After Hours Summary: PPG +4.7%, AA +3.5% rise on earnings; LSCC +7% as it joins the S&P MidCap 400; DKNG +5.3% higher as it becomes an Official Sports Betting Partner of the NFLAfter Hours Gainers:
Companies trading higher in after hours in reaction to earnings/guidance: PPG +4.7%, MATX +4.6%, AA +3.5%, JBHT +2.8%, LAKE +0.9%
Companies trading higher in after hours in reaction to news: BTX +11.6% (pays $1 mln towards acquisition of license for mRNA technology platform), IDYA +7% (announces investor day to review data from Phase 1/2 Trial of Darovasertib), LSCC +7% (to join S&P MidCap 400), PGNY +6.7% (to join S&P MidCap 400), UFS +5.8% (to join S&P SmallCap 600), DKNG +5.3% (to become an Official Sports Betting Partner of the NFL), DMTK +4.9% (announces topline results from its second economic study of PLA), QS +2.3% (tweets response to short report), PTC +1.3% (to join S&P 500), CZR +0.6% (becomes official sports betting partner of the NFL; renews rights as official casino sponsor), NCLH +0.4% (sends "reminder letter" to CDC requesting response to plan to resume cruises from US ports in July), BIIB +0.4% (announces approval of TECFIDERA for multiple sclerosis in China), SPWR +0.3% (has repaid its $30 mln loan with the California EDA), GMED +0.2% (announces first surgeries with CREO ONE robotic screw), QRVO +0.1% (granted EUA from FDA for Omnia SARS-CoV-2 antigen test; also awarded $24.4 mln contract from NIH to scale COVID-19 antigen testing), REGI +0.1% (names new CFO), THG +0.1% (expects Q1 catastrophe losses of $133 mln), AON +0.1% (increases dividend), PSN +0.1% (contract amended by US$75 mln to manage new work at the Giant Mine in Canada), ATR +0.1% (increases dividend)
After Hours Losers:
Companies trading lower in after hours in reaction to earnings/guidance: MRTN -2.3%, WAL -1.5%
Companies trading lower in after hours in reaction to news: SPNE -4.6% (stock offering), SYBX -2.8% (stock offering), SPLK -2.6% (CTO resigns), DTIL -2.1% (reacquires global rights to allogeneic CAR T programs; also names new Chief Medical Officer), CSX -0.9% (closes first phase of $525-mln rail transaction with Virginia), VIAC -0.4% (to integrate CBS News and CBS Television stations into one divisional and leadership structure), FB -0.1% (announces new tools and features to help businesses connect with customers online)
Golden age of rich America’s tax evasion may be drawing to close
Properly funding the IRS would improve collection and reduce pressure to raise headline rates
A trillion here, a trillion there and pretty soon you are talking real money. Were the US Internal Revenue Service to collect all that it is owed under current law, the $1tn yearly shortfall would pay for Joe Biden’s infrastructure bill four times over. Most of this evasion is carried out by the top 1 per cent of US taxpayers — the group that complains most about headline rates. In practice, the rich pay considerably less than advertised.
Rather than increase US tax rates, therefore, Biden’s priority should be to enforce the ones that he inherited. The $1tn annual evasion, which Chuck Rettig, head of the IRS, estimated in testimony to the US Senate this week, does not include the breaks and shelters that make the US tax code so notoriously leaky. Last year, 55 of America’s largest companies, including Nike and FedEx, paid nothing in corporate taxes in spite of collectively making about $40bn in profits.
The headline US corporate income tax rate is 21 per cent, which Biden wants to lift to 28 per cent. However, the official rate is not the point. The effective US corporate tax rate is just 11.2 per cent, which is below that of Ireland. The US Chamber of Commerce and the Business Round Table complain that the nation’s corporate taxes are higher than the western average. In practice, they end up close to the lowest. US tax collections amount to 1 per cent of gross domestic product, compared with a 3.1 per cent OECD average.
All such avoidance is entirely legal. Biden plans to reverse some of this so-called tax base erosion by imposing a global minimum corporate tax. Yet in the absence of a more effective IRS, all that would accomplish is a change of headline. The gutting of the IRS is one of the most under-appreciated stories of the past decade of US government. Since 2011, the agency has lost almost a fifth of its budget in real terms, but roughly a third of its resources relative to GDP. Many of the 17,400 auditors that it has lost were its most experienced.
This has created a perverse situation in which the agency is now statistically as likely to audit Americans who qualify for the earned income tax credit — a negative income tax for people with a median income of $20,000 — as it is to investigate the top 1 per cent. Audits of the poorest are usually automated.
