FT : Sony/Third Point: workspace invaders Second attempt to push group to spin-o

Sony/Third Point: workspace invaders
Second attempt to push group to spin-off its movie business could lead to a happier ending

Movie follow-ups are rarely better than the original. But there are exceptions. Shares in Sony rallied 9 per cent on reports that Dan Loeb's Third Point was building a stake for the second time. His previous attempt to get the Japanese group to spin off its movie business failed. If, as expected, he tries again, investors should hope for a different ending.

The New York-based hedge fund sold its 7 per cent stake in Sony five years ago, having booked a return of a fifth on its $1.1bn stake in just 17 months. While most of its demands to cut costs and sell its entertainment businesses were rejected, other changes followed. Sony sold off its PC and battery businesses. The shares nearly tripled in the following years. 

But over the past six months, Sony shares have dropped by a fifth. There are few positives in its near-term outlook. Profit growth has slowed. Semiconductor sales are down. Its failing smartphone business has eaten into gaming profits, prompting Sony to halve the unit’s staff. PlayStation 4 console and game sales have peaked. Increased competition from cloud-gaming services such as Google’s Stadia loom. 

For Sony, film and television production is 11 per cent of its consolidated total revenue and just 3 per cent of operating profit. There would be benefits from distributing Sony’s content through platforms with a wider reach. The audience of its on-demand video platform SonyLIV is limited.

More than half of Sony’s films are international features. Given the war for global content between digital platforms such as Netflix and Amazon, the business might fetch a large premium. Based on a sector average multiple, a Sony movie spin-off might be worth about half the $71bn paid by Walt Disney last year for 21st Century Fox’s entertainment assets.

Mr Loeb has a record of successful activist campaigns in Japan against the likes of Suzuki Motors and robot maker Fanuc. His reported stakebuilding will add urgency to Sony’s restructuring plans. Investors should look forward to this sequel.

FT : The impending Chinese asset boom

One of the many statistics associated with China's economic rise is the claim that it used more cement in a three-year period than the US did in the entire 20th century.

If the last statistic was about cement, the next will probably be about pensions.

Yesterday, in an interview with Larry Fink, FTfm provided the latest insight into BlackRock's plans in China. The asset manager is "very engaged" with local regulators as it tries to take control of a local investment group.

We've written in the past about the implications of more pension assets, invested in markets, in China. In 2018, the country had fewer pension assets (albeit according to a restrictive measure) than Finland, whose population is more than 200 times smaller. China's pension assets were just 1.5 per cent of GDP, compared with over 100 per cent in the UK, and 121 per cent in the US. It has by far the fastest compound annual growth rate over five years of 22 major economies compared in a recent Willis Towers Watson report.

It's important to distinguish between the provision of pensions via the state (ultimately backed by government spending) and the provision of pensions through savings invested in markets. The latter approach still involves myriad goverment subsidies and incentives, but it also creates huge opportunities for the asset management industry to, well, manage assets.

Against this backdrop, it is no surprise that global asset managers are attempting to establish a foothold in China. The government has also recently moved to liberalise rules constraining the role played by foreign fund managers. Like everything in China, the current arrangement is highly complex. But the general trend can be simplified: if you sell something, and hundreds of millions of people start buying it, that's probably good for your business. In fact, it's about as good as it gets (short of central banks printing money to buy the commodities you handle).

The opportunity extends to general Chinese savings via the asset management industry, which would be influenced by the size of private insurance markets, as well as personal savings. CICC fund management, with which BlackRock has held talks, says the following about its asset management department (AMD):

AMD serves the largest institutional investors, banks and corporations in China. Its clients include the National Social Security Fund, China Telecom, Industrial and Commercial Bank of China, China Construction Bank, Agricultural Bank of China, etc. To capitalise on the rapid growth of China’s asset management market, AMD is also exploring new market segments such as insurance companies, regional pension funds and high-net-worth individuals.
So in China, we are now witnessing the early stages of development for what may become the largest financial system on earth. This would follow the largest construction boom, and the largest urban migration.

The bigger question is the impact on the prices of assets globally. If Chinese savings flow through asset management services, they can be used to buy public assets around the world. If hundreds of millions of people who didn't buy something start buying it, what does that mean for the people who were already buying it?

