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Investor Masayoshi Son sought deals of immense scale and so far has done a fraction of what the firm promised

For years, SoftBank Group Corp. 9984 -0.65% Chief Executive Masayoshi Son has talked about building a global renewable-energy empire capable of carrying solar power across continents.

The Japanese investor sought deals of immense scale in Saudi Arabia, India and beyond. He promised to spend hundreds of billions of dollars tackling one of the world’s toughest challenges—meeting its growing energy demand with less carbon-intensive sources.

Today, his boldest proposals are foundering. Mr. Son has announced plans to build as much as 220 gigawatts of solar capacity in Saudi Arabia and India by 2030—equivalent to half of what exists today around the world. Yet SoftBank has managed to contract for around 3 gigawatts in India and has about 700 megawatts in Japan. The company hasn’t completed a project in Saudi Arabia and doesn’t appear close to winning a major contract there soon.

In India, developers including SoftBank were hit last year by unexpected increases in taxes and tariffs, cancellations of auctions and land disputes. One solar park in the country where SoftBank is building a plant has been hit by delays stemming from squatters refusing to move off the land allocated to the project.

Rivals within the company have jousted over who would lead expansion efforts, and executives misread markets or fumbled relationships with government officials, according to interviews with people familiar with its solar business. Many of its new projects aren’t likely to generate the kinds of returns Mr. Son had hoped for, the people say.

The problems have sowed doubts among potential partners, leading government officials with grand energy visions of their own to question whether SoftBank is capable of delivering what it has proposed.

In the technology sector, betting big can accelerate growth and disrupt markets, says Manoj Upadhyay, CEO of ACME Solar Holdings Ltd., one of India’s biggest solar-power developers. “But in infrastructure, it cannot.”

Mr. Son said SoftBank’s solar business has been focusing on India and “is still expanding vigorously” at a pace that could eventually make it one of the world’s biggest developers. “As for Saudi Arabia, it has its own internal plans and things to manage, so it will take a little while,” he said at a press conference this week.

SoftBank says it has made inroads in India and Japan, and company executives still see more to come.

“I honestly believe what we’re doing today is a tenth, a fifteenth, a hundredth of what’s about to happen,” says Raman Nanda, chief executive of SoftBank’s Delhi-based energy unit.

SoftBank runs and invests in the $100 billion Vision Fund, the world’s largest technology-investment vehicle. The company is launching a second fund it says will be even bigger.

For solar ventures, SoftBank has two main energy units—one in Japan, the other in India. Both have said they are responsible for new projects in Africa, and both are exploring opportunities in Saudi Arabia, people familiar with them say. SoftBank never formally decided who would handle a major Saudi solar development, although the India unit ended up spearheading work, those people say. Both units are called SB Energy, although the India team late last year added “Global” to its name.

Mr. Son, who founded SoftBank in 1981, is famous for his grand visions, even among technology founders. In 2016, he orchestrated a $32 billion purchase of U.K. chip designer ARM Holdings PLC, predicting Arm’s architecture would be in 90% of a trillion connected devices by 2035. The Vision Fund, which poured billions into WeWork Cos., rarely cuts checks of less than $100 million and often presses companies to take more money than they had planned.

Mr. Son’s alternative-energy efforts date from 2011, when a tsunami caused a nuclear meltdown and energy crisis in Japan. Mr. Son announced plans for dozens of solar projects at home and began seeking deals abroad, aiming to create transnational power grids that could export solar or wind energy from places including India, Mongolia or the Middle East.

At one point in 2011, Mr. Son told his board that he was planning to quit SoftBank for a year to focus on energy issues, prompting a shouting match as they argued him out of it, he has said.

In 2015, Mr. Son met Indian Prime Minister Narendra Modi—another renewable-energy fan—and they hit it off, according to Satoshi Shima, then-head of SoftBank’s office of the CEO. They exchanged cellphone numbers, Mr. Shima says.

The two discussed an investment of as much as $100 billion, Mr. Shima says. Mr. Son after the meeting announced a more modest plan for 20 gigawatts of solar-energy in India, at an estimated cost of $20 billion. That is almost seven times what the country had installed at the time.

SoftBank brought in Mr. Nanda, a solar veteran who had been working with the company’s renewable-energy team in Japan, to run the new India unit. It landed its first contract for a 350 megawatt plant in December of 2015—more than half the size of SoftBank’s entire Japan solar portfolio—four months after it was founded, with eight staffers.

The real boost to SoftBank’s solar ambitions would come months later in 2016, after Mr. Son connected with Saudi Arabia’s Crown Prince Mohammed bin Salman. Mr. Son has said it only took him 45 minutes to convince the Saudi royal to invest $45 billion in SoftBank’s Vision Fund. In return, Mr. Son has publicly promised to help remake the kingdom’s oil-dependent economy.

