Gapping down
In reaction to disappointing earnings/guidance:
- IBM -4.9%, GTLS -3.5%, TXT -3%, STLD -1.5%, URI -1.3%, SNA -0.7%, SON -0.7%
Other news:
- SYRS -18.3% (to discontinue further development of SY-1365, its intravenous (IV) CDK7 inhibitor)
- GPOR -2.6% (provides Q3 production and pricing updates)
- NTRA -1.5% (prices offering of 5,714,286 shares of common stock at $35.00 per share) .
Analyst comments:
- BC -2.9% (downgraded to Neutral from Buy at Longbow)
- XOG -2% (downgraded to Underperform from Outperform at Imperial Capital)
- ASC -1.2% (downgraded to Hold from Buy at Stifel)
- STNG -0.6% (downgraded to Hold from Buy at Stifel)
- CMA -0.5% (downgraded to Underweight from Neutral at JP Morgan)
Gapping up
In reaction to strong earnings/guidance:
- LLNW +12.2%, NFLX +8%, ERIC +7.7%, AA +4.6% (also announced intent to pursue non-core asset sales), MS +4%, CSX +3.1%, TCBI +3%, KEY +2.6%, BBT +1.6%, UN +1.6%, PM +1.6%, TSM +1.3%, DOV +1.2%, STI +1.1%, CCI +0.8%, POOL +0.7%, .
Other news:
- TNDM +2.8% (announced publication of DCLP3 study data in the NEJM)
- AZN +0.9% (AstraZeneca and Daiichi Sankyo (DSNKY) announce that the FDA has accepted for review the Biologics License Application for [fam-] trastuzumab deruxtecan (DS-8201) and granted Priority Review)
- EGO +0.7% (reported preliminary Q3 gold production results)
- APA +0.6% (reported certain Q3 financial and operational results; reiterated Q3 production guidance), .
Analyst comments:
- TXMD +8.1% (initiated with a Buy at H.C. Wainwright)
- CRUS +1.7% (upgraded to Equal Weight from Underweight at Barclays)
- CDMO +1.4% (initiated with an Overweight at Stephens)
- SAM +0.9% (upgraded to Outperform from Market Perform at Cowen)
Early premarket gappersGapping up:
- LLNW +10.6%, NFLX +7.6%, ERIC +7.5%, CSX +4.1%, TCBI +3%, TNDM +2.8%, AA +2%, FNB +1.1%, TXT +1.1%, DOV +1%, CCI +0.8%, EGO +0.7%, SNA +0.5%
Gapping down:
- IBM -4.9%, GTLS -3.5%, GPOR -2.6%, STLD -2%, STI -1.6%, NTRA -1.4%, SON -1.3%, HON -1%, URI -0.7%
“THERE IS DEFINITE HANKY-PANKY GOING ON”: THE FANTASTICALLY PROFITABLE MYSTERY OF THE TRUMP CHAOS TRADES
The president’s talk can move markets—and it’s made some futures traders billions. Did they know what he was going to say before he said it?
In the last 10 minutes of trading at the Chicago Mercantile Exchange on Friday, September 13, someone got very lucky. That’s when he or she, or a group of people, sold short 120,000 “S&P e-minis”—electronically traded futures contracts linked to the Standard & Poor’s 500 stock index—when the index was trading around 3010. The time was 3:50 p.m. in New York; it was nearing midnight in Tehran. A few hours later, drones attacked a large swath of Saudi Arabia’s oil infrastructure, choking off production in the country and sending oil prices soaring. By the time the CME next opened, for pretrading on Sunday night, the S&P index had fallen 30 points, giving that very fortunate trader, or traders, a quick $180 million profit.
It was not an isolated occurrence. Three days earlier, in the last 10 minutes of trading, someone bought 82,000 S&P e-minis when the index was trading at 2969. That was nearly 4 a.m. on September 11 in Beijing, where a few hours later, the Chinese government announced that it would lift tariffs on a range of American-made products. As has been the typical reaction in the U.S. stock markets as the trade war with China chugs on without any perceptible logic, when the news about a potential resolution of it seems positive, stock markets go up, and when the news about the trade war appears negative, they go down.
