Business Of Fashion : Kering Proposed a Tie-Up, Says Richemont Chair

Kering Proposed a Tie-Up, Says Richemont Chair

Johann Rupert, Richemont’s chairman, insists he has no interest in selling the Switzerland-based luxury goods company, but admitted Kering proposed a partnership of sorts to him “more than a year ago,” according to the Financial Times.

Online publication Miss Tweed originally reported in late March that Richemont had been approached by French luxury goods group Kering for a potential merger in January but had rejected the offer — a timeline, Financial Times points out, which differs from the one Rupert alluded to.

Speculation over a potential team-up has been swirling for years, as industry experts note it would aid the two companies in competing with LVMH given Kering’s edge in soft luxury items such as leather goods and Richemont’s in hard luxury, like watches. Rupert’s confirmation of past Kering-Richemont talks comes as luxury rebounds rapidly from the pandemic-driven shut downs.

Shares in the Cartier parent rose nearly 6 percent after the group proposed to double its dividend and flagged strong current trading with “accelerating trends across all business areas.”

Business Of Fashion : Gap Bets It All on Yeezy

Gap Bets It All on Yeezy
This week, everyone will be talking about Gap’s earnings (and any clues about its upcoming Yeezy line), the return of vacation travel and hopes for a rebound in makeup sales.

HERE COMES KANYE

  • Gap Inc. releases quarterly results on May 27

  • The company has said its flagship brand’s Yeezy line is on track to launch by the end of June

  • Gap is counting on its Kanye West partnership to revive sagging sales

This may be the week we finally get some details on one of the biggest experiments in mass retail. Gap has said little about its partnership with Kanye West since announcing the deal nearly a year ago (West, of course, has had plenty to say, though little about the clothes themselves). Gap desperately needs this collaboration to succeed. It’s closed stores, sold brands and cut costs, but that alone won’t begin to reverse two decades of declining sales and fading cultural relevance.

Yeezy is a big, big swing at putting Gap back in the fashion conversation, and the company hasn’t been coy about the line’s importance to the brand’s future. The company expects revenue from the line to top $150 million in 2022, its first full year, according to documents reviewed by Bloomberg. That projection is, if anything, conservative: Adidas sold $1.7 billion in Yeezy sneakers last year, according to Bloomberg. The difference is that Adidas is one of two brands securely atop the sneaker marketplace. But the basics category grows more crowded by the day and Gap isn’t the only struggling mall brand pinning its future on a high-profile designer.

(ZH) UK Travellers Barred From Germany Amid COVID-19 Variant Spread

UK Travellers Barred From Germany Amid COVID-19 Variant Spread

Britons will soon be barred from entering Germany after the country’s Public Health Institute designated the UK as a virus variant area of concern.

From midnight on Sunday, May 23, people travelling to Germany from Great Britain and Northern Ireland may only enter the country if they are a German citizen or resident.
Spouses and children under 18 of a German citizen or resident can also enter, as long as the household are travelling together.
Those with an urgent humanitarian reason such as an immediate family bereavement are also able to enter, however anyone entering the country from the UK must quarantine for two weeks on arrival, even if they test negative for COVID-19.
People who are only transferring from one flight to another will still be allowed in, however they must remain in the airport transit area.
The move comes after Spain lifted travel restrictions on British visitors, with the country’s prime minister Pedro Sanchez saying Spain will be “delighted, extremely delighted” to receive British tourists again.
Spain is lifting its restrictions on travellers from the United Kingdom beginning on Monday.
Germany and Spain are both on the UK government’s amber list, meaning travellers must quarantine at home for 10 days and take a pre-departure test and two post-arrival tests.

(ZH) Does Bitcoin Use "Too Much" Electricity?

Does Bitcoin Use "Too Much" Electricity?

