TheChek News Flow

A setback with India and ongoing talks with the U.S. test Beijing’s rhetoric over lowering global barriers.

SHANGHAI — Xi Jinping, China’s top leader, broadly endorsed free trade principles and promised to welcome foreign investment in a speech on Tuesday, but a setback with India and a lack of details toward ending the punishing trade war with the United States are testing Beijing’s ability to prove it can make a deal.

Speaking at the opening of the second annual China International Import Expo in Shanghai, Mr. Xi indirectly criticized the Trump administration when he briefly denounced unilateralism.

“Economic globalization is a historical trend,” he said, comparing the momentum to the world’s great rivers. “Although there are sometimes some waves going backward, and even though there are many shoals, the rivers are rushing forward and no one can stop them.”

Most of Mr. Xi’s remarks were devoted to promising that China would maintain its long-running programs of economic reform and opening up. Many Western economists have suggested that during his seven years in power, Mr. Xi has gradually shifted China’s economy back toward a greater reliance on domestic industries, especially state-owned enterprises.

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Mr. Xi sought to portray a different image on Tuesday morning, saying that the Communist Party’s top leaders in a meeting last week reaffirmed the principle that China must engage more with the rest of the world.

“China will open its doors only wider to the world,” he said. “China will adhere to the fundamental state policy of opening up.”

The question is whether China will open up fast and far enough for the Trump Administration, which has made Beijing’s management of the world’s second largest economy a major sticking point toward resolving the trade war.

Chinese and American negotiators reached the outlines of a “first phase” trade agreement in Washington on Oct. 11. The framework calls for China to make large-scale purchases of American farm goods and improve protections for intellectual property. In exchange, the Trump administration committed to roll back at least some of its recent increases in tariffs on Chinese goods. The two sides have been working out the details ever since.

Previous plans for Mr. Xi and President Trump to conclude a deal on the sidelines of the Asia-Pacific Economic Cooperation summit meeting at the end of next week in Chile were thrown into disarray when the Chilean government canceled the meeting because of street protests in the capital, Santiago. Mr. Trump has suggested that a signing could be held in Iowa instead.

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Mr. Xi did not mention on Tuesday when, where or even whether an agreement might be signed.

The opening of the import expo also came the day after a mixed outcome from seven years of trade talks strongly backed by Beijing to produce a free-trade agreement that would span much of Asia.

Senior officials from 10 Southeast Asian nations plus China, Japan, South Korea, Australia and New Zealand mostly resolved their differences in talks ending in Bangkok on Monday, and hope to sign an agreement next year, the Thai government announced on Monday after hosting the talks.

China had high hopes for the agreement, known as the Regional Comprehensive Economic Partnership. Whatever way the trade war with Washington ends, the prospect of more tensions between the two countries has put pressure on Beijing to open more markets for its companies and factories.

But in a setback for trade negotiators, India announced on Monday that it would not join the new free trade area. India had participated in the negotiations from the beginning.

Since the 15 other countries already have a variety of free trade agreements among each other, the addition of India, with few such agreements, was supposed to be the main benefit of the new pact. But Indian officials have worried that cutting tariffs would mean a flood of Chinese manufactured goods that might put Indian factories out of business.

India had its own free trade demands that China was wary of meeting. India sought a pact that would allow it to export its vast array of low-priced, generic pharmaceuticals to China — a potent source of competition that China’s pharmaceutical industry resisted.

India also asked for broader access to the Chinese market for its formidable business outsourcing industry, including easy visa access for Indian software engineers to come work on projects in China. With China’s tech industry already starting to slow and lay off workers, however, that proposal received a frosty reception from Beijing.

Mr. Xi nonetheless welcomed the outcome of the Bangkok negotiations, telling import expo attendees that he learned of the result with “hope that the agreement will be signed into force as soon as possible.”

China’s trading partners and business groups are pushing Beijing to do more on other fronts to knock down trade barriers.

