TheChek News Flow

Shares in the company have risen almost 60% since its IPO in September

The Hut Group, the Manchester-based ecommerce company, said it now expects revenue for the current year to increase by between 30 and 35 per cent, up from previous guidance of 20 to 25 per cent growth after a strong start to the year.

The company, which floated on the stock market in September, added that revenue in the final quarter of the year to December was £559m, up 51 per cent compared with an estimate of 40 to 45 per cent growth given at the start of that month.

Growth was particularly strong at its online beauty business, where revenues rose 66 per cent to £298m.

Hut Group also announced fresh contract wins and partnerships for its Ingenuity ecommerce technology business, including soft-drinks maker Vimto and paints group Akzo Nobel. However, revenues from Ingenuity are still small in a group context, totalling £40m in the fourth quarter.

Shares in the company are up almost 60 per cent since its initial public offering and its market value, at £7.6bn, is well above the threshold required to trigger large incentive payments to a number of staff, including founder and chief executive Matthew Moulding.

Hut Group shares rose more than 2 per cent after the update on Tuesday morning.

The new forecast from Hut came as Very Group, the credit-based online retailer owned by the Barclay brothers, marked its best Christmas trading period with retail sales up 18 per cent in the seven weeks to December 25.

Homewares and electrical goods were the best sellers for the Liverpool-based retailer, as has been the case for many rivals. Sales in many subcategories rose more than 40 per cent as families spent cash on their homes that might have gone on holidays or meals out.

* Abcam Raised to Outperform at RBC; PT 1,750 pence

* BASF Raised to Outperform at Bernstein; PT 78 euros

* Dialog Semi PT Raised to 60 euros from 50 euros at Deutsche Bank

* Mediolanum Raised to Accumulate at Banca Akros (ESN); PT 8 euros (+)

* Infineon PT Raised to 40 euros from 33 euros at Deutsche Bank

* Siltronic PT Raised to 150 euros from 135 euros at Deutsche Bank

Despite the concerning increase of new COVID-19 infections, the Democratic win in the Georgia runoffs, the OPEC oil cuts and stronger-than-expected December data provided solid support for more rotation across and within assets. US 10y rates broke the 1% threshold with breakeven rates now above 2% and real rates moving higher.

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Steris, Cantel Medical discussing a mostly stock deal, according to people familiar with the matter

Steris PLC is in talks to combine with Cantel Medical Corp. , according to people familiar with the matter, in a deal that would bring together two big providers of sterilization products.

The companies are discussing a mostly stock deal that could be completed as soon as Tuesday, assuming talks don’t fall apart, the people said.

Cantel has a market value of around $3.5 billion, while Steris’s is around $17.3 billion.

Dublin-based Steris, which has a U.S. presence in Mentor, Ohio, sells sterilization equipment, surgical tables, and other products and services used in hospitals and laboratories.

Little Falls, N.J.-based Cantel is similarly focused on sterilization, making items including disposable products used in endoscopy procedures, towels and bibs used in dental offices, and surgical masks.

A combination would offer cost-cutting opportunities and expand Steris’s reach into the dental market. Both companies have done deals of their own in recent years: Steris paid $850 million to buy Key Surgical late last year, and Cantel paid $775 million to buy dental-equipment maker Hu-Friedy Manufacturing in 2019.

The coronavirus pandemic has been a mixed bag for the companies’ businesses. On the one hand, health care providers and their suppliers have been hurt by a decrease in elective medical procedures as patients avoid unnecessary hospital visits. On the other, demand for certain supplies and protective equipment has been jumping as the population tries to beat back the pandemic.

When reporting its quarterly earnings in December, Cantel said its sales were hurt by the reduction in medical procedures but that revenue per procedure had increased because of higher sales of personal protective equipment. Cantel’s chief executive, George Fotiades, said the company expects the volume of medical procedures to fully recover as more people receive the Covid-19 vaccination.

Steris’s chief executive, Walter Rosebrough, said on its quarterly earnings call in November that the company’s life-sciences unit had a jump in revenue, partly because of customers buying supplies in anticipation of Covid-19 vaccine production. The company’s health care segment was hurt by a decline in medical procedures, while its sterilization unit benefited from increased demand triggered by the pandemic.

Steris is set to present Wednesday at JPMorgan Chase & Co.’s annual health care conference, which is often a forum for deal announcements.

The combination of electric vehicle mania and blank cheque companies has proved a volatile one

Automotive tech start-ups catapulted on to the US stock market via blank cheque vehicles have together amassed a market capitalisation of approaching $60bn even as several are yet to book a single dollar of revenue or make a product. 

The electric vehicle sector proved fertile hunting ground last year for special purpose acquisition vehicles, which take companies public by raising money from investors and then cutting deals.

After stock markets recovered from a March meltdown when the pandemic erupted, blue-chip mutual funds, private equity firms and retail investors ploughed money into Spacs, which often bought companies with grand ambitions but limited track records.