The news was viewed positively. The S&P index moved swiftly on September 11 to 2996, up nearly 30 points. That same day, President Donald Trump said he would postpone tariffs on some Chinese goods, and the S&P index moved to 3016, or up 47 points since the fortunate person bought the 82,000 e-minis just before the market closed on September 10. Since a one-point movement, up or down, in an e-mini contract is worth $50, a 47-point movement up in a day was worth $2,350 per contract. If you were the lucky one who bought the 82,000 e-mini contracts, well, then you were sitting on a one-day profit of roughly $190 million.
But these wins were peanuts compared to the money made by a trader, or group of traders, who bought 420,000 September e-minis in the last 30 minutes of trading on June 28. That was some 40% of the day’s trading volume in September e-minis—making it a trade that could not easily be ignored. By then, President Trump was already in Osaka, Japan—14 hours ahead of Chicago—and on his way to a roughly hour-long meeting with China’s President Xi Jinping as part of the G20 summit. On Saturday in Osaka, after the market had closed in Chicago, Trump emerged from his meeting with Xi and announced that the intermittent trade talks were “back on track.” The following week was a good one in the stock market, thanks to the Trump announcement. On Thursday, June 27, the S&P 500 index stood at about 2915; a week or so later, it was just below 3000, a gain of 84 points, or $4,200 per e-mini contract. Whoever bought the 420,000 e-minis on June 28 had made a handsome profit of nearly $1.8 billion.
Traders in the Chicago pits have been watching these kinds of wagers with an increasing mixture of shock and awe since the start of the Trump presidency. They are used to rapid fluctuations in the S&P 500 index; volatility is common, of course. But the precision and timing of these trades, and the vast amount of money being made as a result of them, make the traders wonder if all this is on the level. Are the people behind these trades incredibly lucky, or do they have access to information that other people don’t have about, say, Trump’s or Beijing’s latest thinking on the trade war or any other of a number of ways that Trump is able to move the markets through his tweeting or slips of the tongue? Essentially, do they have inside information?
Theoretically, market regulators are supposed to be keeping an eye on big trades such as these, to try to figure out whether they are just happy coincidences or whether there is something more nefarious afoot. And they say they do. But calls to the Chicago Mercantile Exchange, where the trades takes place, the Securities and Exchange Commission, which regulates the equity markets, and to the Commodity Futures Trading Commission, which regulates futures contracts, such as e-minis, were answered in different ways. Christopher Carofine, at the SEC, declined to comment. The CFTC did not respond to my inquiries, while a spokeswoman for the CME says the trades in question did not originate from a single source and they were of no concern.
There is no way for another trader, let alone an outsider such as me, to know who is making these trades. But regulators know or can find out. One longtime CME trader who has been watching with disgust says he’s never seen anything quite like these trades, not at least since al-Qaida cashed in before initiating the September 11 attacks. “There is definite hanky-panky going on, to the world’s financial markets’ detriment,” he says. “This is abysmal.”
In the case of Trump, market manipulation also yields political dividends. Perhaps the most obvious example dates to late August, when Trump, desperate to reignite trade talks with China, boasted during the G7 summit that his counterparts in Beijing had come back to the table. “We’ve gotten two calls—very, very good calls,” he told reporters. “They mean business.” The market rose more than 900 points over the next few days. But a spokesperson for the Chinese foreign ministry said he was not aware of any such calls. An editor at the Global Times, the state-controlled newspaper, tweeted that he knew of no calls made in the days leading up to the G7 meeting and that “China won’t cave to US pressure.” Two U.S government officials later told CNN that Trump misspoke and “conflated” comments from China’s Vice Premier Liu He with direct communication from the Chinese. According to CNN, the officials said Trump was “eager to project optimism that might boost markets.”
Indeed, this single Trump lie briefly inflated domestic markets by hundreds of billions of dollars. “What this describes is, quite literally, market manipulation that constitutes criminal violations of the Securities Exchange Act of 1934,” commented George Conway, the conservative attorney and Trump critic.