For example, China is trying to finalize by January the regulations for a new legal code governing foreign investment. The National People’s Congress, China’s rubber-stamp legislature, approved the new legal code last March, but it was little more than a framework, with some critical issues addressed by only a single sentence and the details left to be resolved in the regulations.

Carlo Diego D’Andrea, the chairman of the European Union Chamber of Commerce in Shanghai, said on Monday that draft regulations released last month offered some improvements. But by preserving a separate legal code for foreign investors, he said, the new arrangement ensures that foreign businesspeople would not be treated equally to domestic investors.

At the same time, China continues to impose many rules that deeply frustrate foreign investors, he said.

“You have hundreds of regulations and indirect barriers that make your life miserable doing business here,” Mr. D’Andrea said.

The import expo was designed to promote an image of China as a big customer for foreign exporters and as a proponent of free trade. More than 3,000 companies from around the world sent delegates or opened exhibit booths at Shanghai’s immense convention center, which has five times the exhibition space of the Javits Center in New York City.

For all of China’s difficulties in striking deals, other global leaders have echoed Beijing’s criticism of the Trump administration. Mr. Trump has picked trade fights with allies and rivals alike, upsetting a global trade order that underpins much of the world’s economic activity.

President Emmanuel Macron of France, speaking after Mr. Xi at the opening ceremony, also indirectly criticized the Trump administration’s confrontational approach to demanding trade policy changes from China.

“Should we just resort to unilateralism, tariffs and the law of the jungle?” Mr. Macron asked. “Is that the way forward? I don’t think so.”

Critics say Tokyo has surrendered its leverage but others argue it made important gains

Greetings from Tokyo, where it has been a slow start to the week for the FT bureau given headaches induced by England’s disappointing defeat to South Africa in the final of the Rugby World Cup. But the tournament was a huge success for Japan, on and off the pitch — a reminder, were any needed, of what the country can achieve when it sets its mind to it.

Japan also believes it is doing well in trade, striking big pacts with the EU and the Trans-Pacific Partnership, but, as we discuss below in today’s main piece, the recent US deal is more controversial. Today’s chart of the day looks at Cameroon’s exports to the US after Donald Trump slapped trade restrictions on the country last week, while the obvious policy watch today is whether and when the US and China will sign their phase one agreement, potentially easing the recent trade wars.

US-Japan trade

The US-Japan deal leaves many important areas of trade, including automobiles, untouched © Bloomberg

The recent US-Japan free trade deal, struck in September at breakneck speed, is something of an oddity. On one hand, it is a strikingly conventional piece of trade liberalisation, under which Japan cuts tariffs on beef and other foodstuffs while the US cuts tariffs on a miscellany of goods, including machine tools, musical instruments and green tea. There is a separate agreement on digital trade.

On the other hand, the deal leaves many important areas of trade, including automobiles and almost all services, untouched. As a result, many experts question whether it meets the World Trade Organization’s requirement to cover “substantially all the trade between the constituent territories”.

Japanese critics say that by cutting its tariffs on beef, Tokyo has surrendered its leverage with the US, and will never be able to get rid of the remaining US tariffs on automobiles and trucks. In a piece titled “The defeatism of calling the US-Japan deal a win-win”, the Newsweek Japan columnist Akihiko Reizei takes the Japanese negotiators to task for their failure to get anything on the crucial issue of car parts and for throwing the Japanese market open to US technology giants such as Amazon and Google.

But according to one Japanese negotiator, this is a “simplistic analysis”. Based on interviews with a number of officials — including an on-the-record conversation with the FT last week with chief negotiator and now foreign minister Toshimitsu Motegi — here is the case that Japan got a good deal.

First, Section 232 tariffs. Mr Motegi said the US had given “unusually clear” assurances, both in the leaders’ summit and their joint statement, that it would not impose national security tariffs or import quotas on Japanese automobiles. That is implicitly backed up by the ability of either side to terminate the deal by giving four months’ notice. If the US did impose Section 232 tariffs, Japan could quit the deal.