As SoftBank sought to deepen its financial ties in Saudi Arabia, discussions between Mr. Son and the country’s sovereign-wealth fund, called the Public Investment Fund, or PIF, turned to solar. SoftBank could help Saudi Arabia achieve its long-sought goal of using less oil in domestic power production and exporting it instead, Mr. Son said, by building up the kingdom’s solar-power capacity, according to a person familiar with the discussions.

In the fall of 2017, Mr. Son and PIF floated their initial plan with a group of Saudi energy officials. As partners, they would build 1,500 gigawatts of energy-generating capacity, complete with plants to make the solar panels and create 100,000 jobs.

Saudi officials burst out laughing, according to people familiar with the proposal. The 1,500 gigawatt total was more than triple the entire world’s solar-power capacity at the time.

Mr. Son argued in one meeting that to compete with China, the world’s biggest solar-panel supplier, a developer would have to be at that scale and take on that kind of risk, one of the people says.

For decades, the country’s powerful energy ministry has driven a hard bargain with international oil companies, seeking to maximize the value of the kingdom’s abundant natural resources. They planned to do the same with Saudi Arabia’s abundant sunshine as well, and the ministry had its own renewable-energy unit with a less ambitious solar plan.

In March, Prince Mohammed and Mr. Son made a surprise appearance at New York’s Plaza Hotel. Together, SoftBank and PIF announced a plan to build 200 gigawatts of solar capacity at a cost of $200 billion by 2030. The press release, issued by the Saudi embassy in the U.S. and PIF, didn’t mention the energy ministry at all.

The deal wasn’t subjected to the kind of vetting and bidding process energy officials in the country use for oil deals, according to people familiar with the process. Energy officials felt slighted by the announcement and viewed it as unrealistic, the people say.

A month later, Mr. Son pitched Indian officials a plan to develop 1,200 gigawatts of solar power by 2030, along with 2,200 gigawatt hours of battery capacity to store that energy and manufacturing plants to make panels and batteries domestically, according to people familiar with the proposal. The local industry component was something India dearly wanted.

SoftBank’s energy unit in India went shopping for companies to make the batteries needed to support all that capacity. It proposed to invest in a Kentucky-based startup called EnerBlu, which was seeking $60 million to build a modest battery-manufacturing plant, its first. SoftBank said it needed more.

A SoftBank official said Mr. Son would want to make a far greater investment and pushed EnerBlu to build a facility that was 10 times the size of its initial plan. SoftBank said it would invest around $400 million, according to former EnerBlu CEO Daniel Elliott.

“Frankly, $60 million doesn’t move our needle; I can’t take that back to Masa-san,” a senior SoftBank executive over India told EnerBlu at a May 2018 meeting, using a common moniker for Mr. Son, Mr. Elliott says.

The world’s biggest lithium-battery factory, run by Tesla, currently has a capacity of around 35 gigawatt hours. SoftBank wanted more than 2,000 gigawatt hours of storage for Saudi Arabia and India by 2030, according to one production plan.

SoftBank’s Japan solar business was making high returns in the country’s heavily subsidized market, targeting around 30% investment returns, according to one person familiar with the matter. Mr. Son expected returns of 15% to 30% in Saudi Arabia and India, people familiar with the company say.

In India, government officials reviewing SoftBank’s proposal decided the country could absorb only a maximum of 350 gigawatts of solar energy by 2030, an energy official says. With solar technology and prices changing so fast, the government felt it wouldn’t be wise to award so much capacity at once, the official says.

Fierce competition for contracts, pressure from local governments wanting inexpensive power, land acquisition struggles and other complications were driving down the profitability of solar-project returns in the country. Mr. Nanda and his team were torn between Mr. Son’s demand for scale and his push for high returns, the people familiar with SoftBank’s business say.

SoftBank skipped one tender for 10 gigawatts of solar-generation capacity. For another auction of 3 gigawatts last summer, SoftBank told officials it would take the entire amount at a favorable price if authorities revised regulations to let it do so, an Indian official says. When the government obliged, SoftBank bid for much less, at a much less favorable price, annoying New Delhi.

The award was subsequently canceled.

“Masa has a big dream” for unprecedented solar-energy scale, says the Indian official. “But they are not capable of handling such a large project.”

Mr. Nanda says SoftBank’s India plants “have consistently performed above” targets set by his board and are getting “above-market returns.” He says the company has a business that can grow quickly when opportunities arise.

In Saudi Arabia, energy officials had auctioned off solar contracts to other developers based on the lowest price that builders could offer. Saudi officials proposed buying electricity from SoftBank at prices similar to those achieved at auction, which would allow profit margins of 4% to 6%, the people familiar with the matter say.