With technology disrupting the automotive industry, investors have raced to secure exposure to potential winners — whether battery makers, manufacturers of other forms of power storage or developers of the “lidar” sensors that some believe are key to the development of self-driving cars.

Yet according to a Financial Times analysis, the nine auto tech groups that listed via a Spac last year expected revenues of just $139m between them for 2020. They include QuantumScape, a battery company backed by Bill Gates and Volkswagen; the hydrogen truck start-up Nikola; and the lidar company Luminar Technologies.

While the past 12 months proved a hot market for tech groups doing conventional IPOs, bankers and lawyers say that the Spac process gives companies — and the vehicles acquiring them — far greater latitude in disclosing future financial projections. The nine auto tech companies, for example, together predict their revenues will reach $26bn by 2024. 

Spacs often justify stratospheric projections by pointing to large “addressable markets” such as that for electric vehicles, where even a tiny market share can be lucrative and make valuations based on predictions of future revenues appear cheap.

“There is a regulatory arbitrage between the Spac model and traditional IPOs,” said Gary Posternack, head of global M&A at Barclays.

“In the marketing process around Spac combinations, there is an ability to discuss projections or forward guidance, whereas in regular-way IPOs, companies can’t provide that information. The regulators may ultimately try to narrow this gap, but for now the difference is creating real opportunities,” he added.

The money pouring into the sector — and not just via blank cheque vehicles — is a bet that electric vehicles will eventually become ubiquitous. The market research firm IDTechEx estimates EVs will constitute up to 80 per cent of the global market by 2040, while heavyweights such as Volkswagen and General Motors are investing billions of dollars to develop their own models.

But even if EVs do become dominant, it will not happen overnight. And as the talismanic performance of the electric vehicle pioneer Tesla — now with a market value of almost $800bn — helps underpin the investment mania for car tech groups, venture capitalists who specialise in backing risky start-ups warn of the potential dangers.

“If you project that your first revenue is in 2025 and you have to build out a model based on a product you haven’t built yet, I think that’s really hard,” said Arjun Sethi, partner at Tribe Capital, a venture capital firm based in San Francisco. “It’s one of the reasons you have venture capitalists.”

QuantumScape’s short history as a public company underlines the volatility investors face. Riding a wave of demand, shares in the group peaked at $131 in late December, a thirteen-fold increase on the $10 at which Spacs typically list.

Spun out from Stanford University, QuantamScape released data that it says shows advances in solid-state battery technology, which could help improve the driving range of electric vehicles. The market capitalisation of the company, which does not expect any revenues until 2024 and any profits for three years after that, last year briefly eclipsed that of Ford and Fiat Chrysler.

However, the stock has since plunged 60 per cent from its peak. QuantumScape did not respond to a request for comment.

Luminar Technologies is another Spac with a brief but so far striking life as a public company. Shares in the group, which develops laser-based imaging sensors, or lidars, that can be used for autonomous driving, have almost doubled since listing in December.

Founded by 25-year-old engineer Austin Russell, the Silicon Valley company has signed a production agreement with Volvo due to begin in 2022, setting it apart from competitors. But its roughly $10bn valuation dwarfs the market for automotive lidar, which Northland Securities analyst Gus Richard estimates will be worth $2.5bn in 2025. Luminar declined to comment.

One senior Wall Street lawyer who has worked on numerous Spac deals says that the enthusiasm of retail investors has been a key feature of the mania for the car tech sector.

“If the trading strategy is ‘I’m going to buy across the spectrum, because there will be winners and I know there will be losers’ then that’s not a crazy investment strategy,” the Spac adviser said. “But not all the electric vehicle companies will survive. They just can’t, there’s too many of them.”

Retail investors were among those caught out by the crisis that engulfed Nikola, a US electric truck start-up and early beneficiary of the investment craze. After peaking in June, Nikola shares tumbled in September after shortseller Hindenburg Research alleged that the company was an “intricate fraud”. Its founder Trevor Milton, who stepped down in September, has denied any wrongdoing.

Despite the turbulence, shares in all nine of the auto tech companies that used Spacs to go public last year trade well above $10, with a median price above $20. Indeed, shares in almost three quarters of the 37 completed Spac deals last year are trading above $10. More than a third are trading above $20.

Nor is there any sign that the wave of interest has peaked. Lucid Motors, a Californian electric vehicle group controlled by Saudi Arabia’s sovereign wealth fund that has yet to deliver a single model, is in talks to merge with one of the Spacs launched by former Citigroup investment banker Michael Klein, according to people with direct knowledge of the matter. 

However, some caution that the combination of the mania for auto tech and Spacs is likely to remain a combustible one this year.

“It’s not sustainable because at some point things are going to normalise and investors are now buying these things blindly,” said a senior equity sales bank executive.