Mr Motegi also said the deal committed the US to negotiate on auto tariff reductions, though whether that means much to US president Donald Trump is an open question.

Japan’s leverage or lack thereof is an issue. The reduction in tariffs on beef was a big card to play. However, Japan still has others: the deal did not touch rice, forestry or fisheries. (One cynical ex-official suggests that Mr Trump had little interest in the rice farmers of Democratic-voting California.) What is more, beef tariffs will never fall to zero in any of Japan’s trade deals and, as the country’s farming population ages and shrinks, its need to protect the farming sector will diminish.

On exports, Mr Motegi said he was able to get a reduction of tariffs in areas where Japanese companies “have a high interest in exporting or the trade volume is great”. Machine tools are a big industry for Japan; they will now get a leg up over German rivals. The inclusion of green tea, melons, soy sauce and a quota for Wagyu beef also points to a desired future for Japan as an exporter of high-end luxury foods.

The digital part of the deal is held to be an example of Japanese prime minister Shinzo Abe’s concept of “data free flow with trust”, which he pushed as chair of the G20. Japan hopes to internationalise parts of the deal. As the home of a considerable video game and animation industry, it also believes it can hold its own in digital trade with the US.

Ultimately, the question is whether Japan meets its strategic goals, and for Tokyo, the security relationship with the US always comes first. The US may have got more of what it wanted in the short-term, but Japan made some gains, and Mr Abe has kept his close relationship with Mr Trump intact. In that sense, it truly was a win-win.

Charted waters

The US president last week removed Cameroon’s preferential status under the African Growth and Opportunity Act (AGOA), citing human rights concerns. This chart looks at the country’s major exports to the US, with crude oil playing a much bigger role in the past two years.

One in 10 new cars sold in the UK in October was a hybrid or electric vehicle, bolstered by sales of battery-powered cars tripling, latest figures show.

So-called alternatively fuelled vehicles accounted for 9.9 per cent of the market, up from 6.9 per cent in the same month a year earlier, as demand for green vehicles climbed against the backdrop of falling overall sales.

New car sales in Britain fell 6.7 per cent last month compared to October 2018, figures from the Society of Motor Manufacturers and Traders released on Tuesday showed.

Sales over the first 10 months of the year were 2m, 2.9 per cent down on last year and the lowest level for the period since 2013.

“The UK car industry will surely look back at 2019 as one of its gloomiest on record,” said Alex Buttle, director at vehicle comparison site Motorway.co.uk. “It’s unlikely new car sales are going to pick up materially before the end of the year, with consumers also now having a general election to get their heads around.”

The rise in green sales in October was driven by hybrids, which climbed almost a third to 7,950 vehicles, a market share of 5.5 per cent.

Fully electric cars saw sales triple to 3,162, taking their market share in the month to 2.3 per cent.

Meanwhile diesel vehicles saw sales fall for the 31st straight month, dropping a third to 34,666, or a quarter of all sales.

During September, overall new sales rose by 1.3 per cent, an anomaly because of a steep dive a year earlier. But it was the lowest growth rate among major European markets such as Germany, France and Spain.

Lagging consumer confidence is being blamed for the persistent soft market.

“The growth in alternatively fuelled cars is very welcome, showing increasing buyer appetite for these new technologies,” said Mike Hawes, SMMT chief executive. “The overall market remains tough, however, with October now the year’s eighth month of decline and in need of an injection of confidence.”

Ian Plummer, commercial director at online car marketplace Auto Trader, said: “Brexit is the driving force of this lack in confidence, with continued uncertainty around our exit from the EU. The upcoming general election will continue to cause further uncertainty around consumer purchase intentions.”

He added that the election, which is scheduled for December 12, was likely to have a relatively small impact on car sales because the last month of the year is traditionally a quieter period than the boom months of April and May.