By early this year, Mr. Son had told officials their proposed returns were too low for SoftBank to invest, a person familiar with Saudi Arabia’s renewable program says. The murder of Saudi journalist Jamal Khashoggi in October, accompanied by allegations, which Saudi Arabia denied, that Prince Mohammed was involved, complicated the kingdom’s relationship with SoftBank and made it difficult for the company to do anything together with the country publicly, people with knowledge of the events say.

SoftBank walked away its proposed deal with EnerBlu in January. EnerBlu, drained of money by the long courtship with SoftBank, has filed for bankruptcy protection.

“SoftBank shows up and says they’re going to do all this stuff,” says Mr. Elliott, who is now working for a private-equity firm in California. “Shame on us for trusting them.”

SoftBank says it decided not to proceed with the deal because its due diligence concluded EnerBlu wasn’t equipped to handle the scale needed. “No commitments were made at any stage,” according to a company statement.

On Jan. 15, the Saudi energy minister unveiled a scaled-down energy plan calling for 40 gigawatts of solar-power generation by 2030. The energy ministry, which has begun auctioning new projects, is responsible for 30% of that and PIF and international partners the remaining 70%, according to a diagram of the plan. SoftBank wasn’t mentioned in the new strategy, and it isn’t one of the 60 firms that have received an initial green light to bid on the ministry’s latest project.

SoftBank remains an “important partner for PIF and for the Kingdom,” the fund said in a written response. It declined to comment on specific investment decisions.

Business must prepare for aggression by states

Companies should consider participating in military exercises

The crew of Stena Impero, the UK-flagged tanker seized last month in the Strait of Hormuz by the Iranian Revolutionary Guard, knew what to do in case pirates attacked. Being seized by another country’s armed forces is another matter.

Businesses today are a convenient target for nation-state aggression and they need to be ready for it. If the west is to protect itself against a wide range of threats, industry should prepare alongside the military.

The occasional company already participates in military exercises — but these tend to be ones already involved with the armed forces. Nato’s Trident Juncture 2018 exercise in Norway featured Norwegian transportation companies that have contracts with the country’s armed forces. Business representatives are sometimes brought in to assist with armed forces exercise scenarios — but without industry itself taking part. That is a missed opportunity, because the private sector would be greatly affected by a national security emergency.

“Exercises combining the armed forces and the private sector are not just desirable; they are absolutely vital,” says retired Major General Mats Engman of the Swedish Air Force. “Most modern societies are based on the assumption that, in a crisis, the armed forces will be supported by civil society. Such support can only work if companies have practised national security contingencies with the armed forces.”

Maj Gen Engman is the chief evaluator of Sweden’s Total Defence 2020, a resurrected and modernised version of the exercises that Sweden’s government, industry and volunteer groups perfected during the cold war.

Most large businesses already conduct crisis-management exercises, but they restrict them to their own staff, and with scenarios specific to their operations. That is limiting when national security threats affect the private sector. The genius of hybrid warfare is that it mixes military and non-military elements. In Ukraine, Russian military activities have been mixed with disinformation campaigns and cyber attacks. They have brought down banks, media outlets and government agencies.

Governments thus need the private sector to prepare for national security contingencies with their armed forces. Given that they would face devastating consequences if caught unprepared in a national security crisis, companies would benefit from participating.

Think of a conventional attack in combination with a range of hacks against companies, combined with seizures of commercial freighters, which would both disrupt vital supply chains. As Britain is currently discovering, supply chains are the lifeblood of the just-in-time economy: shuttling food, fuel, medicines and industrial components to where they are needed. Britain, for example, imports half of the food the country consumes. If one link in the chain goes down, it no longer functions.

That is true even for companies headquartered a long way from potential adversaries: imagine the consequences if, say, an internet giant server farm lost access to electricity. (Back-up generators rely on fuel, a precious commodity in a crisis.)

Having businesses tag on to military exercises to practise defence against hybrid aggression would be a novel approach, but so is hybrid warfare with its focus on non-military attacks. Rear Admiral Sverre Nordahl Engeness of the Norwegian Navy, who planned the logistics of the Trident Juncture exercise, including 50,000 troops and 10,000 vehicles, told me that involving a wider range of businesses would be relatively straightforward. “You just have to sort out the legal issues first,” he said. Those include granting access to classified information.

Many businesses might conclude that practising for national security contingencies is in their interest — but others may not. “Today many companies are foreign-owned, sometimes with spurious ownership arrangements,” Maj Gen Engman noted. “Such owners may even be based in countries that are our strategic competitors, such as Russia or China.”

That challenge could be overcome. Because participation in military exercises should, at any rate, not be open to every company, the armed forces could invite only the most relevant businesses. What’s more, the increasing threat of climate change will force both the military and industry to practice for severe disruption of daily life (through hurricanes, flooding or water scarcity), so why not practice for other threats, too?