Whether Conway is right or wrong is a matter of legal opinion, but given how fishy and coincidental the trading in e-minis seems to be these days, the SEC or CFTC would be doing a great service (and their job) for the American people by investigating who is behind these lucrative trades, and what they knew before they placed them. At the moment, what we’re getting from them is an indifferent shrug.
Federal regulators might start here: In the last 10 minutes of trading on Friday, August 23, as the markets were roiling in the face of more bad trade news, someone bought 386,000 September e-minis. Three days later, Trump lied about getting a call from China to restart the trade talks, and the S&P 500 index shot up nearly 80 points. The potential profit on the trade was more than $1.5 billion
Growing European food and agritech industry pulls in investment
Funding for the sector predicted to double to €2bn this year
Investment in European food and agritech start-ups is expected to more than double this year as corporate and generalist venture capital groups increased funding in what has been regarded as a niche market.
This year investment in the sector is expected to rise to €2.3bn from €1.1bn in 2018, Paris-based Five Seasons Ventures and Dealroom, an Amsterdam-based data provider on the technology industry, revealed.
European food and agritech investment in 2019 were led by a $575m late-stage round by Deliveroo, a €125m capital increase by Ynsect, a start-up that raises insects for pets and fish feed, as well as a $100m round by vertical farming group Infarm, Five Seasons Ventures, a food and agritech investor, found.
Niccolo Manzoni, partner at Five Seasons, said interest was rising in the nascent sector as exits, or sales of the companies, have increased while more entrepreneurs are entering the market, he added.
“We’re seeing a new generation of foodtech companies,” he said at the Future Food-tech conference in London.
In total valuation terms, start-ups delivering products direct to consumers are the top category in Europe, estimated at €4.5bn, while alternative proteins are at about €600m.
Multinationals have been behind recent exits in Europe, with Unilever buying Graze, a UK online retailer delivering natural food, for £150m in February and The Vegetarian Butcher in December. Mars bought sports German nutrition maker FoodSpring this year.
Rimowa Turned Luggage Into a Status Symbol. Can It Sell Fashion?
Three years after LVMH acquired the hardside luggage maker, Chief Executive Alexandre Arnault aims to move the brand beyond the baggage carousel and hit €1 billion in sales, all while building a ‘case study’ for a new way of working.
Paris, France — Did LVMH buy Rimowa for the wheels?
That’s the word on the street amongst some industry insiders, who suggest the brand’s high-tech wheels could end up on Louis Vuitton luggage in the near future. The German hardside-luggage maker’s 360-degree wheel technology is certainly nothing to sniff at: hundreds of online reviews praise the smooth ride they deliver when you’re manoeuvring your hardcase through the airport.
But it’s doubtful Rimowa’s wheels alone were worth the €640 million LVMH spent to acquire an 80 percent majority stake in the brand in 2016. While other brands in the group are using some elements of the manufacturer’s proprietary technology in their products, the wheels remain exclusive to Rimowa for now. Besides, LVMH's ambitions for the brand are far wider.
Indeed, it's a good time to be Rimowa. Founded in Cologne, Germany in 1898, the company is uniquely positioned to benefit from the shift in discretionary spending from things to experiences, especially travel.
In 2018, tourists made 1.4 billion international arrivals, up 6 percent from 2017 and significantly outpacing the 3.7 percent growth in the global economy that same year, according to the World Tourism Organization, a United Nations agency. Chinese tourists are driving the uptick. While the World Tourism Organization says that just 9 percent of Chinese citizens owned a passport in 2018, about 149.7 million Chinese residents took international trips in 2018, up 1,326 percent from 10.5 million in 2000.
All those tourists need suitcases. So, it’s no surprise that global sales of luggage are forecasted to reach $27.5 billion by 2025, up from $22 billion this year, according to market research firm Euromonitor International. What’s more, for upwardly mobile Millennials, luggage is a new status symbol: something covered on Highsnobiety and Hypebeast alongside luxury streetwear and sneakers. For them, suitcases are fashion and Rimowa makes the coolest of them all, far more broadly desirable than niche players like Globe-Trotter and mass brands like Tumi and Samsonite.