SPDR Gold Trust, the world’s biggest gold ETF, sees inflows of $6.5bn this year

The amount of physical gold held by exchange-traded funds surged over the third quarter as investors looked for safe places to stash cash amid concerns over slowing global growth and looser monetary policy.

Demand for the yellow metal among retail and institutional investors more than doubled compared to the same quarter last year to reach 408.6 tonnes, of which almost two-thirds — 258 tonnes — was attributable to buying by ETFs, according to data from the World Gold Council, an industry-backed body. The balance of about 150 tonnes came from investors buying gold bars and coins directly.

Gold has been one of the best performing commodities of 2019, rising by almost 18 per cent to a six-year high above $1,500 an ounce.

The year’s advance has led some analysts to predict that gold could hit a record $2,000 an ounce within the next two years, topping the nominal highs of 2011. The rally has also given a lift to the share prices of major producers, including Barrick Gold and Newmont Goldcorp.

The precious metal has traditionally been seen as a haven and a store of value, as well as being less exposed to political risk than many other commodities. Its appeal has been burnished further this year by a huge stock of bonds trading at negative yields, which guarantee buyers a loss if they hold to maturity.

“Investors have increased their exposure to gold in response to low interest rates, negative yields, and geopolitical and economic uncertainty,” said Alistair Hewitt, a director at the WGC.

Last week, the US Federal Reserve announced its third interest rate cut of 2019, which it justified on the grounds of an uncertain global economic outlook. Its more cautious stance since the turn of the year has been mirrored by the European Central Bank and the Bank of Japan, among others.

“The biggest change this year has been the impact of the Fed. Last year everyone expected the Fed to raise rates [this year],” Mr Hewitt said. “The US [Federal Reserve] is important but gold is globally traded and more central banks have cut rates this year than any since 2009.”

Gold-backed ETF holdings rose to a record 2,855 tonnes, worth $136bn, in September. Demand from US-listed ETFs was particularly robust during the third quarter, said the WGC.

SPDR Gold Trust, the world’s largest physically-backed gold ETF, saw inflows of $6.5bn of gold over the nine months to September. At Blackrock’s iShares Gold Trust, inflows over the same period came to $2.9bn.

Gold has also been supported by purchases by central banks, especially in Turkey, Russia and China. Combined, the trio added almost 120 tonnes of gold to their reserves during the quarter, which puts purchases by public institutions on track for another record year. As a group, central banks have snapped up almost 550 tonnes so far this year.

However, consumer demand for gold jewellery took a hit, down 16 per cent to 460 tonnes, damped by falls in confidence in India and China.

But many analysts see the gathering economic gloom weighing in gold’s favour. Joni Teves, a precious metals strategist at UBS, said in a note that “the current environment remains supportive of gold — we continue to see higher prices ahead”.

In our latest in-depth report, BoF examines how the Italian brand’s limited-edition monthly drops became one of the most compelling new models for luxury.

MILAN, Italy – Moncler is a modern luxury success story. Its Chairman, Chief Executive and main shareholder Remo Ruffini bought the near-bankrupt heritage skiwear label in 2003, transforming it into an exclusive fashion brand that now generates more than $1.5 billion annually. To accomplish this feat, Ruffini reinvented Moncler’s marketing model not once, not twice, but three times over the course of 15 years.

In 2018, the Italian luxury brand embarked on its most ambitious overhaul yet, replacing its seasonal fashion collections with monthly collaborations featuring a collective of guest talents, including Valentino’s Pierpaolo Piccioli, Craig Green and Simone Rocha. It was a bid to keep pace with a fashion market that craves newness and innovation at the speed of Instagram, staying continuously present in the hearts, minds and social media feeds of consumers.

“You cannot talk to your customer every six months; you need to talk every day," Ruffini said at the time. "I hope the Genius strategy will get young kids, a young generation, talking about Moncler around the world.”