“We were lucky,” New York governor Andrew Cuomo said last month after engineers restored power to 72,000 New Yorkers hit by a power cut. By joining the armed forces in exercising contingencies, companies would not have to rely on luck.

Pressure on costs and staff grows as investors flee active products

Profits at European fund managers look likely to fall by almost 6 per cent this year, adding to pressure on investment companies to cut costs and reduce staff.

The profit pool for Europe’s mutual fund industry will shrink from €79bn in 2018 to €74bn this year, according to an analysis by Prometeia, an Italian consultancy that has analysed data from more than 40,000 funds.

Increased competition on price, outflows from actively managed equity strategies and the shift by investors into low-cost passive trackers are expected to bite into industry earnings.

Prometeia forecasts that net investor flows into European funds will halve from €94.8bn last year to €46.2bn in 2019. Profit margins, measured as share of assets, are predicted to shrink from 79 basis points to 72bp.

Prometeia also cautioned that profits could experience a more severe decline of about 8 per cent if equity and bond markets delivered muted returns, which would lead to further weakness in new business inflows. A market correction would lead to an even larger fall in profits.

Active equity funds, the most lucrative products for managers, are expected to bear the brunt, with investor withdrawals leading to a decline of about 10 per cent in profits for those fundsthis year. Earnings from multi-asset funds and unconstrained funds that aim to replicate hedge fund strategies are also expected to decline.

“Active managers need to deliver more added value to justify their pricing premium in the current low interest rate environment, where they face increasing competition from passive strategies,” said Claudio Bocci, a partner and head of asset management at Prometeia.

Investor appetite for both equity and fixed income passive funds is increasing steadily but these low-cost trackers represent less than 5 per cent of the European industry’s profit pool.

BlackRock, the world’s largest asset manager, has established a dominant position as the biggest provider of passive strategies in Europe. BlackRock’s success in attracting tracker fund inflows has, in effect, shrunk the pool of new business available to rivals.

Funds that incorporate environmental, social and governance metrics are predicted to experience strong demand and increased profits in 2019.

“ESG strategies are really taking off with an increase of around 44 per cent in their assets under management since the start of last year. That is also translating into higher profits from ESG for asset managers,” said Mr Bocci.

Disappointing results for the first half of 2019 have already been reported by Schroders and Standard Life Aberdeen, which announced declines in pre-tax profit of 14 per cent and 10 per cent respectively. Amundi reported flat pre-tax profit in the first half, while Legal & General Investment Management posted a 1 per cent increase in first-half operating profit.

Failure at two generators caused travel chaos and cut off a million homes and businesses

The UK government has ordered its own inquiry into power cuts which affected nearly a million businesses and homes in England and Wales on Friday and caused severe transport disruption at the start of the weekend getaway.

New Business and Energy Secretary Andrea Leadsom said on Saturday that she would commission the government’s energy emergencies executive committee to look at the incident after power outages during rush hour caused “enormous disruption”.

Hundreds of people were trapped on trains as a result of the power cuts, which were reported across the South-east, Midlands, South-west and North-east of England as well as in Wales. They also disrupted traffic lights in areas of London and the South-east as well as essential services such as hospitals.

National Grid, which is in charge of Britain’s electricity system, “must urgently review and report to [energy regulator] Ofgem”, Mrs Leadsom added in a tweet.

The energy emergencies executive committee oversees urgent responses and recovery after major power incidents to ensure the country always has a secure supply.

Mrs Leadsom’s intervention came after Ofgem threatened National Grid with a possible fine and demanded a detailed report from the company “so we can understand what went wrong and decide what further steps need to be taken”. This could include enforcement action, the regulator said. 

Ofgem has the power to fine energy companies up to 10 per cent of their turnover if they are found to have been at fault. In National Grid’s case, any such fine would only apply to the part of the business that is regulated, a spokeswoman for Ofgem said.

National Grid said on Saturday evening that it would work closely with the government’s investigation “to ensure that learnings can be reflected in industry processes and procedures going forward” and said it had initiated its own internal review.

It had earlier claimed the cause of the power cuts “was not with our system but was a rare and unusual event, the almost simultaneous loss of two large generators, one gas and one offshore wind” at 4.54pm on Friday.

The generators involved were the Little Barford gas-fired power station in Cambridgeshire, owned by the German power company RWE, and the Hornsea offshore wind farm, owned by Danish utility Orsted. 

National Grid said other generators had increased their output to compensate for the loss in supply. However, due to the scale of the generation losses this was “not sufficient” so it disconnected selected areas of demand across the country to “protect the network and ensure restoration to normal operation . . . as quickly as possible”.

Duncan Burt, National Grid’s operations director, told the BBC the company was “very confident that there was no malicious intent or cyber attack involved” in the incident.

RWE acknowledged its Little Barford site had experienced a technical fault on Friday afternoon, but said it was back in action and ready to be called upon by National Grid to generate power later that night. 