US senator Elizabeth Warren claimed last week that bitcoin uses too much electricity.
In doing so, she makes a judgment about the "correct" amount of electricity use. But it raises the question of who is entitled to make such a judgment.
It’s fine for Warren to judge for herself, but it’s not fine for her to try to foist that opinion on others through government force or coercion.
A follow-up question from a decent reporter might be, “Is there really not enough available energy?”
At least two centuries of oil exist underground at current levels of usage. It’s not a question of whether it exists; it’s a question of how costly it is to get to. Uranium supplies will last longer than that.
Energy is abundant and easy to provide in a free market environment. However, a free market environment can be hard to come by, for government won’t let a free market for energy exist. Governments around the world are so eager to control energy generation and distribution that the mechanism of supply and demand can’t do its job. Instead, we are left with a bunch of impractical government stipulations by know-it-all politicians and bureaucrats.
Clearly, whoever makes such a decision about whether there is enough energy is operating from a mindset of artificial scarcity.
With unlimited sunlight, nearly unlimited uranium and similar substances, and many years of petroleum, any argument that there is not enough energy is misguided at best. In a marketplace there would never be such a worry as “Is there enough?” There would instead be a question of “How much exists at what price?” The marketplace handles scarcity well. It is government that imposes artificial barriers on the handling of such needs as energy to fuel economic development.
No one is saying Facebook uses too much energy, yet it has more than a billion people using its network each day.
There are, in contrast, thousands of computers operating on the bitcoin network at any given moment.
No one is saying online pornography uses too much energy, yet it is a dominant use of the internet.
No one is saying these things, because we have long considered it a person’s right to decide how they use their resources. They get to say what they do with their time and their money, not someone in Washington, DC.
What business does a US senator even have reaching into this area of life and saying that?
From time immemorial, bad folks have been figuring out how to take other people’s property from them, and good folks have been figuring out how to protect people’s property. “Thou shalt not steal” is not “Thou shalt not steal unless you are a US senator.”
Government has long extorted money from people with the threat of jail. Sick of this process, revolutions have often occurred in which people freed themselves from oppressive, thieving governments. The American Revolution was seen as a tax revolt by many participants. People wanted government’s hands off their property. It wasn’t long after the revolution that Washington, DC, was extorting a great deal more in taxes than any king across the Atlantic had ever demanded of his subjects. Even worse, in 1913, a form of servitude was added to the US Constitution with the implementation of the income tax in the Sixteenth Amendment, a policy by which a portion of a man’s labor was to belong to government.
Man has the ability to decide what has value to him and to operate accordingly. What has economic value to one may not have value to another. Economic value is subjective. What Elizabeth Warren and many others are really saying is, “I decree for myself the power to decide that economic value is not subjective, but objective, and based on the decisions of government.”
This is the heart of socialism: governmental control of an economy. When tried, this always fails. It removes the important tool of price, which shares so much information in a marketplace and is necessary to the individual, and instead lets a committee engage in brute-force central planning.
This is very harmful to society.
It is telling that Elizabeth Warren wants people to have their weed and their porn, items which enfeeble and harm, but she doesn’t want people to have their bitcoin

WSJ : Extreme Weather Kills 21 Runners in Chinese Mountain Ultramarathon

Extreme Weather Kills 21 Runners in Chinese Mountain Ultramarathon
The dead were among 172 participants in event hit by freezing rain and gale-force winds in Baiyin, Gansu province

BEIJING—Twenty-one people running a mountain ultramarathon died in northwestern China after hail, freezing rain and gale-force winds hit the high-altitude race, state-run media reported Sunday.

After an all-night rescue operation in freezing temperatures involving more than 700 personnel, rescuers were able to confirm that 151 people were safe, out of a total of 172 participants. Twenty-one had died, according to the state-run Xinhua News Agency, which said the runners suffered from physical discomfort and the a sudden drop in temperature.

The runners were racing on an extremely narrow mountain path at an altitude reaching 6,500-9,800 feet. The 60-mile race was held Saturday in the Yellow River Stone Forest tourist site in Baiyin, in Gansu province.

Among those who died was Liang Jing, a well-known runner who had won a 62-mile race in Ningbo, reported the Paper, a state-backed newspaper based in Shanghai.

A woman who worked for the race organizer, Gansu Shengjing Sports Culture Development Co., said there were no predictions of extreme weather for the day of the race, according to Beijing News, a paper owned by the Beijing city government.

However, the local Baiyin branch of the National Early Warning Information Center had warned for the past three days of hail and strong winds.

The race also followed a relatively established course, having been held four times, according to an account posted online by a participant in the race who quit and managed to make his way to safety.

But the weather caught them off guard, and on the morning of the race Saturday, he already sensed things weren’t normal. The runners weren’t dressed for winter-like conditions, many wearing short-sleeved tops.