Talk they did, generating millions of dollars' worth of earned media value. They also turned up at Moncler boutiques in greater numbers, driving an uptick in sales. The strategy has inspired the likes of Tod’s and Calvin Klein to develop similar initiatives. But operationalising the approach was a massive undertaking for Moncler, requiring tighter coordination among departments, changes to company culture and heavy investment in logistics and delivery.

This case study goes inside Moncler to examine the mechanics of the company's 'Genius' strategy. While Ruffini and his executives don’t have all the answers, 'Genius' is one of the luxury fashion industry’s most compelling solutions to the dynamics of a post-internet world.

A surprising partnership between the British heritage handbag maker and one of Sweden’s coolest labels is launching today. BoF investigates why.

LONDON, United Kingdom — What does a British heritage brand, known for its craftsmanship and practical handbags, have to gain from a partnership with a Scandinavian fashion house with a streetwear edge?

Fashion collaborations — from the high-low mix of Karl Lagerfeld and H&M, to Supreme's tie-up with Louis Vuitton and Moncler's Genius Project — remain a clever tool to drive excitement, traffic and new consumers to brands.

A tie-up between leather goods focused Mulberry and Swedish luxury label Acne Studios is a little more surprising.

Design elements from both brands — like Mulberry's buckle straps and Bayswater shape, and Acne's twisted knot design and salmon-pink colour — have been married together in the 17-piece collection, which ranges from a £90 keyring up to the £1,295 Musubi Bayswater in Oak. The products will be stocked in both brands' key stores and websites, selected wholesalers and digital partners, including Farfetch, Selfridges, Nordstrom and Tmall.

But the collaboration makes good business sense for both brands.

For one, Mulberry could do with an injection of cool. It has a heavy weighting towards the British middle market where it is sold in department store chains popular among older generations and is widely stocked (it has 55 sale points in the UK alone). Mulberry sales slipped 6 percent last year, pushing the business into the red.

Sales have recovered somewhat, but collaborating with Acne, which has more elevated, limited stockists like Harrods and MatchesFashion, as well as credentials with a younger customer base, will expose Mulberry to a new fashion-forward shopper that is needed to boost its relevance.

"We have been friends with the team at Acne Studios for a long time and we share many of the same qualities," Chief Executive Thierry Andretta told BoF over email. "For Mulberry it allows us to bring something fresh and innovative to our customer that adds a twist to both our brands."

Innovating is key to keeping up with the pace of newness as desired by a social-media obsessed young generation, and Mulberry, while tapping trends like mini-bags and limited edition offers with its new artisan studio at its Somerset factory, is competing in a crowded marketplace. Digital is core to their growth plan — already accounting for 22 percent of sales — and the tie-up will offer some kudos to the brand on social media.

Andretta wouldn't be drawn on the longevity of the collaboration but said that working with other brands is on the cards. "We are incredibly proud of our factories and the world-class quality of our in-house craftsmanship.... [We] are always open to exploring new opportunities."

Opportunity for growth in Asia is also a factor to the collaboration. Andretta has signalled the region as the brand's biggest growth market, where it has taken back control of its franchisee business, opened more stores and invested in influencer-led campaigns, including a catwalk show in Seoul last year. Partnering with Acne, which already has a huge following in Asia (Chinese shoppers account for its largest consumer demographic) and sold minority stakes to two Chinese-focused investment firms last year, will undoubtedly help.

But what's in it for Acne, which typically forgoes large marketing budgets, influencer spend and paid media in favour of word-of-mouth, guerrilla postings and a product-centric approach to Instagram?

Acne's leather goods offering — typically the highest-margin product category for luxury brands — is small in comparison to its peers. Analysts estimate that Acne, which started as a creative collective in 1996 with denim, broadening out to womenswear and menswear, garners only single-digital percentage revenue from handbags, leather goods and sunglasses. Saint Laurent, by comparison, brings in 69 percent of its revenues from leather goods.