Away, a New York-based direct-to-consumer travel start-up that was valued at $1.4 billion in May 2019, presents the biggest challenge to Rimowa. Away’s hardside bags — which now include aluminium — cost roughly a third of Rimowa’s products. (A large aluminium carry-on from Away is $495, while Rimowa’s comparable Original Cabin Plus bag is $1,250).
Rimowa Chief Executive Alexandre Arnault acknowledges that Away — which reportedly generated around $150 million in sales in 2018 — has captured a lot of attention in the US, especially among young professionals not quite ready to trade up to Rimowa. But he is not convinced that the customer overlap is high.
“They are the loudest ones in the US now, and we’re happy to have them shine a light on the category,” Arnault said. “But we’re very different brands in terms of quality and design. They’ve done a great job building this brand from scratch, and we’re completely coexisting.”
Over the past three years, Arnault has been working to transform Rimowa’s own position in the market. With the support of former Chief Brand Officer Hector Muelas (who departed for Apple in June 2019), Arnault has worked to boost Rimowa’s cool by animating what he describes as a “bit cold, geometric” product through storytelling. Rimowa has a lot of famous globe-trotting fans, many of whom wrote to Arnault after the acquisition, declaring their devotion. He enlisted several of them to appear in advertising campaigns, including Roger Federer, LeBron James, pianist Yuja Wang and Louis Vuitton men’s designer Virgil Abloh. He has also launched collaborations with Abloh, Supreme, artist Alex Israel and Dior men’s designer Kim Jones.
These partnerships have attracted the young streetwear crowd, earning plenty of media coverage. But while Millennials are set to account for half of luxury spending worldwide by 2025, Arnault insists he’s not chasing a demographic.
“One thing we have voluntarily never done is have a collaboration committee where we say, ‘Okay, we need to target 18-34-year-olds that have this net worth because we need to be cool with Millennials,’” he said. “A lot of brands are doing that today. As a Millennial myself I think it’s very dangerous and scary, because when a brand targets me like this, I feel it immediately and I kind of run away.”
In 2015, the year before LVMH bought Rimowa, it generated €440 million ($488 million) in sales. In its first two years as part of the group, Rimowa’s sales contracted as Arnault exited hundreds of unfavourable wholesale arrangements. At the time, it had more than 5,000 points of sale, many of which were independent travel stores, which could price the product any which way they like. (About 85 percent of the business was done through wholesale or franchise partnerships.) This meant that pricing was wildly inconsistent. A case could be €800 ($887) in one place, €400 ($443) in another. Arnault pulled the product out of the majority of those stores, buying back about half of the inventory, and recalibrating prices so that they were better harmonised. (Prices have increased an average 20 percent overall.)
Today, the breakdown of the business has flipped: 80 percent of sales are made directly through the company’s stores, with 20 percent contributed by multi-brand retailers and a few remaining franchise agreements. There are just 500 points of sale, including 105 directly owned stores.
Despite the necessary sales drop, Arnault said the company was able to maintain profitability over the course of the reorganisation.
“The group can afford to have some unprofitable brands... but we’ve always felt that if we were profitable and cash-generating, we’d be free to make the decisions we want to make,” he said.
This year has marked a return to growth, with 2019 sales set to be “way higher” than the €440 million figure from 2015. (LVMH does not break out sales for individual brands, so Arnault could not share a specific number.) However, sales are set to double in the next “four-to-five years,” which would set up Rimowa to hit €1 billion in revenue in less than a decade of operating within the LVMH fold.
By no means would this make Rimowa the largest brand in the group, but it wouldn’t be the smallest either. Its rate of growth is outpacing that of most soft luxury labels, which can take more than a decade to achieve similar results, even with a hit handbag (or three).