By contrast, it takes time and expertise to sift through the under-reporting or outright tax evasion of people whose income mostly derives from investments. In 2011, almost every single one of America’s top corporations was audited every year as a matter of course. That has fallen to below 50 per cent. Big US companies have enjoyed a golden era of tax avoidance, as have wealthy individuals. This may now be coming to an end.
In last week’s “skinny budget”, the White House proposed boosting the IRS budget by slightly more than 10 per cent to $13.2bn. That would go some way towards bolstering a very demoralised agency. Richer Americans would become warier of being audited. The IRS’s never-ending audit of former president Donald Trump’s history of negative tax payments could actually be wrapped up.
Yet the White House’s proposal is a surprisingly modest increase, given how much bang Biden would get for his buck. Every dollar he puts into the IRS could get up to $10 in return, according to one very credible estimate. Moreover, every dollar in better enforcement would be a dollar less pressure to raise the headline rate. Even if the rebooted IRS could close just a fifth of that gap, it would almost fully pay for Biden’s $2.3tn infrastructure bill.
Properly funding the IRS is the political equivalent of low hanging fruit. Surveys show that a clear majority of Americans, including Republicans, are happy to pay their taxes. What enrages them is the idea that others are not paying their fair share. Anyone who drives round the country has seen suburban gardens with grazing livestock — a tax break meant for actual farmers. They know that tax complexity is a friend of those who can afford lawyers and accountants. At 4m words, the US tax code is four times longer than JK Rowling’s Harry Potter book series — and offers far more scope for wizardry. Now that is a top line worth studying.
Italian football at war over €1.6bn private equity deal
Serie A boss Paolo Dal Pino faces no confidence motion from top clubs over his role in proposed stake sale
A group of elite Italian football clubs has demanded the resignation of the president of the country’s top league over his handling of a radical €1.6bn deal to bring outside investors into one of the world’s best-known competitions.
Paolo Dal Pino has been instrumental in directing a proposed transaction to sell 10 per cent of a new company that will manage Serie A’s broadcasting and commercial rights to a consortium including private equity groups CVC Capital Partners and Advent International and Italian investment group Fondo FSI.
The call for his resignation signals the level of opposition to the deal among elite Italian teams, which are concerned about losing control of the contest. Several club executives said there was no longer enough support for it to pass.
According to correspondence seen by the Financial Times, seven clubs including Juventus, Inter Milan, Napoli, Lazio, Atalanta, Fiorentina and Hellas Verona wrote to the Serie A president this week demanding his resignation.
The letter from the clubs states that the group had made “previous objections to your conduct as president of the Lega Serie A” and that Dal Pino’s actions had “led to the need to represent to you our irrevocable no confidence with regards to your role, conduct and management as president of the League”.
Dal Pino, who is also chief executive of telecoms group Telit Communications, has led the negotiations with the investment consortium over selling a stake in a new company that would manage Serie A’s broadcasting rights, international trademark and commercial development.
The deal would be the first of its kind in European football, offering the opportunity to buy into one of the top competitions in the world’s favourite sport. Germany’s Bundesliga and Spain’s La Liga have all begun exploring similar auctions.
However CVC and Advent’s latest offer lapsed in early February and the private equity groups have not been actively working on the deal since then, one person close to the process said.
People with knowledge of their views said private equity groups had hoped to secure agreement on the stake sale after the Serie A clubs had approved a hotly debated €2.5bn media rights sale to sports streaming service DAZN last month.
An executive at one of Serie A’s top clubs said that Dal Pino had mismanaged the stake sale, saying the decision appeared to be driven primarily by the financial problems caused by the pandemic rather than the long-term interests of the sport.
Serie A, Juventus and Inter Milan declined to comment. CVC and Advent did not immediately comment.