"Bags is a relatively young product category for us, and it is obviously a very crowded market," said Mattias Magnusson, chief executive of Acne. "Mulberry have created some of the most iconic bags of our time and we were really keen to marry them with our design."

Acne only began offering handbags to its wholesale accounts from Spring Summer 2018, a year after launching their Musubi twisted knot line, made in Italy from calf leather and priced from £550 to £1,200, just below most luxury players. They also have a cheaper Baker shopper tote, colour-blocked utilitarian bags from its Blä Konst denim line and the streetwear-inspired Face line of sports bags.

Occasionally Acne does enter into collaborations, like last year's tie-up with Nordic outdoor heritage brand Fjällräven, whose functional backpacks, sleeping bags and down jackets were given an Acne design update. But they have been limited.

"It was great to see that the features of our Musubi bags could look great also on the iconic [Mulberry] Bayswater," said Magnusson, adding that more bags are coming. "We have a lot of things in the making also outside of the Mulberry project,"

Natalie Kingham, buying director at Matches Fashion, said Acne has a strong following and a fashion edge. "Not all brands are able to translate into accessories, but Acne have done," she said. "It takes a lot of development. We've stocked their bags from the first season and they've done very well."

For Acne, Mulberry brings craftsmanship and expertise in leather goods. The British brand makes half of its products in two owned factories in rural Somerset, where this collection was produced. Craftsmanship, quality and durability have been core to their business since it started in 1971.

"Both brands deserve consumer attention, in my view, and would stand to gain from the cooperation," Bernstein analyst Luca Solca said. "Mulberry has been in the background for a while, and Acne provides a sharp streetwear complement."

Other companies the huge tech investment fund has backed have struggled lately

SoftBank Group Corp. 9984 2.43% ’s longtime strategy of dumping mountains of cash on promising young companies to create big winners failed dramatically at WeWork, and is showing cracks at a number of its other investments.

SoftBank’s nearly $100 billion Vision Fund gave companies like dog-walking app Wag and indoor farm Plenty more cash than they wanted, but the investments failed to ignite growth. After a sizable bet on online car-lessor Fair, that company is struggling to stay afloat. Wag is for sale, people with knowledge of the companies say.

Dozens of other firms, such as Chinese ride-hailing giant Didi Chuxing and South Korean e-commerce company Coupang, are in industries known for burning cash and with uncertain paths to profitability. The Wall Street Journal reported that Didi—the Vision Fund’s biggest investment at $11.8 billion—was seeking more cash this summer, months after a company executive said it was losing money on every fare booked. Coupang, in which the Vision Fund has invested $2.7 billion, said that last year its operating loss grew faster than its revenue.

The failure of WeWork’s initial public offering forced SoftBank to fund a $9.5 billion bailout to salvage its $9 billion investment and helped to sour the market on big-spending, unprofitable startups. It has also drawn attention to SoftBank’s investing strategy, which has had big successes in the past.

SoftBank will be under scrutiny on Wednesday when it releases earnings. Analysts are estimating SoftBank and the Vision Fund will have to take billions of dollars in losses as they mark down the value of many investments. Investors are watching the fund’s performance closely—particularly because SoftBank is trying to raise funds for a second Vision Fund even bigger than the first.

“All funds have investments that are performing at different levels,” said a SoftBank spokesman. “The Vision Fund is barely two years old and we’re confident that our diversified portfolio of 88 companies will produce strong returns over the long term.” Many of the Vision Fund’s investments have appreciated in value multiple times, said a person familiar with the fund.

Some of SoftBank’s gains have come by adding to its bets on companies at higher valuations. In one of the starkest examples, SoftBank and the Vision Fund have led more than $2 billion in funding rounds for fast-growing Indian hotel chain Oyo Hotels & Homes since 2015—pushing the valuation up to $10 billion from less than $1 billion just two years ago and booking paper gains for the fund along the way.