“I ran 2 kilometers before the starting gun fired to warm up...but the troublesome thing was, after running these 2 kilometers, my body still had not heated up,” the competitor said in a first-person account that has been viewed more than 100,000 times on his WeChat account “Wandering about the South.”

He later said that the forecast the day before the race didn’t predict the extreme weather they encountered, the Paper reporter.

The most difficult section, from mile 15 to kilometer mile 22, climbed 3,280 feet. There, he said the path was just a mix of stones and sand, and his fingers grew numb from the cold.

When he finally decided to turn back, he already felt dazed. He said he was able to make it to safety and met a rescue crew. He didn’t respond to a request for comment left on his social-media account.

Some runners farther along the course fell off the trail into deep mountain crevices, according to a reporter for state broadcaster CCTV. It wasn’t clear how many of them survived.

Video footage showed rescuers in winter jackets searching at night with flashlights along steep hills and narrow paths. Search operations ended by noon Sunday, rescuers told Xinhua.

Online, some wondered what, if any preparations the organizers had made in the event of an emergency. The race organizer didn’t immediately respond to calls seeking comment Sunday.

Baiyin Mayor Zhang Xuchen held a news conference later Sunday and apologized as the organizer of the event. The government promised a full investigation.

“We express deep condolences and sympathy to the families of the victims and the injured,” the mayor said.

WSJ : For Startup Leaders, SPACs Have Lost Their Allure

For Startup Leaders, SPACs Have Lost Their Allure
Entrepreneurs are increasingly wary about the money-raising tool after watching peers’ stocks slide and investors balk

Startup chief executives are turning a cold shoulder to SPACs.

Skeptical CEOs say they are turning down offers from special-purpose acquisition companies, deleting their solicitous emails and tapping the brakes on merger deals amid nosediving shares and disappointed investors.

So-called blank-check companies, which go public with no assets and then merge with private companies, exploded in popularity last year as a mechanism for startups to raise a lot of money with more speed and fewer regulatory hurdles than a traditional initial public offering.


More recently, startup CEOs have watched many of their peers endure stock slides and earnings calls with disappointed investors in the weeks after finishing a SPAC deal. For many, it has been a bitter reality check that public-market investors might not be as generous as SPAC creators have been with early-stage companies with unpredictable revenue and growing pains.

“The reluctance is palpable,” said Adam J. Epstein, who advises startup CEOs and their boards. “It’s gone from being a bona fide alternative path to an IPO to ‘We don’t really want to be a punchline.’”

Will Hayes, CEO of Lucidworks Inc., a startup that makes AI search tools for businesses, spoke with two SPACs about merger deals a few months ago but turned them both down. He thinks his company will be ready for the public markets in three to five years, but not today.

“It feels like a shortcut,” he said. “I got increasingly more uncomfortable.”

Some one-time SPAC believers lost faith after many startups immediately struggled to meet their growth targets. Of those that completed a public listing through a SPAC merger in 2020, about 50% missed their revenue forecasts and 42% saw their revenue decline in their first year as a public company, according to a report from Silicon Valley Bank.

“If you don’t know to a very high degree of fidelity what you are going to do next quarter, you are going to get reamed for it” in the public markets, said Brad Hargreaves, CEO of Common Living Inc., which rents out apartments and co-living spaces. He said he was approached by 10 SPACs over the past six months but hasn’t pursued any conversations with them; he wants his company to get bigger and have more predictable revenue before going public.

Among 44 technology startups that completed a SPAC deal from the start of 2020 through this past April, share prices have on average fallen 12.6%, according to data provided by Minmo Gahng and Jay Ritter, public-stock researchers with the University of Florida. More than half of the tech stocks declined more than 20%. The research is based on the share closing price on May 17.

Stocks of traditional IPOs have also dipped, although not quite as steeply: The 77 tech companies that had an IPO during that period saw their stocks fall 10.7% from the close of their first day of trading, according to Mr. Gahng and Mr. Ritter.

Enthusiasm for SPACs waned after the U.S. Securities and Exchange Commission announced new accounting mandates last month and stepped up scrutiny of other SPAC practices. Another deterrent for startups is mounting litigation from stock traders against SPACs, alleging conflicts of board members, breaches of fiduciary responsibilities and misleading statements, among other things. Some fund managers said they have put a moratorium on new SPAC investments, and one San Diego-based family office, Sky and Ray, said since last year it has slashed its SPAC holdings to five from 104.