Gapping down
In reaction to earnings/guidance:
- ETH -2.8% (guides MarQ EPS above dual-analyst est),
M&A news:
- BSY -2.7% (to acquire INRO Software)
Other news:
- MAXN -10.4% (stock offering), GBX -4.1% (convertible notes offering)
- REI -2.7% (provides update on drilling program),
- PCRX -1.4% (seeks court injunction seeking retraction of articles pertaining to EXPAREL)
- GSK -1.4% (provides update on feladilimab; will stop enrolling patients in phase 2 trials),
Analyst comments:
- KSU -0.4% (downgraded to Equal Weight from Overweight at Wells Fargo)
- INTC -0.8% (downgraded to Underperform from Mkt Perform at Raymond James)
- OC -1.3% (downgraded to Neutral from Buy at Northcoast)
Gapping up
In reaction to earnings/guidance:
- APXT +16.2% (provides guidance for AvePoint), AEO +6.1% (guides Q1 revs above consensus), CMPR +5.7% (guides MarQ revs above single analyst est), VSH +3.4% (issues upside Q1 guidance) UNH +2%, HROW +1.8%, BLK +1.6%, RAD +1.5%, TGNA +0.9% (guides Q1 revs above consensus),
M&A news:
- DELL +7.3% (DELL announces planned spin-off of 81% equity ownership of VMW), PPD +6.3% (to be acquired by Thermo Fisher Scientific (TMO), VMW +2.8% (DELL announces planned spin-off of 81% equity ownership of VMW),
Other news:
- KXIN +16.5% (announces approval by NASDAQ of Haitaoche acquisition)
- FSRV +9.7% (partners with custom PC retailer group Cybertron International, Inc. )
- IMUX +6.7% (announced interim data from Cohort 2 of its phase 2 EMPhASIS trial of IMU-838 in relapsing-remitting multiple sclerosis)
- MRNA +3.1% (met with Nexus Pharma re vaccine manufacturing, according to Reuters)
- DEH +3.1% (and Vicarious Surgical announce definitive business combination agreement )
- NVAX +2.7% (to participate in a Phase 2 trial which combines COVID vaccines)
- VLRS +2.1% (announces additional liquidity preservation initiatives, $100 mln of working capital relief), CMPS +1.4% (New England Journal of Medicine publishes exploratory study showing signals of positive activity in COMP360 psilocybin compared with escitalopram for major depressive disorder)
- MLCO +1.2% (becomes first in Macau and the Philippines to receive esteemed third-party Responsible Gaming accreditation RG Check ), FGEN +1.1% (FDA has granted Rare Pediatric Disease Designation for the company's anti-CTGF antibody, pamrevlumab, for the treatment of patients with Duchenne muscular dystrophy),
Analyst comments:
- COIN +7.8% (initiated with a Buy at BTIG)
- AHH +4.8% (upgraded to Buy from Neutral at DA Davidson)
- BUD +4.2% (upgraded to Overweight from Equal Weight at Barclays)
- CRWD +2.5% (initiated with a Buy at Deutsche Bank)
- YI +1.9% (resumed with a Buy at Citigroup), HSY +1.7% (upgraded to Buy from Neutral at Goldman)
- CDLX +1.6% (upgraded to Overweight from Equal Weight at Wells Fargo), TDOC +1.5% (initiated with a Buy at Needham),
Thales, champion de la souveraineté en France
ABONNÉS
EXCLUSIF - Quelles sont les entreprises les plus contributives à la souveraineté française? Thales domine le classement Vélite des entreprises du CAC 40 sur ce critère, ArcelorMittal ferme la marche.
Le théorème de Thales, champion de France? "Notre contribution à la stratégie de souveraineté s’appuie sur la recherche, la conception et la production, explique Philippe Keryer, membre du comité exécutif et directeur général adjoint stratégie, recherche et technologie. Ce triptyque est fondamental, il impose d’investir de manière constante dans les hautes technologies". Performante sur tous les critères, l’entreprise spécialiste de l’électronique appliquée à l’aérospatiale, la défense ou la sécurité ressort largement en tête parmi les entreprises du CAC 40 lorsqu’on mesure sa contribution à la souveraineté française, selon la méthodologie mise en place par le cabinet de conseil en intelligence économique Vélite. Pour la première fois, un acteur indépendant évalue le CAC 40 sur cette dimension devenue cruciale. "Au début de la crise, les Français se sont aperçus qu’ils étaient très dépendants de l’étranger pour les approvisionnements stratégiques, raconte Pierre-Marie de Berny, directeur associé du cabinet Vélite. Tout à coup, on s’est mis à parler de souveraineté en France. Chez Vélite, le sujet nous tient forcément à coeur: nous accompagnons quotidiennement des grands groupes sur des appels d'offres hautement stratégiques à l'international."