In the latest round, announced in October, the Vision Fund led an $800 million investment that raised its stake in Oyo to 48% from 45%. But SoftBank’s chairman, Masayoshi Son, gave the company an additional boost by backing a loan to its 25-year-old founder, who used the money to invest $2 billion into Oyo, including buying stakes of $1.3 billion from venture-capital investors including Sequoia Capital and Lightspeed Venture Partners, according to people familiar with the deal. Representatives for Sequoia and Lightspeed declined to comment. Mr. Son has since recused himself from decisions regarding future investments in Oyo, says a person familiar with the matter.

Oyo, through a spokesman, declined to comment on questions about Mr. Son’s loan guarantee. A SoftBank spokesman said it is standard practice for venture-capital firms to lead subsequent rounds in winners.

Those bets could still produce rich paydays if things go well. Mr. Son has gambled on promising startups for decades—though mostly with smaller check sizes—and has notched at least one spectacular success: an early investment in Chinese e-commerce goliath Alibaba Group Holding Ltd. that is now worth more than $100 billion.

The Vision Fund, too, has made some successful bets. It sold Indian e-commerce firm Flipkart to Walmart for a $1.5 billion profit. And at the end of June, it said the companies that had gone public in its portfolio—including Uber Technologies Inc. and cancer-test company Guardant Health —had increased in value 2.6 times from the previous year, although some of those shares have since tumbled.

Wag had been seeking only $75 million in funds before the Vision Fund persuaded it to take $300 million in January 2018, said a person familiar with the events. Employees at Wag thought the money would let them dominate the burgeoning on-demand pet-services industry and defeat rival Rover, a dog-sitting app that was moving into walking as well. Rover soon raised more than $100 million itself, eroding Wag’s fundraising lead.

The Vision Fund’s cash was supposed to help the company deliver on its ambitions to expand internationally, and to move beyond dog-walking into related pet services including grooming, boarding, food and veterinary care.

Wag’s new chief executive, Hilary Schneider, who was installed around the same time as the Vision Fund investment, failed to deliver on those ambitions. Sales growth has stalled on her watch, credit-card data from research firm Second Measure shows. Rover’s sales are larger and continue to increase.

Now, Wag is trying to sell itself, likely at a price well below the $650 million valuation of the Vision Fund investment, people close to the fund say. It has already been rebuffed by Rover, a person familiar with the discussions said. Recode earlier reported that Wag was exploring a sale.

“Wag was a very exciting high-growth business that created a new category, but when SoftBank came in, they hired a whole layer of management who changed the nature of the business,” said Duncan Davidson, general partner of venture firm Bullpen Capital, an early Wag investor.

Ms. Schneider has focused on improving the customer experience at Wag, building a deeper leadership team, and improving profits for each dog walk, according to a statement from Wag’s board of directors. “The Board and Wag leadership have full confidence in the direction of the company,” the statement said.

In 2017, the Vision Fund similarly gave Plenty, which builds indoor farms, double the $100 million it had initially sought. Plenty’s management realized it couldn’t grow as fast as the fund wanted, according to a person familiar with the company. About a year ago, management decided it would be better to keep its staff lean, focus on its technology and postpone its international plans, said a Plenty spokeswoman.

The Vision Fund led a more-than-$380 million investment in Fair, the car lessor, in late 2018. At that point, that was seven times more than its next-largest round—and more cash than many of its competitors had ever raised. The Santa Monica, Calif.-based company spent most of that money in less than a year, according to former employees.

Fair buys cars and leases them to consumers as well as drivers for ride-hailing company Uber, another of the Vision Fund’s biggest investments. The money for Fair was supposed to support Uber by getting the company more drivers, say people close to Fair.

With the money, Fair added new car lots, hired more salespeople and offered promotions that attracted new customers but made the car leases unprofitable, say former employees. The company often ended up underwater on cars it leased because they so steeply depreciated in value that Fair would have to sell them at auction at a discount.