“What is now needed is for National Grid and Ofgem to investigate why the wider system issues occurred,” the company added.

Orsted confirmed that problems had occurred at its Hornsea One wind farm, off the Yorkshire coast, on Friday, adding: “We are investigating the cause, working closely with National Grid System Operator, which balances the UK’s electricity system.”

Such technical faults at power plants are not uncommon but it is rare for two generators to trip at the same time. 

The last similar incident was in 2008, when the Sizewell B nuclear plant in Suffolk and the now closed Longannet coal-fired station in Fife went offline within minutes of one another, causing blackouts for hundreds of thousands of homes.

Tom Edwards of Cornwall Insight, a consultancy, said problems can occur when there is an unscheduled outage at one plant “then you have got to change the output at another one and it doesn’t want to do that and it falls over as well”. 

Although it caused inconvenience for lots of people, Mr Edwards described Friday’s events as the electricity system doing what it is “supposed to do in those situations”, where National Grid needs to act quickly to avoid a total shutdown of the system and blackouts nationwide.

There would have been “no human being in control of what was happening, all the automatic systems kicked in”, Mr Edwards added.

Some have questioned whether the greater contribution of renewables to Britain’s overall electricity mix could raise the likelihood of such events occurring due to the unpredictability of their output, which is based on weather conditions. 

Mr Edwards said renewables such as wind and solar — which accounted for a third of electricity generated last year — do make it more challenging to balance supply and demand across the system but that there is technology, such as batteries, to deal with it. 

National Grid is working on a plan to ensure the system is ready to cope with a scenario where 100 per cent of electricity could be generated by zero carbon sources by 2025, he added.

Market Questions is the FT’s guide to the week ahead

What next for the renminbi’s trajectory?

With its first week above the seven-per-dollar threshold in a decade behind it, the renminbi’s path ahead remains fraught and subject to the impact of China’s economic slowdown and an escalating trade war.

US president Donald Trump remains a wild card but investors can attempt to get their bearings on the currency’s trajectory by looking to a suite of economic indicators set for release in China next week.

Official data on lending and liquidity for July could be released at any point during the week, while on Wednesday there will be readings on retail sales, industrial output and fixed-asset investment. On Thursday figures on house price changes in major cities will arrive.

Economists’ forecasts for these figures are generally bearish. If they are proved right, more bad news would weigh on the currency’s exchange rate. Market expectations for further depreciation became clear last week as a gap widened between the less regulated offshore exchange rate and that of the onshore renminbi, which is limited to trade 2 per cent either side of a daily midpoint set by the People’s Bank of China.

Analysts have tipped the PBoC to step into the offshore market if speculation against the currency intensifies. The central bank has already flagged the sale of Rmb30bn of short-term securities in Hong Kong this week — the perfect way to sop up liquidity in the offshore renminbi market, which should help stem the currency’s fall.

That will make it harder for investors to profit off the currency’s depreciation against the dollar. And that is exactly how Beijing likes it.

Deal would make Bristol company second largest supplier of electricity and gas in country

SSE is in talks about selling its UK energy supply business to Ovo, a deal that would see its smaller rival become the second largest supplier of electricity and gas in the market behind British Gas.

SSE has been trying to find a solution for its domestic business, which supplies around 5.7 million homes in Britain, after a deal to spin it off and combine it with Npower, the UK retail unit of Germany’s Innogy, fell apart at the end of last year.

Ovo and SSE have held talks in recent months although details of any possible transaction are not yet known. 

SSE said in a statement late on Saturday in the UK that the discussions “are continuing, however no final decisions have been taken and no agreements regarding the terms of any transaction have been entered into”.

Since the Npower deal fell through in December, the FTSE 100 utility has been exploring both a sale or a possible flotation of the unit as a standalone business.

SSE added in the statement that it remains “focused on securing the best long-term future for the business, its customers and employees, and for shareholders”.

Ovo Energy was founded in 2009 by Stephen Fitzpatrick, a former City financier, and has quickly become a significant force in the UK energy supply market, attracting customers away from the so-called Big Six suppliers, which include British Gas, Eon, EDF Energy, Npower, ScottishPower and SSE. 

It has a 5 per cent share of the market, making it the seventh largest supplier, according to the latest data from UK energy regulator Ofgem. A deal for SSE’s retail business would give it an 18 per cent share, just behind British Gas on 19 per cent.

Bristol-based Ovo earlier this year sold a 20 per cent stake to Japan’s Mitsubishi Corporation in a deal that valued it at about £1bn. It is also backed by private equity group Mayfair Equity Partners.

Mr Fitzpatrick has been expanding the company outside of the UK and last year bought a majority stake in a German supplier. Ovo has also been investing in technology such as vehicle-to-grid, which allows owners of electric vehicles to store electricity in their car battery when it is cheap and sell it back to the grid when there is strong demand. 

