Renault board accuses Ghosn of violating company ethics
French carmaker publicly criticises former leader for the first time following probe
The board of Renault has accused Carlos Ghosn of “questionable and concealed practices” in personal spending and violating the company’s ethics, the first time the French carmaker has publicly criticised its former leader.
A probe by the carmaker into Mr Ghosn uncovered suspicious payments to the Middle East as well as benefits that accrued to him in his position at the head of the company.
A separate investigation also uncovered “serious deficiencies” in “financial transparency” at the Dutch holding company that was at the centre of the alliance Mr Ghosn headed for close to two decades before his arrest last November.
The French board plans to dock €1m from Mr Ghosn’s pay package at Renault, including bonus payments from last year and a portion of his future pension.
It marks a reversal for Renault, which was initially reluctant to condemn Mr Ghosn in the days that followed his shock arrest last November by Tokyo prosecutors, who later charged him with financial misconduct at Nissan.
Mr Ghosn quit as chief executive and chairman of Renault in January and will quit as a director of the company in June, the board said on Wednesday. Renault is looking to shrink its board, with two other directors stepping down and only one joining.
Mr Ghosn has consistently denied the allegations against him. He has vowed to “tell the truth” next week at his first press conference since his November arrest.
Renault’s own internal investigation is now complete. It found that Mr Ghosn’s pay from 2010 to 2018 was “in compliance with applicable regulations, with the exception of some errors which are being corrected.”
However, the board also said that “certain expenses incurred by” Mr Ghosn “are a source of concern, as they involve questionable and concealed practices.”
Those expenses include Renault’s sponsorship of the Palace of Versailles which allowed Mr Ghosn’s use of part of the venue for a wedding party, at an estimated cost of €50,000 and potential issues concerning payments made to one of Renault’s distributors in the Middle East.
Both Renault and Nissan have discovered payments made to a Nissan-Renault distributor in Oman that are suspected to have been subsequently diverted for his personal use, according to people familiar with the matter. Last week, Renault brought those payments to the attention of French judicial authorities.
The joint investigation with Nissan into RNBV, the Dutch-listed alliance joint venture, has yet to conclude with a final report expected closer to the end of this month.
However, on Wednesday, Renault said that “RNBV’s internal organization suggests serious deficiencies in terms of financial transparency and expenditure control procedures” and that “certain expenses which have yet to be precisely quantified, but may amount to several million euros since 2010, raise serious questions as to their conformity with RNBV’s corporate interest.”
Investigators have been looking at fees paid to consultants via RNBV and the cost of using leased private jets, say people familiar with the matter. The existence of those jets came as a surprise to Renault, according to people close to the company, even if people across the alliance and Mr Ghosn say they were not a secret.
Gapping down
In reaction to disappointing earnings/guidance:
- USNA -13.5%, GME -11.3%, NG -0.7%
Other news:
- AVEO -10.1% (AVEO Oncology discloses that the EMA's CHMP has determined that the analyses of various factors that may have impacted the preliminary OS data in TIVO-3 trial do not fully explain discordance, and that more mature OS data is required prior to drawing a conclusion)
- SBLK -2.2% (files for $950 mln mixed securities shelf offering and approx. 48 mln common share offering by holders)
- STNE -1.7% (prices upsized follow-on offering of 19.5 mln of its Class A common shares at a public offering price of $40.50 per share)