Fair also struggled with logistics. Some cars were shipped to the wrong state, stolen from lots, or sat for months on a dealership lot or in the driveways of customers who had stopped paying, according to former employees. Fair declined to comment.

When Fair founder and former Chief Executive Scott Painter approached SoftBank a few weeks ago about another round of funding, it responded by dispatching a team of auditors to Fair’s headquarters for a joint review of its finances, according to former employees.

Mr. Painter resigned as CEO last week after the company laid off 40% of its workforce, according to statements by the company and people familiar with the matter, with Fair’s board temporarily installing a Vision Fund partner in his place.

Fair has moved to cut costs, including scrapping plans for a promotional car giveaway in October, a person with knowledge of the matter said. SoftBank also provided Fair about another $25 million so the company could pay its bills, say people familiar with the matter. Mr. Painter, who is still chairman of Fair’s board, is pursuing additional funding for the company, the people say.

Fimalac buys London digital ad company Jellyfish to create ‘new kind of agency’

Fimalac, the holding company owned by French billionaire Marc Ladreit de Lacharrière, has bought a majority stake in digital marketer Jellyfish as it seeks to rival Martin Sorrell’s S4 in a rapidly changing advertising landscape.

The French group will merge its data-driven marketing specialist Tradelab into London-based Jellyfish as part of the deal. Fimalac declined to comment on terms but said the combined entity would have a market capitalisation of roughly £500m.

“We want to create this new kind of agency that Martin Sorrell started,” said Véronique Morali, president of Webedia, Fimalac’s digital media subsidiary. “Now we are in very good shape to be a real competitor.”

Jellyfish, which was founded in 2005, was an early adopter of search engine optimisation techniques and helps brands apply digital analytics to marketing and advertising. It also offers creative campaigns, digital training and consultancy for clients including Uber, eBay, Disney, Spotify, Nestlé, Ford, Aviva and Asos.

The merger between Jellyfish and Tradelab comes as the traditional advertising agency model dominated by the likes of Omnicom, WPP and Publicis is being overturned.

Clients are shifting from traditional media such as television and billboards towards data-driven online advertising, while competitors are emerging from other sectors, including consultants such as Accenture and Deloitte and digital platforms like Facebook.

Digital marketing is advertising’s fastest-growing area. It will attract €330bn in ad spending this year, or about half the global total, according to forecasts by eMarketer.

Sir Martin launched digital-only S4 in May last year, just a month after being forced out of WPP, and the group has since embarked on an acquisition spree.

Rob Pierre, Jellyfish co-founder and chief executive, said he believed the future of advertising was a “data and a digital-first approach” and that this had paved the way for new entrants to the advertising industry.

“In the past, the big agencies and the networks almost had a monopoly . . . If you bought all the television slots, all the billboards, all the advertising space in magazines and papers and radio, you could actually freeze out competitors and the disruptive brands trying to come through.”

Mr Pierre said the rise of digital marketing had opened up the market. “Through data you can now have one-to-one relationships with each one of your customers. You can provide them with personalised marketing, understand what are their behavioural habits and make sure that the technology is in place so that they can own their data.”

Fimalac will own roughly 74 per cent of the combined entity. Jellyfish was advised on the transaction by boutique investment bank GP Bullhound.

Jellyfish last year recorded sales of £53.7m and profits of £8.5m. Mr Pierre said the deal was attractive because it allowed Jellyfish to “further our growth and to accelerate”.

The merger with Tradelab will give it a presence in new markets including France, Germany, Italy and Brazil. It will also increase headcount from 780 people to almost 1,200, with a target of 3,000 within two years.

“We’re taking similarly aggressive ambitions to S4 Capital because we’re right in the same place and we’re looking at the same opportunity,” said Mr Pierre.

Fimalac, formed by Mr Ladreit de Lacharrière in 1991, has interests in sectors from live entertainment and digital media to luxury hotels and real estate. Last year it sold the remainder of its stake in rating agency Fitch to US media group Hearst.

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