The Big Six energy suppliers have come under increasing pressure as the number of new “challenger” brands such Ovo have mushroomed in the past decade, attracting customers on the promise of cheaper deals and better customer service. The number of suppliers in the market has grown from 12 at the start of the decade to a peak of 70 last year.

A government-mandated cap on energy prices for 11 million households, which came into force in January, has also put large suppliers with high legacy cost bases under pressure.

SSE wants to concentrate on the development of renewable energy projects and its regulated networks business.

This isn't the first time Neiman's has been sued over a controversial transfer of the assets of its online shopping retailer MyTheresa.

Neiman Marcus Group Inc. was hit with a lawsuit in New York by UMB Bank that accused the private equity firm that controls the company of trying to elude creditors by changing the corporate structure of the retailer’s “crown jewel” asset, the online retailer MyTheresa.

According to the suit, the trustee for certain debt Neiman’s has issued, Ares Partners moved the MyTheresa subsidiaries in 2018 to another entity, even though the online shopping retailer was essentially serving as an asset that backed the Neiman’s debts. The MyTheresa subsidiaries were valued at roughly $1 billion, according to a valuation in March by Goldman Sachs.

The debts come from the effort to fund the retailer’s 2013 leveraged buyout by Ares and the Canada Pension Plan Investment Board, according to the suit, which was filed in state court in New York.

“There was no business purpose for the unlawful transfers: their intended result was to place MyTheresa into entities beyond the reach of the company’s creditors, including holders of the unsecured notes, to hinder and delay creditor recovery,” UMB said in the suit.

This isn’t the first time Neiman’s has been sued over this controversial transfer of MyTheresa assets. Marble Ridge Capital claimed in a lawsuit in Texas state court that the move was a ploy to put a valuable asset out of the reach of creditors. But the judge there dismissed the case in March, saying the court didn’t have jurisdiction.

A Neiman’s spokeswoman said on Friday: “These allegations are meritless. It’s disappointing that these debt holders chose to assert claims through the trustee that are nearly identical to those already dismissed by a Texas court with prejudice, rather than join the overwhelmingly successful exchange offer that the company achieved with the majority of its debt holders. As has been demonstrated time and again, the exchange and MyTheresa transactions fully complied with the company’s debt documents. The company intends to vigorously defend itself.” A representative for Ares did not immediately comment on Friday.

In 2014, Neiman’s acquired MyTheresa, an international online business that helped broaden the offerings of the U.S.-based and brick-and-mortar-focused company. But Neiman’s continued to have financial difficulty in subsequent years.

“Unbeknownst to the market in general, let alone to the company’s creditors, [the retailer] and Ares were planning and beginning to implement transactions designed to strip value from the company for their own benefit, despite the company’s dire situation, all at the creditors’ expense,” UMB said in the complaint.

“The heart of this strategy was seizing MyTheresa, the crown-jewel asset from the company’s portfolio,” it said.

The London-based company's stock held onto losses occurred in after-hours trading Thursday, trading down 45 percent.

A good night’s sleep didn’t improve investors’ mood over Farfetch.

The London-based company’s stock held onto losses logged in after-hours trading Thursday and closed down 45 percent to $10.09 Friday as Wall Street’s taste for the onetime stock market darling soured.

Traders appeared to be fretting over Farfetch’s triple reveal after the market closed.

Just as the company recorded wider second-quarter losses, fueling concerns about just when the company will become profitable, it announced that it had acquired brand platform New Guards Group, the licensee of Virgil Abloh’s Off-White brand, for $675 million. Not done, Farfetch also told investors that its longtime chief operating officer Andrew Robb would be leaving the company after nine years only one year after its initial public offering.

Ike Boruchow, a senior analyst at Wells Fargo, said: “What was supposed to be a simple investment thesis (industry-leading top-line growth with structural industry tailwinds) has become increasingly complicated and controversial over the past few months — and Farfetch’s second-quarter print was disappointing and, more importantly, ratcheted up the complexity by several notches.”

In particular, he said Farfetch’s reduced guidance on gross merchandise value for the second half of the year was “extremely surprising and disappointing.” He had expected it to increase, primarily due to the platform’s push into China and a normalization of margins.

As for the acquisition — the third this year after Stadium Goods and Toplife, Boruchow said it raises questions as to how these businesses all fit into Farfetch’s model and how management can integrate them all without taking their eye off the ball.

This echoed concerns of Bernstein luxury goods senior analyst Luca Solca, who noted that the business remains far from making a profit, while continuing to reduce GMV guidance.

“This happens despite the recent acquisition of Top Life, which should provide tailwinds in the [second half] in China,” he said. “The changing perimeter of the business — and its rising exposure to first-party risks — [are] clouding the picture. Investors will have a harder time to verify that the underlying business model actually works and leads to profitability, eventually.”