- BABA -1.4% (Altaba's Board approved the liquidation and dissolution of the Fund; expects to sell ordinary shares and ADSs of Alibaba)
- ACB -1.4% (files preliminary short form base shelf prospectus for up to $750 mln in offerings)
Analyst comments:
- BLKB -1.4% (downgraded to Equal-Weight from Overweight at Stephens)
- CAT -1% (downgraded to Hold from Buy at Deutsche Bank)
- DNKN -0.8% (downgraded to Market Perform from Outperform at BMO Capital Markets)
Gapping up
In reaction to strong earnings/guidance:
- PLAY +7.1%, BOOM +6%, SIG +4.9%
Select Chinese related names showing strength:
- HUYA +2.5%, MOMO +2.1%, SINA +2.1%, ASHR +1.7%, WB +1.5%, JD +1.4%, IQ +1.4%, BIDU +1.2%, FXI +1%
Other news:
- APRN +20.8% (appoints Linda Findley Kozlowski as President and CEO; reaffirms guidance)
- ADMA +3% (receives Department of Health and Human Services U.S. License for ASCENIV)
- GRTS +1.8% (presents data at AACR demonstrating outperformance of EDGE for MHC class II neoantigen prediction)
- BILI +1.7% (offering of 11,473,813 shares by it and 6,526,187 shares by selling shareholders at $18.00/share)
- AKBA +1.4% (after closing near lows - down 13% on the day; was defended by Raymond James shortly before the bell)
- TSLA +1.0% (to host Autonomy Investor Day on April 19)
Analyst comments:
- ASNA +9.1% (upgraded to Neutral from Sell at Citigroup)
- I +7.8% (upgraded to Overweight from Neutral at JP Morgan)
- ELF +5.3% (upgraded to Buy from Hold at Jefferies)
- AMD +4.3% (initiated with Buy at Nomura / Instinet)
- IRTC +1.9% (upgraded to Buy from Neutral at BTIG Research)
- EPD +1.6% (upgraded to Buy from Neutral at Goldman)
- URBN +1.3% (upgraded to Buy at DA Davidson)
- HLI +1.2% (upgraded to Buy from Neutral at Goldman)
Early premarket gappersGapping up:
- APRN +15.6%, ADMA +7.7%, PLAY +6%, HUYA +3.1%, AMD +3%, MOMO +2.1%, SINA +2.1%, IQ +2%, GRTS +1.8%, WB +1.7%, ASHR +1.5%, JD +1.5%, AKBA +1.4%, URBN +1.3%, FXI +1.1%, BIDU +1.1%, TSLA +0.9%
Gapping down:
- AVEO -24.1%, USNA -13.5%, GME -9.1%, STNE -2.8%, BABA -1%, ACB -0.9%, ATVI -0.7%, NG -0.7%, QCOM -0.5%, BOOM -0.5%
Andreessen Horowitz rides the wave of Silicon Valley IPOs
Venture capital firm’s co-founders feel vindicated after gatecrashing investment world
A decade after gatecrashing Silicon Valley’s most exclusive party, Ben Horowitz is sounding vindicated.
The venture capital firm he set up with Netscape co-founder Marc Andreessen has long drawn detractors — not least over what rivals claimed was a willingness to bid up the valuations of the most promising early-stage tech start-ups to uneconomic levels.
After the stock market debut of ride-hailing company Lyft at the end of last week, Mr Horowitz was ready with a response: “It doesn’t look that way in retrospect, now does it.” The IPO turned his firm’s investment, estimated at around $100m, into a holding worth more than $1bn, even after a 12 per cent share price drop on Monday. “It’s not easy to make $900m,” he added.
Andreessen Horowitz has never been too concerned about antagonising others in the clubby world of venture capital. Breaking into a narrow sphere where personal networking is key and returns are disproportionately concentrated in a small number of the most successful firms was never going to be easy.
“People are always going to bark at us because we’re always beating them,” Mr Horowitz said. “When you get beaten by the same people over and over again, you talk smack. But that’s OK, that’s just the name of the game.”
The firm has had big “exits” from its investments before, notably last year’s sale of code sharing site GitHub to Microsoft, bringing it about $1bn worth of Microsoft stock (like all VCs, it also has had its share of disappointments, among them one-time internet stars such as coupon marketing site Groupon, gaming company Zynga and Foursquare, the location-sharing app, that never lived up to the hopes).