Arnault was able to make the shift so quickly, in part, because of LVMH’s vast real estate portfolio, which allowed him to open up — and renovate — Rimowa stores at a steady clip. The label is also in the viable position of being underpenetrated in both the US and Asia, with zero presence in the Middle East prior to the acquisition. (Germany remains its largest market.) There’s digital opportunity, too. Online sales have grown from zilch to 10 percent of the business since 2015, and Arnault hopes to get that number to 20 percent.
But he also updated the product, changing the design of 100 percent of the offering and working with Rimowa’s vertically integrated factories in Germany, as well as suppliers of spare parts, to improve the quality of the goods. He also worked on improving lead times on popular styles, which were once up to a year-and-a-half in certain circumstances, by building a 50-person-plus team dedicated to supply-chain efficiency.
“We’re taking inspiration from the Apples and Teslas of the world, not the luxury brands,” he said. In part, that means reducing the number of products on offer, but increasing the number of colours and customisation possibilities in order to appeal to different audience segments.
To market Rimowa’s new look, Arnault did away with print advertising, making it the only LVMH-owned brand to devote all of its advertising spend to digital, noting that he prefers the transparent, data-driven analytics offered by online advertising.
According to LVMH Chief Digital Officer Ian Rogers, who works across the group, Arnault's success has come from his ability to balance the new with the old. "He’s not losing what’s great about the way LVMH does things," he said, citing Rimowa's ramped up retail network and refined distribution system. "He’s modernising very selectively. There’s a lot of subtlety to it."
But in order to maintain such momentum, Arnault plans to take Rimowa far beyond the baggage carousel.
“Ultimately, the dream is to sell the experience of not having a suitcase; that you go to Tokyo and your suitcase will be there, with everything you need inside. But this is a bit utopian,” he said. “Right now, the brand is only linked to the terrible parts of travelling: to the airport and from the airport. When it comes to the enjoyable parts, there is zero interaction. I want the customer to interact with the brand a bit more on a day-to-day basis.”
With Dior, Rimowa recently made its first foray into handbags, including clutch bags and backpacks for Kim Jones’ Spring/ Summer 2020 runway show.
“In a way, it’s not farfetched. Louis Vuitton was also born in luggage to then move into handbags,” said Luca Solca, a luxury analyst at Sanford C. Bernstein Schweiz. “So why not Rimowa? I wonder how you can translate the hard-shell design DNA into handbags, though.”
Credibly moving Rimowa into handbags will be challenging. Prada and Louis Vuitton both successfully transitioned from luggage to fashionable accessories, but their material of choice was nylon and canvas, respectively. Hard metal and plastic, on the other hand, are less adaptable to the soft-goods model.
But Arnault is undeterred.
The third-born, 27-year-old son of LVMH Chairman and Chief Executive Bernard Arnault, Alexandre did not attend business school, instead earning a postgraduate degree in research innovation from the École Polytechnique, his father’s alma mater. Nonetheless, he talks in the vernacular of a Harvard MBA, trying to build a new kind of culture at Rimowa. The brand’s wood-panelled offices feel more start-up than luxury, complete with ping pong tables and stand-up desks, resulting in an upbeat, crackling energy that feels less reserved than elsewhere at LVMH.
“We’re trying to build a case study within the group,” Arnault said. “The main thing that is driving us is culture. We’re more American than European, and definitely not luxury [in that way].”
Rimowa is not the only experiment bubbling at LVMH. There’s Rihanna’s Fenty fashion play, as well as Guillaume Henry’s new Patou. But these projects are relatively small in comparison to Rimowa. And, critically, they don’t have an Arnault at the helm.
Tod’s Taps Walter Chiapponi
The troubled Italian maker of luxury comfort shoes is trying to reverse falling sales and re-energise its brand.
PARIS, France — Tod's, the Italian maker of luxury comfort shoes famous for its Gommino loafers, has appointed Walter Chiapponi as creative director of its women's and men's collections. The move comes as the troubled label is trying to reverse falling sales and re-energise its brand.
