (CD&R) was preparing a takeover bid for Morrisons, Britain's fourth-biggest supermarket chain.

Others to have received bids since the spring include St Modwen, the property company which has agreed to be bought by Blackstone; John Laing, the infrastructure investor which is to be taken private by KKR; UDG Healthcare, a healthcare group which is also being bid for by CD&R.

Mr Dixon is no stranger to conversations with private equity bidders.

In 2019, he held talks with Lone Star Funds, Starwood Capital, TDR Capital and Terra Firma Capital Partners but abandoned the negotiations after they failed to produce an offer that could be recommended to shareholders.

Earlier that year, IWG rejected a takeover bid from Brookfield Asset Management and Onex which valued the company at 280p-a-share.

CC Capital has a track record of buying large companies, including Dun & Bradstreet, the commercial data provider.

The buyout firm was founded by Chinh Chu, who was previously a top executive at Blackstone, one of the world's biggest private equity investors.

CC Capital has also launched a series of special purpose acquisition companies (SPACs) in partnership with the asset manager Neuberger Berman.

IWG's rival, WeWork, is preparing to become a publicly traded company in New York after agreeing a deal in March to merge with another SPAC.

The combination is expected to value WeWork at approximately $9bn - a fraction of what it was worth prior to its near-collapse in 2019.

IWG declined to comment.

A public relations adviser to CC Capital said his client could not be reached for comment.

Once bright hope for UK North Sea fails to push through plan that would have slashed shareholder equity

Hurricane Energy, the oil and gas producer once considered a bright hope for the UK North Sea, has failed to push through a controversial financial restructuring that would have virtually wiped out its shareholders.

The UK’s High Court ruled on Monday it would not sanction the plan, which would have handed control to Hurricane’s bondholders in exchange for forgiving $50m of debt and extending the maturity date on a further $180m of bonds due to be repaid in July next year.

The plan had been extremely unpopular with shareholders, including activist fund Crystal Amber, Hurricane’s second-largest investor with a stake of more than 11 per cent.

However, management led by chief executive Antony Maris had argued it was a “necessary step” to secure Hurricane’s future following production disappointments, warning it would not be in a position to repay its $230m of bonds next year.

The Aim-listed company had hoped to open a new frontier in UK waters by producing oil from “fractured basement” rock formations — naturally occurring fissures in the granite that lies below the softer sandstone from which most other North Sea hydrocarbons are extracted.

However, Hurricane admitted last year that it was unable to sustain intended production rates from its flagship Lancaster field west of the Shetland Islands and parted ways with its founder and former chief executive Robert Trice.

A hearing on the proposed restructuring, which would have left shareholders with just 5 per cent of the company’s equity, was held at the High Court last week.

In a lengthy judgment handed down on Monday, Mr Justice Zacaroli said “despite the fact that there is projected to be a shortfall between available cash and the sum required to redeem the bonds at maturity”, there was a “reasonable possibility . . . it could be bridged”.

He added there was “no other sufficient ground of urgency” for the bonds to be restructured now.

Hurricane said it was “considering all options, including an appeal”, and warned that bondholders had “certain rights under the terms of the convertible bonds that, if enforced, could result in an acceleration of the convertible bonds and ultimately an insolvent liquidation of the company”.

Crystal Amber has proposed to remove Hurricane Energy’s chair and non-executive directors and replace them with two of its own candidates at an extraordinary general meeting on July 5, although several directors are already up for re-election at the company’s annual meeting on Wednesday.

Hurricane said: “It is the company’s understanding that, in the event all of the executive directors are removed from the board, the company’s nominated adviser is likely to resign with immediate effect.”

It said this was likely to result in its shares being suspended from trading, “and, if a replacement nominated adviser is not in place within a period of one month, it may result in the shares of the company being delisted from Aim”.