The cooling demand is set against formidable supply: There are more than 400 SPACs searching for startups to merge with, according to data provider SPAC Research. SPACs generally have two years to complete their deal, although startups tend to shy away from those that haven’t found a partner after about six months, investors and CEOs say.

CEOs said they are inundated with SPAC mail that they just delete or ignore. Some SPACs are emailing cut-and-paste boilerplate letters, according to interviews with CEOs and letters viewed by The Wall Street Journal. In one case, a SPAC sent a pitch to a CEO emblazoned with the logo of the wrong startup.

Jamie Hodari, CEO of co-working startup Industrious, said about 30 SPACs have approached him in the past year to make a deal. He took four meetings. Some, he said, are thoughtful in their overtures, but with many of them “it’s almost to the point where your company is irrelevant—they just want a deal.”

Mr. Hodari, who is a member of a SPAC board himself, said a SPAC deal is still a possibility in the future. He raised $250 million from a large real-estate firm in February and is biding his time.

At the height of the frenzy, many startups skipped traditional private financing rounds in favor of a SPAC deal, but CEOs now say they are more inclined to tap the abundant venture-capital or private-equity options.

Cybersecurity startup Area 1 Security Inc. raised $25 million from venture capitalists a year ago and plans to fundraise again early next year, said CEO Patrick Sweeney. He turned down three SPAC meetings because he doesn’t want the distraction of being public while trying to grow his company and doesn’t see the need for a SPAC with plentiful other sources of capital.

SPAC deals are still getting done. In the past two weeks scooter company Bird Rides Inc., mortgage lender Better Holdco Inc., automation manufacturing business Bright Machines Inc. and self-driving trucking startup PlusAI Corp. have announced SPAC agreements. The shares of each SPAC in those deals were trading below their listing price of $10 at market close on Friday, a level considered widely by investors to be the minimum because it represents the amount of cash the SPAC holds.

Startups that are still pursuing SPACs say they now have the upper hand in negotiations as they weigh multiple offers.

Cetin Mericli, CEO and co-founder of autonomous trucking startup Locomation Inc., said he is reviewing offers from multiple SPACs. His largest competitor, TuSimple Holdings Inc., went public through a traditional IPO last month, and Mr. Mericli said he wants a war chest to compete. He also wants to offer public-company stock to prospective employees, which will help with recruiting.

Mr. Mericli said meanwhile, as he mulls his options, he is raising more venture capital.

FT : A good chance to reform global corporate taxation

A good chance to reform global corporate taxation
The world must engage with Joe Biden’s proposal of a minimum tax

The Biden administration has proved to be imaginative and bold in many ways. Yet, from the point of view of its leading partners, few proposals are more significant than that for a global minimum rate of effective corporation tax. This should open the way to a resolution of a number of issues that are as important as they are technically complex. Its partners should urgently seize this opportunity to agree reform.

In a world of multinational corporations, mobile capital and seamless digital transactions, the taxation of companies poses at least three huge challenges. First, it is too easy for modern businesses to shift large portions of their profits into tax havens, such as Bermuda or the Cayman Islands, or low-tax jurisdictions, such as Ireland. Second, countries are engaged in a “race to the bottom” on corporate taxation, from which ultimately they lose. Finally, it is hard to identify where modern businesses with large intangible capital, especially digital businesses, locate their activities. This duly turbocharges the other two issues.

As these challenges became more obvious, the OECD sponsored analysis and discussion of what it calls “base erosion and profit shifting”. Those discussions finally settled on two “pillars” of any resolution: “pillar one” focuses on how profits should be allocated and “pillar two” on the need for a global minimum rate.

Yet, until the election of the Biden administration, agreement could not be reached. One difficulty, related to pillar one, was the desire of the UK, France and others to tax the digital giants that operate within their economies, but pay next to no corporation tax, even if domestic competitors do so. Another, related to “pillar two”, was to agree any minimum rate of tax.

The US proposal takes the world part way to solutions but not all the way.

It does offer a minimum rate of tax. Initially, the US proposed a rate of 21 per cent. But it has already lowered this to a far less onerous 15 per cent. This is a significant concession, since the administration wishes to raise the US headline rate to 28 per cent. The administration must be unlikely to make further concessions, since the risks of a new race to the bottom rise, the bigger the gap between the agreed minimum and domestic US rates.