"Walter Chiapponi is a talented Italian creative who knows and is able to combine Tod’s Italian lifestyle with a touch of modernity, without ever losing sight of the high quality and craftsmanship that represents the brand’s DNA,” said Diego Della Valle, president of Tod's Group, which also owns Roger Vivier and Hogan.
The group, which is controlled by Italy's Della Valle family, kicked off a brand revamp at the end of 2017. In a bid to forge relevance with millennials, which is very low (they drive less than 20 percent of sales, according to estimates), Tod’s launched its Factory initiative, an ongoing series of designer collaborations that have essentially replaced the Italian shoemaker’s seasonal fashion collections in the mould of fellow Italian brand Moncler’s Instagram friendly “Genius” strategy.
In September, Della Valle signalled signs of progress without providing specifics.
In the 2018 fiscal year, Tod’s Group reported a 26 percent drop in 2018 profit, with full-year earnings before interest, taxes, depreciation and amortisation (EBITDA) falling to €118.3 million (around $130 million) after five years of declining retail sales. Group sales fell to €454.6 million (around $504 million) in the first half of 2019, 4.7 percent below the same period in 2018.
Chiapponi replaces former Tod’s womenswear designer Alessandra Facchinetti, who left the brand in 2016, and menswear lead Andrea Incontri, who exited in June. The 41-year-old Milan-born designer studied at the European Institute of Design. His resume includes stints at Givenchy, Valentino, Gucci, Miu Miu and, most recently, Bottega Veneta under former creative director Tomas Maier.
Chiapponi's first collections for Tod's will hit stores next autumn.
Facebook’s Libra is a threat to national sovereignty
The company has shown economic and political ambitions with its plan for a digital currency
When 11 countries in Europe joined the euro in 1999, they freely relinquished their national currencies. They didn’t just say yes to a new currency as a medium of exchange; they consciously decided to transfer part of their sovereignty to the European level.
With its Libra plan for a global digital currency, Facebook has shown both economic and political ambitions. The project would mean a private company controlling a common good and taking over tasks normally discharged by states. This is unacceptable for both economic and political reasons.
Facebook’s 2.4bn users would give Libra instant worldwide reach. Its aim is to improve cross-border transactions that remain too slow and costly. In addition, Libra would be pegged to a basket of currencies and managed by a group of private companies. All this raises serious concerns.
Beyond well documented risks such as money laundering, terrorist financing and questions about data and consumer protection, Libra’s global ambition could trigger antitrust risks and undermine financial stability. The current legal framework is not ready to manage all these risks, nor would it protect the consumers using this currency.
Would a regulatory response be able to address all these risks? The answer is no, because Libra is asking states to share their monetary sovereignty with private companies. In fragile countries where many don’t have access to a bank account or a stable currency, people could simply stop using the national currency and turn to private currencies instead. Some countries may end up surrendering their monetary sovereignty and control over their economy.
Libra may also undermine monetary policy in developed countries. The decision of the private actors behind the project to change the quantity of a given currency in the basket may dramatically alter its value, without any public authority having a say.
Do we really want to give private interests such power, given the consequences it would have on trade and financial stability? I cannot countenance one of a sovereign state’s most powerful tools, monetary policy, falling under the remit of entities not subject to democratic control.
In the eurozone, the independence of the European Central Bank is guaranteed by the EU treaties. Members of the ECB executive board are selected by democratically elected governments at the European Council. The owners of Libra, on the other hand, won’t be accountable to governments, parliaments or even central bankers. This is unconscionable. The monetary sovereignty of states is underpinned by their citizens’ freedom of choice.
Does this mean we should reject any technological developments in financial services? Of course not. France has been advocating the opposite. President Emmanuel Macron has been pushing to establish a legal framework for new technologies, to help France become a leader in technological and financial innovation. We created an innovative legal framework for blockchain technologies. We should pursue these efforts and strive to find ways of meeting consumers’ reasonable expectations for modernised payment methods.