Spécialiste de l’intelligence économique, le cabinet de conseil Vélite accompagne les équipes dirigeantes de grands groupes dans leur conquête de marché en France et à l’export. Il les aide à "mieux décoder leurs marchés et à gagner des appels d’offre stratégiques sur les cinq continents". Le cabinet a collecté et passé au crible environ 2.500 données pour établir ce palmarès. Un travail de bénédictin mené avec la collaboration de Frédéric Gonand, docteur en économie, professeur associé à Dauphine et ancien conseiller de Christine Lagarde à Bercy. Pour mener les travaux, il a d'abord fallu définir la souveraineté. Selon Vélite, elle consiste à "augmenter et protéger la puissance économique d’un état de telle sorte qu’elle bénéficie à l’ensemble de sa population et de ses territoires". Vélite a conçu les indicateurs et réalisé ses analyses à partir d’investigations documentaires et de sources ouvertes.
A cette aune, derrière Thales, Safran brille pour son indépendance, comme pour son activité dans le dépôt de brevets. Le classement fait aussi la part belle au secteur de l’énergie. Total se distingue sur le critère de la puissance économique, "typique de l’énergie, car le groupe est incontournable pour l'accès aux ressources vitales du pays", explique Pierre-Marie de Berny. Il est porté par l’innovation et "sa très bonne réputation dans le monde qui contribue à l’image de la marque France". Le leader mondial du luxe LVMH profite notamment de son indépendance "sur le modèle des entreprises familiales comme Dassault et Bouygues" et devance L’Oréal, Hermès et Kering.
ArcelorMittal, bon dernier
A contrario, le classement sanctionne plusieurs de nos grandes entreprises cotées. Teleperformance ne compte que 23% d’actionnariat français et Pernod-Ricard 25%. Legrand et Publicis ne donnent pas d’informations sur plus de 80% de leur actionnariat et n’indiquent pas leurs emplois en France. Bon dernier, ArcelorMittal "s’illustre par de nombreuses destructions d’emplois dans les territoires depuis son passage sous pavillon indo-néerlandais en 2006", explique Pierre-Marie de Berny. La souveraineté tricolore a sa lanterne rouge.
Méthodologie: Cinq critères pour noter les entreprises du CAC 40
Vélite utilise une méthodologie de l’OCDE pour évaluer la contribution d’une entreprise du CAC 40 à la souveraineté économique de la France. Et distingue 5 rubriques regroupant 19 indicateurs. – Le savoir-faire ("know how"), mesuré à partir de l’activité de R&D (brevets, moyens mobilisés, formations spécifiques). – La contribution au développement économique du territoire et à la solidarité nationale, mesurée à partir du nombre d’emplois créés en France et de son évolution, de la solidarité avec les PME françaises, et de l’intensité des actions sociales. – La contribution au rayonnement et à l’influence française ("soft power"): réputation médiatique, actions de promotion de la langue française, sponsoring et partenariats. – La contribution à la puissance économique française ("hard power"): rang mondial sur une activité critique, capacité d’investissement, acquisitions et chiffre d’affaires à l’international. – L’indépendance vis-à-vis de puissances étrangères: nationalité des actionnaires et du top-management, vulnérabilité à une OPA, localisation et protection des activités critiques, sensibilité aux enjeux d’intelligence économique. Les indicateurs sont pondérés en fonction de leurs rangs. La totalité de la méthodologie est accessible sur cabinet-velite.com.
Electric-Vehicle Startup XPeng Bets on the Tech That Tesla Rejects
One of three U.S.-listed Chinese EV makers, it is relying on innovation to overtake its rivals
GUANGZHOU—Once a Tesla Inc. TSLA -3.95% fan who owned four of its vehicles, He Xiaopeng, co-founder of Chinese electric-vehicle startup XPeng Inc., XPEV -7.30% now wants to overtake the car company that originally inspired him.
While acknowledging Tesla as an inspiration, Mr. He said XPeng—one of three Chinese EV companies listed in the U.S.—can win using innovation, an area in which Chinese technology companies have become increasingly formidable.
“We have a saying in China,” Mr. He said in an interview Wednesday at XPeng’s headquarters in the southern city of Guangzhou. “To defeat someone, you need to do something different.”
XPeng, alongside its U.S.-listed peers Li Auto Inc. and Nio Inc., has taken investors on a wild ride over the past eight months.
The company’s August listing on the New York Stock Exchange valued it at $8 billion. By November its value had jumped to nearly $58 billion. Now it is back down to about $27 billion. In March, the Shanghai-based research firm Hurun Report said Mr. He was worth $11 billion.
XPeng unveiled its third production vehicle, the P5 sedan, in Guangzhou on Wednesday. Deliveries of the P5, which is said to have a 372-mile driving range, are due to start this year. The company didn’t announce the car’s price, though it will be lower than the in-production P7 sedan, which starts at roughly $35,000 and is a direct competitor of the made-in-China Tesla Model 3, which costs the equivalent of about $38,000.