>>> US Gapping down

Gapping down
In reaction to disappointing earnings/guidance:

  • LNN -11%, PNR -8.8%

Other news:

  • ZGNX -26% (receives Refusal to File Letter from FDA for FINTEPLA New Drug Application treating seizures associated with Dravet syndrome)
  • HOLI -7.7% (to offer 7.8 mln ordinary shares through underwritten public offering; files for ordinary share shelf offering)
  • NBEV -4.7% (after nearly 40% move higher on the day)
  • MXWL -3.7% (indicated lower after Tesla [TSLA] extended the expiration to May 15 from April 10 of its previously announced tender offer to acquire outstanding common stock of Maxwell)
  • FIXX -3.6% (launches $125.0 mln common stock offering)
  • WYNN -1.5% (Crown Resorts confirms that it is in confidential discussions with Wynn regarding a potential change of control transaction following approaches to Crown by Wynn)

Analyst comments:

  • SAP -2.5% (downgraded to Hold from Buy at HSBC Securities; downgraded to Neutral from Buy at UBS)
  • BHVN -2.2% (downgraded to Equal-Weight from Overweight at Morgan Stanley)
  • AAT -1.2% (downgraded to Sector Weight from Overweight at KeyBanc Capital Markets)
  • SMPL -1.2% (downgraded to Hold from Buy at SunTrust)
  • BLL -0.9% (downgraded to Market Perform from Outperform at BMO Capital Markets)

>>> US Gapping up

Gapping up
In reaction to strong earnings/guidance:

  • MUX +3.4%

Other news:

  • PHAS +28.1% (receives FDA Breakthrough Therapy designation for PB2452 for the reversal of the antiplatelet; provided immediate and sustained reversal of ticagrelor antiplatelet effects in ph I trial)
  • CMRX +13.9% (appoints Mike Sherman as CEO and Mike Andriole as Chief Business Officer)
  • MTSI +6.7% (still checking; is scheduled to present at Broadcasters conference April 8-11; will showcase its portfolio of cable equalizers, cable drivers, reclockers and crosspoint switches supporting SDI)
  • GWPH +3.5% (competitor Zogenix (ZGNX) receives refusal to file letter for its seizure drug)
  • AVYA +3.3% (continued strength on LBO speculation)
  • BLDP +3.1% (signs supply agreement with Norled for Fuel Cell Modules)
  • HA +1.6% (reports total traffic increased 0.2% for March)

Analyst comments:

  • GERN +5.4% (upgraded to Buy from Hold at Needham)
  • DIS +0.7% (upgraded to Outperform from Market Perform at Cowen)

FT : UK legislation to allow no-fault divorce for the first time

UK legislation to allow no-fault divorce for the first time
Reform comes after longstanding calls to remove blame from marriage breakdown

The UK government will introduce legislation to overhaul the divorce system for the first time in more than 40 years and allow couples to apply for divorce without apportioning blame for a marriage breakdown.

The new law, which will apply to marriages and civil partnerships, will remove the need to show “fault” or evidence of the other spouse’s behaviour and will end the right of one party to contest a request for a divorce.

The Ministry of Justice said couples will have a minimum six-month period to “allow for reflection” between requesting a petition for divorce and the act becoming final. The department said the new legislation would be tabled “as soon as parliamentary time allows”.

David Gauke, the justice secretary, said the reform would help end the “blame game” for divorcing couples.

He told the BBC on Tuesday: “Frankly, we are not going to keep marriages together by having a divorce process that just makes it more acrimonious [and] tries to apportion blame in such a way that the couple are likely to have a weaker, poorer relationship subsequently than they would otherwise do.”

Divorce law has remained unchanged since the Matrimonial Causes Act 1973, despite repeated calls for reform by judges and lawyers.

Currently divorces are only granted after it can be proved that the marriage has broken down because of adultery, desertion or “unreasonable behaviour”, or because both spouses agree to the divorce and have lived separately for more than two years.

If either party contests the petition, the couple must live apart for more than five years for the divorce to be granted.

>>> US to tax $11bil of EU Products - D. Trump

@realDonaldTrump
34s
The World Trade Organization finds that the European Union subsidies to Airbus has adversely impacted the United States, which will now put Tariffs on $11 Billion of EU products! The EU has taken advantage of the U.S. on trade for many years. It will soon stop!

>>> US Early premarket gappers

Early premarket gappers

Gapping up:

  • PHAS +27.8%, CMRX +7.7%, MTSI +4.8%, AVYA +3.9%, GWPH +3.6%, MUX +3.4%, BLDP +1.7%

Gapping down:

  • ZGNX -30.6%, HOLI -7.5%, LNN -6.5%, MXWL -3.7%, FIXX -3.6%, PNR -2.8%, NBEV -0.9%, WYNN -0.6%