That is why I have invited my European partners and G7 members to consider two ways forward. First, we should develop innovative national and cross-border payment methods which are faster and less expensive. We expect banks and payment providers to deliver quickly. Second, we should consider the creation of central banks’ own digital currencies, in the medium to long term. We cannot let China be the only player in this field. Our independence is at stake. France’s position is clear: we want financial innovation to respect the sovereignty of states. Neither political nor monetary sovereignty can be shared with private interests.
H2O’s Windhorst-linked La Perla bonds set to be repaid
Fundraising from Italian lingerie maker will help repay bonds bought by asset manager
One of the illiquid bonds at the heart of the crisis that engulfed H2O Asset Management earlier this year is set to be repaid in full, after La Perla, the Italian lingerie maker, announced a €200m capital increase.
The London-based fund manager saw clients withdraw €8bn from its funds after the Financial Times revealed in June the scale of its holdings of bonds related to the German financier Lars Windhorst. While H2O met all of these redemptions and its chief executive Bruno Crastes vowed to “never gate” his funds, the asset management subsidiary of French bank Natixis still came under intense scrutiny.
One of those bonds was from La Perla, a lossmaking luxury underwear brand that Mr Windhorst acquired in February 2018 from Silvio Scaglia, an Italian entrepreneur and former legal adversary. The German businessman raised a €500m bond to back the acquisition, with H2O’s fund filings showing that it owned more than €300m of this debt at the end of 2018.
On Wednesday La Perla, which listed its shares on France’s junior stock market Euronext Growth market last month, announced it has binding commitments from investors for a €200m capital increase. A person familiar with the matter said that Mr Windhorst’s Tennor Holding is putting more money into the business along with several other investors.
La Perla also announced that it now intends to repay all of its bonds at face value. While €500m of bonds are outstanding, not all of these were placed with external investors, according to people familiar with the matter.
The repayment could help vindicate H2O Asset Management’s original valuation of these bonds. H2O marked down its La Perla bonds to just 25 cents on the euro in June, following the flood of redemptions, having previously valued them above face value.
Morningstar, the fund rating firm, questioned the “robustness” of H2O’s valuations of its Windhorst-linked bonds in June, in a critical report on what it described as the fund’s “loose risk controls”.
H2O and Mr Windhorst declined to comment.
La Perla went public in early September through a so-called “direct listing”, where stock is not sold to outside investors, giving it a market capitalisation of €473m. The stock is very thinly traded, however, with only one share changing hands on 11 out of the 29 trading days since the listing.
When La Perla floated it disclosed that H2O Asset Management already owned a 9.5 per cent stake in the company. While it is best known for investing in government bonds and currencies, H2O also has an equity-focused fund called Multiequities.
Fund filings show that in March 2019 more than 11 per cent of this Multiequities fund was invested in unlisted shares linked to Mr Windhorst, exceeding the 10 per cent threshold known as the “trash ratio” that restricts holdings of illiquid assets.
This counted as a “passive breach”, however, because it was due to a revaluation of its existing holdings. H2O later sold part of its stake in Mr Windhorst’s medical robotics company Avatera to get its fund back within the 10 per cent limit, according to people familiar with the matter.
While losses have narrowed since Mr Windhorst acquired La Perla, the company still booked a €91m operating loss last year. Accounts from its Dutch holding company show that the lingerie maker was bought from its previous owner for just €1. Mr Windhorst has denied this, saying that he paid “a significant double-digit million euro amount.”
Rather than creating a new holding company to acquire La Perla, corporate records show that Mr Windhorst purchased an existing Dutch entity from the Italian-born businessman Georg Kofler, who was formerly the chairman of German television station ProSieben.
Mr Kofler, a judge on the German reality TV programme Lion’s Den, told the Financial Times that he sold the Dutch vehicle for a “nominal amount”. He added that this made it “quicker and easier” for Mr Windhorst to complete the transaction.
The annual accounts of Mr Kofler’s Luxembourg investment vehicle show that he has previously invested in several companies owned by the German financier.
The Italian-born businessman said that Mr Windhorst is a “risk taker”, but added that he is also a “great entrepreneur”.
“If he offers me a good deal, I do it with him,” Mr Kofler said. “And the deals with him never failed. I always made good money.”