Considered by some analysts as the most tech-centric of China’s EV players, Xpeng deploys a voice-operated user interface in its cars, and an autonomous-driving system for use on stretches of highway with 5G internet coverage.
It recently tested the software by sending a fleet of its cars on a 2,200-mile trip from Guangzhou to Beijing, and logging 0.71 human-operator interventions per 100 km (62 miles)—a new benchmark for self-driving cars, the company claimed. On the roughly 200-mile Shanghai to Nanjing leg attended by the Journal, the car’s human operator intervened once, swerving when the car failed to notice a bus changing lanes ahead.
XPeng claims its autonomous-driving systems, which have previously used radar and cameras, will be significantly enhanced by the addition of lidar, which uses lasers to scan the vehicle’s surroundings—and which Tesla Chief Executive Officer Elon Musk has dismissed as a waste of money. Xpeng says the new P5 is the first Chinese EV that comes with lidar as standard.
XPeng sold 13,340 vehicles in the first quarter of 2021 and likely needs to sell as many cars every month to break even, said Tu Le, founder of Sino Auto Insights, a consulting firm. Mr. He said in the interview that he was focused on building revenue and growing XPeng’s reputation, rather than on profit.
Tesla sold 69,280 vehicles in China in the January-to-March period, according to the China Passenger Car Association, while Nio sold 20,060 cars.
XPeng is in a strong position as a car company whose main asset is its software, Mr. Le said. “The post-1990s generation in China are all digital natives, and they like Chinese brands,” he said. “What XPeng is doing plays very well with that young Chinese consumer.”
At a moment of rising nationalism in China, homegrown brands have generally been gaining ground on Western ones among local consumers, from clothing to cars.
Mr. He this month announced plans for a third XPeng plant in Wuhan; its second plant, in Guangzhou, is still being built. The three plants will give the company an expected production capacity of 300,000 cars a year.
XPeng last year unveiled a prototype flying car that Mr. He said was far from being a gimmick and potentially key to the company’s future. The company’s growing fleet of EVs is just a starting point for a company with ambitions to define “the future commute,” he said.
Originally a computer programmer, the 43-year-old Mr. He, who comes from the central city of Huangshi, founded UCWeb Inc., a mobile-browser developer, in 2004. He sold the company to Alibaba Group Holding Ltd. a decade later in what was then China’s biggest internet merger, and worked as a senior Alibaba executive until 2017 before leaving to run XPeng, which he had co-founded as an investor in 2014.
The birth of his son in early 2017 jolted Mr. He into starting something new, he said. He settled on EVs despite having no automotive background and, by his own admission, regarding the overheated EV sector as “a crazy business.”
“I wanted my son to think that he had a cool dad,” he said.
Unable to persuade Alibaba to let him develop an EV in-house, Mr. He joined XPeng as full-time chief executive and brought the e-commerce giant on board as an investor. Alibaba owns 12.5% of the company, while Mr. He holds 22.7%. Alibaba didn’t immediately respond to a request for comment.
Mr. He said he only fully realized the difficulty of teaming software engineers with car mechanics when the company produced its first working prototype in late 2017.
The XPeng team was moved to tears when the vehicle rolled out: Engineers wept with joy because the machine worked, while the software developers were heartbroken because to them the unpainted and incomplete test-model “looked like trash,” Mr. He said.
The experience taught Mr. He and his software colleagues that developing a competitive car would be an arduous, yearslong process.
Mr. He said his priority was to build XPeng into a global company rather than to outflank Tesla or other competitors, but there is open enmity between Mr. He and the company that once inspired him.
In 2019, Tesla filed a lawsuit against a former employee who had quit Tesla to join XPeng, alleging that he had downloaded its Autopilot source code with a view to handing it over to his new employer. XPeng was never a party to the legal case and said it is “confident we have engaged in no wrongdoing.”
In November, Mr. Musk trashed XPeng’s autonomous-driving system, saying on Twitter that “they have an old version of our software” and alleging that intellectual-property theft “was just an XPeng problem. Other companies in China have not done this.”
Mr. He fired back on Weibo. “It seems XPeng’s next-generation autonomous driving architecture…has made someone in the West feel very upset,” he said.
“Elon Musk is an amazing person and a great entrepreneur, despite some flaws,” Mr. He said in the Wednesday interview. Tesla didn’t respond to a request for comment.