But in the round of big tech initial public offerings that is expected to follow Lyft, Andreessen Horowitz stands to come out as one of the main winners. It was an early investor in several, leading the second, or “B” rounds, of financing for business messaging service Slack, social media site Pinterest, and PagerDuty, a business software company in which it holds a stake worth up to $250m, based on the indicated IPO pricing. It also led the B round for accommodation-booking site Airbnb, which has also been eyeing a stock market listing, though not before next year.
The IPOs are the culmination of a campaign by Andreessen Horowitz to break into the A-list of VC firms. As a recently appointed partner at another top Silicon Valley investment firm explained, the only sure route to superior returns in VC is to be first in line when the entrepreneurs with the best new business ideas are looking to raise money. That gives established firms with the strongest brands and personal networks a big edge.
Andreessen Horowitz has been aggressive in its marketing — something previously unheard in the VC world — and cast itself as the champion of the entrepreneur. That came easily to the abrasive Mr Andreessen, who co-founded Netscape and whose first experience in business was an all-out fight with Microsoft at the height of its power. The quieter Mr Horowitz also worked at Netscape and the two went on to found one of the first cloud computing companies before selling it to Hewlett-Packard.
According to Mr Horowitz, the firm was built on what its founders had learnt themselves as customers of the VC industry. For instance, it hired its own recruiters, marketing experts and others to support the founders it backed, replacing the informal networks of personal contacts other firms relied on. His own book The Hard Things About Hard Things on the challenges of starting a business based on his experience is often cited by tech founders as an inspiration. “We really moved the model into the future, and we’re the best at it,” he said.
If that kind of self assurance has antagonised rivals, critics also accuse the firm of making unrealistic promises to win over entrepreneurs. Mr Andreessen, for instance, once said the firm was happy to hold on to stock in its private companies for 15 years or more — much longer than most VC firms are set up to do.
“In general, venture capitalists are pushing for an earlier IPO than the founders of the company,” said Jay Ritter, an IPO expert at the University of Florida.
Mr Horowitz denied that Andreessen Horowitz had made exaggerated claims. “The promise wasn’t that we’d hold the stock,” he said. “The promise was, ‘We’re going to help you run your company and we’re going to give you a network that makes you powerful enough to do so’.”
He also argued that the latest generation of tech companies have been staying private longer as “a direct result of a set of regulations that were put in place between 1997-2004”, which made it less attractive to be public.
For the investors who backed the handful of big winners from the latest cycle of tech start-ups, the delayed IPOs could now bring big returns.
“From a purely selfish standpoint it’s great when they take a long time because they build so much value in the private markets, and that’s great for us,” said Mr Horowitz. But he called it a “tragedy” for the markets as a whole.
“The public market investor doesn’t get access to a lot of the growth, and that just creates wealth inequality, it’s terrible,” he said. In trying to protect small investors from too much risk, he added, regulators “basically gave all that growth opportunity to people who are already wealthy. We have to, as a country, do something to fix that.”
While Andreessen Horowitz’s first fund — a $300m investment vehicle raised in 2009 — is reputed to have performed strongly, it is too early to judge the much larger funds that followed. Its latest investment vehicle, a $2bn fund that has yet to be officially announced, is its largest to date and takes the total raised in its lifetime to more than $9bn. It faces the hard job of maintaining a high return on the much larger sums invested. Meanwhile, money has poured into Silicon Valley and competition has escalated sharply — not least with the arrival of SoftBank’s $100bn Vision Fund.
In search of opportunities, the firm has created separate funds to invest in cryptocurrencies and blockchain start-ups, and in technologies that are transforming healthcare. And in its core consumer and business markets, it is betting that artificial intelligence will open a big new investment cycle.
The firm’s website still bears the slogan “Software is Eating the World”, a reference to an influential article Mr Andreessen wrote in 2011 in The Wall Street Journal. In it, he argued that software companies were “poised to take over large swaths of the economy”. The firm he and Mr Horowitz founded is now counting on AI to bring another decade of profitable disruption.