It also offers only part of a solution to the desire to tax digital businesses, which is important to Rishi Sunak, the UK’s chancellor of the exchequer. Sunak is not just interested in raising more tax from businesses based in the UK. He also wants to tax the global digital giants that do business there, reflecting a broader push towards local taxation of local sales. Washington insists it cannot accept discrimination against US businesses and that no system of taxation should be specific to any one sector.

The US proposal is, therefore, to focus on the 100 largest multinational enterprises. This, it argues, could raise about as much money as would considering many more. It would also focus on the companies that benefit most from global markets, are most engaged in intangible activities and are best equipped to handle complex cross-border allocation of profits.

No system of global corporate taxation can be perfect, partly because the issues are complex and partly because the interests of countries are in conflict. But the US proposals have now opened up room for a compromise that would resolve today’s principal challenges, by halting the abusive use of tax havens, stopping the race to the bottom and preventing huge companies from operating freely within a country’s markets while paying it no tax. This is a good start. It is essential now to reach a satisfactory agreement.

FT : Brazil’s infrastructure minister predicts $50bn investment boom

Brazil’s infrastructure minister predicts $50bn investment boom
The government is auctioning concessions in assets including airports, ports, highways and railways

Brazil’s infrastructure minister has predicted a boom in development of the nation’s highways, railways and airports on the back of $50bn in investment in concession projects by the end of next year.

“Brazil will become an immense construction site,” Tarcísio Gomes de Freitas told the Financial Times.

“With the planned concessions, by the end of 2022, $50bn will have been contracted in investments for the modernisation of airports, ports, highways and railways. In other words, the equivalent of more than 30 years of the public budget for infrastructure,” he said.

The investments will be a rare bright spot for the Brazilian economy, which even before the pandemic had for years been buffeted by anaemic growth, soaring debt levels and rising unemployment. Latin America’s largest nation is also plagued by weak infrastructure, notably poor-quality roads that increase transport costs as well as a lack of basic sanitation services for millions of poorer Brazilians.

The success of the concessions model — in which companies and investors bid to invest in and operate long-term projects — will also be a boost to the liberal economic agenda of the government and finance minister Paulo Guedes, who has sought to reduce the role of the hulking state.

In a marathon week of auctions last month, investors poured almost $10bn into an array of projects, including 22 airports, five ports, a rail line linking the country’s east coast with the western agricultural interior and multiple road works. French airport group Vinci won seven of the 22 airports, with Brazilian companies taking the rest of the concessions.

By the end of next year, the government plans to have auctioned concessions for 100 assets.

For de Freitas as well as independent analysts, much of the success of the auctions was down to improvements in Brazil’s regulatory environment and growing trust in legal frameworks.

“Brazil is well positioned to continue to attract international investors. The country is taking the right measures to attract them — structuring good projects, publishing the notices in advance in foreign languages, increasing the level of legal security for the projects and the arbitration clauses in contracts,” said Rafael Vanzella, an infrastructure lawyer with Machado Meyer Advogados.

“We have seen improvements, and each day an additional step is taken in this direction. Brazil is reaching an important level of maturity.”

De Freitas added that Brazil’s commitment to fiscal discipline — the clarion call of minister Guedes in recent years — had made investors more comfortable about considering the country.

A trained army engineer who moved into the public service more than a decade ago, de Freitas said Brazil was facing an “urgent task” to transform its transportation matrix and wean itself off heavily polluting trucking.

“The railway segment today accounts for only 15 per cent of the national logistics distribution, while road transport represents 65 per cent. The government’s goal is to increase the participation of rail to 35 per cent of the total cargo transported by 2035,” he said, pointing to the government’s flagship project to build a railway to connect the vast agricultural interior with Amazonian riverine arteries.

“The mere substitution of the road for the railway is estimated to reduce by up to 1m tonnes of Co2 from the skies of the Amazon per year.”

This focus on constructing railways has made de Freitas a popular figure in Brazil’s agricultural states and some have suggested he may have bigger political aspirations — a suggestion he denies.

He is, however, a target of ire among environmentalists, who say they have not been consulted on many of the infrastructure projects popping up around the country.

“The government talks directly with the business sector, but does not have a dialogue with civil society,” said Tatiana Oliveira from the Institute of Socioeconomic Studies.

“There is a pattern of treating the environment as an obstacle to the country’s progress and development. The environment and the communities have always been ignored.”