Giving his thoughts on the stock tumble, Jonathan Blackledge, an analyst at Cowen, said investors were caught off guard given New Guards is arguably a collection of brands, contrasting with Farfetch’s platform approach to luxury online fashion.

“Key risk factors in our view include sustaining attractiveness of these brands for long-term growth and the risk that brands such as Off White may be near peak popularity,” he said. “That said, we’re willing to give management the benefit of the doubt and think the selloff (much of which was ostensibly tied to the New Guards announcement) was an over-reaction.”

Wells Fargo’s Boruchow concluded that while it’s clear that the story has changed meaningfully since the IPO, and Farfetch shares are headed to the “penalty box,” there’s still a structural story underlying the stock.

“Luxury is under-penetrated online, demographic trends are favorable for online players and there is a huge opportunity for the company in China,” he said. “So, we’re sticking with our outperform rating on the shares — though it’s no longer our top pick in the space, and we’re significantly reducing our [fiscal year 2019 and 2020] adjusted EBITDA [earnings before interest, taxes, depreciation and amortization] estimates to losses of $140 million and $125 million, respectively,” he said.

Dumping United Kingdom–based real estate listings service Rightmove might be, well, the right move for investors.

The stock faces some severe property-market headwinds and uncertainty over Brexit for at least the next six to nine months, analysts say.

“We believe there are challenges ahead’’ for Rightmove (tickers: RMV.UK and RTMVY), according to a report from U.K. broker Peel Hunt. Put simply, the stock is overvalued given the economic environment the company faces.

Other analysts spy trouble ahead for the stock. The number of Sell ratings totaled five (out of 12) recently, up from 3 of 10 three months ago. That downgrading sent the stock skidding. The shares are down about 8% in the three months through Wednesday, versus a roughly flat return for the FTSE 100 index, which tracks the U.K.’s largest listed companies. But they could fall further.

The Peel Hunt report says the stock is worth 4.45 pounds sterling per share ($5.38), or 13% below its recent price of £5.14. Morningstar says the stock is worth 15% less than its current price.

Rightmove doesn’t sell real estate directly, but that doesn’t mean it’s immune to the U.K. housing market. “They have more of an indirect exposure through their client base,” says Laith Khalaf, a senior analyst at U.K. financial company Hargreaves Lansdown. In other words, Rightmove’s customers sell real estate, and the realty business is hurting. The London property market is in bad shape, with prices down 4.4% on average over the past year, according to U.K. Land Registry data. More broadly in England, the pace of housing-price growth has slowed to an annualized 1% in May from 2.7% in July 2018. Investors could see prices across England start to dip before long.

A UBS report notes that it isn’t just pricing that’s down, but also fewer people are buying homes. That’s having a knock-on effect with agents who advertise with Rightmove. Many are no longer promoting their services through the website.

Rentals are suffering too, as estate agents now face a ban on charging renters fees. “The tenant fee ban could accelerate branch closures, given its likely impact on cash flow at small branches,” according to UBS. Renters now can’t be charged for administrative services or credit checks.

Due to falling property-sales volumes and the renting law change, UBS sees the website losing 560 estate agents in the second half of this year and a further 500 in 2020. That will reduce Rightmove’s revenue. As of June 30, Rightmove had about 20,000 agents advertising on the website.

The drop in agents hits Rightmove harder because of the stock’s pricey valuation. It trades at a forward price/earnings ratio of 26, according to Morningstar.

“It doesn’t look cheap,” says Ian Forrest, an investment research analyst at financial-services firm The Share Centre in England.

He also notes that revenue is projected to slow. Sales growth averaged 13.9% over the past five years, according to Morningstar, but UBS projects that will drop to single digits this year and next.

There are risks for investors who dump the stock or who sell the borrowed stock in hopes of profiting from a drop in price. The property market could pick up if Britain gets a deal to continue trading with the European Union after its scheduled Oct. 31 Brexit date. That would send the stock higher. Shorting is risky because of the potential for losses in excess of 100%.

“Investors see a lot of uncertainties when they look at the next six to 12 months,” Forrest says.

Losing a trade war would be a catastrophic blow to the national psyche of China or the U.S. But there’s something even more dangerous than losing: thinking you can “win.”

Both sides in this fight now seem to be gaining confidence in their ability to prevail, and that’s why investors should worry. Portfolio managers and strategists said this past week that they’re re-evaluating their portfolios—not to exit the market completely but to focus on investments that can withstand a longer and costlier phase in the trade war.

The tit-for-tat tariff battle entered dangerous new territory early in the week as China allowed its currency, the yuan, to decline in value after President Donald Trump threatened a new round of tariffs on about $300 billion worth of Chinese imports, including cellphones and clothing. China reportedly is also limiting purchases of U.S. agricultural goods.

The latest tariff round would place 10% duties on iPhones, laptops, and toys, among other items. On their own, the tariffs are unlikely to force the U.S. into recession, as they account for just 0.14% of U.S. gross domestic product, according to Keith Lerner, chief market strategist at SunTrust. But the tariffs are now just a small part of the standoff. The weapons in the trade war are getting more sophisticated and harder to quantify. Both China and the U.S. have figured out ways to cause the other side to flinch.

The U.S. can claim a kind of victory because the latest trade data show that China is faring far worse from the trade slowdown. China’s second-quarter GDP grew at its slowest rate in at least 27 years. Chinese exports to the U.S. fell by $5.6 billion in June, versus a $1.8 billion drop for U.S. exports to China. (Mexico just surpassed China as the top trading partner with the U.S.)

Numbers like these are “increasing the likelihood that President Trump will make good on his threat to apply duties to all Chinese exports from Sept. 1,” wrote Panjiva analyst Chris Rogers. China hawks have been emboldened.

Trump also may be emboldened by the Federal Reserve’s recent swing back to an accommodative monetary policy, argues Morgan Stanley strategist Michael Zezas. The administration may think a trade-war escalation could lead to a “quicker, potentially more aggressive Fed stimulus response that could help the economy heading into the election,” Zezas says.

China has reason to believe that it can “win,” too, particularly as Trump faces more political risks heading into the 2020 election. China learned this past week that it can also inflict pain on the U.S. The Dow Jones Industrial Average fell 767 points, or 2.9%, on Monday, after China allowed the yuan to drop in value, thereby making Chinese goods relatively cheaper than American ones. After China halted the currency’s decline on Tuesday, U.S. stocks bounced back. For two days, Chinese policy makers played the U.S. market like a yo-yo.

“It is as simple as this—the Chinese government has the power to use currency weakness to trigger selling in the U.S. equity market,” wrote Michael O’Rourke, chief market strategist at JonesTrading. “Every bit of U.S. equity weakness also weakens President Trump’s position. Furthermore, the Chinese government has a daily yuan fix through which it can foster daily volatility if it wishes.”

Nomura strategist Naka Matsuzawa wrote on Wednesday that investors expect that “China is prepared to accept an economic downturn” if it means Trump loses the election.

So much “winning” on both sides indicates that investors should be nervous. “In our view, negotiating positions and the macro backdrop reveal that each side perceived that the benefits of standing one’s ground outweigh the benefits of cooperation,” wrote Zezas. “We expect further market weakness will be required before de-escalation is achieved.”

For investors, that makes comeback rallies potentially treacherous. “An environment where China’s currency swings are a key catalyst behind U.S. financial volatility is an environment where U.S. investors should avoid chasing rallies,” O’Rourke wrote.

But that doesn’t mean investors should run to cash in anticipation of a recession. “It isn’t something you can just wish away, but at the same time, what is being proposed today isn’t enough to tip the U.S. economy or the global economy into recession,” said Anne Mathias, global rates and foreign-exchange strategist in Vanguard’s Fixed Income Group.

Stocks that can absorb the tariffs or sidestep them altogether are in a better position to advance. Peter Andersen, a Boston money manager who oversees just under $1 billion in client assets, said he’s particularly bullish on areas like cybersecurity. “That is an area where no company is ever going to cut the budget,” he noted.

Andersen likes CyberArk Software (ticker: CYBR) and Palo Alto Networks (PANW). “I own both these stocks and don’t plan on selling them for some time,” he said.

Andersen also likes Procter & Gamble (PG), which isn’t immune to tariffs but has shown that it can manage the cost. The company has said the tariffs are costing it nearly $100 million a year—a manageable amount for a company that made $67 billion last year. “It’s like a blip on their revenue,” he said.

Martin Leclerc, a portfolio manager at Barrack Yard Advisors in Washington, D.C., is finding ways to navigate around the tariffs by concentrating his bets in areas that he thinks will be less affected. He likes U.S. companies that do all of their business domestically, including small-cap rural broadband provider LICT (LICT). As for global stocks, he favors brands such as Hermès International (RMS.France) and Michelin (ML.France), although he says Hermès’ valuation is too rich right now.

Leclerc also likes companies that have a “regional specialty,” an ability to profit from trade and growth without getting stuck in regulatory binds. That’s why he owns Jardine Matheson Holdings (JMHLY), a conglomerate headquartered in Hong Kong that has operated in Asia for nearly 200 years and owns businesses in a diverse set of industries, from hotel chains to insurance to vehicle sales. He likened it to Berkshire Hathaway (BRK.B) and said its valuation of less than 12 times expected earnings over the next 12 months makes it a bargain.

“We’re morphing into a world with regional trading blocks,” Leclerc said. “As a money manager, that can still be interesting.”