VEON reports Q4 results, details financial targets for FY19 (2.41)
- Q4 revs were -3.1% y/y to $2.25 bln vs. the $2.18 mln analyst estimate; EBITDA was $714 mln vs. $753 mln a year ago
- VEON's Board of Directors approved a final dividend of US 17 cents per share, bringing total 2018 dividends to US 29 cents per share, in line with the Group's progressive dividend policy.
- FY19 Targets:
- Guidance for total revenue is low single-digit organic growth and for EBITDA is low to mid single-digit organic growth
- The target for equity free cash flow excluding licenses is approximately at the same level as FY 2018 (around USD 1 billion), based on currency rates as at 20 February 2019.
- VEON has committed to reduce the Group's cost intensity ratio by at least 1 percentage point organically per annum between 2019 and 2021, from 61.8% reported in FY 2018
Kosmos Energy misses by $0.06, misses on revs (5.80)
- Reports Q4 (Dec) loss of $0.09 per share, excluding non-recurring items, $0.06 worse than the S&P Capital IQ Consensus of ($0.03); revenues rose 65.4% year/year to $309.5 mln vs the $332.55 mln S&P Capital IQ Consensus.
- Additionally, the co announced that it is hosting a Capital Markets Day presentation today in London for sell-side analysts and institutional investors. Highlights include:
- Reduction in 2019 capital expenditure from $500-600 million to $425-475 million: This can be done while maintaining the same 8-10% production compound annual growth rate for 2019-21
- The company can fund its sustaining capital expenditure and dividends at $35/barrel Brent
- Kosmos has discovered a significant and valuable resource in Mauritania and Senegal and the final investment decision of the Tortue project in December 2018 has created a value inflection point: Following interest from multiple third parties, Kosmos intends to sell down its position to ~10%
- Kosmos' exploration portfolio creates asymmetric upside, with 2019 an active exploration year for the company: Kosmos expects to drill 6 exploration wells across the portfolio targeting 500 mmboe net
Lyft IPO rekindles debate on dual-class share structures
Prospect of ‘super-voting’ stake for co-founders at flotation stirs fears for investor rights
As Silicon Valley’s unicorns head to the public markets, questions are being raised over how the latest generation of hotly anticipated technology listings will treat their future shareholders.
The debate over dual-class share structures — in which founders and sometimes early investors are issued stock with extra voting rights — has been revived following reports that Lyft, the ride-hailing company, is preparing to create “super-voting” shares for its co-founders, as it plans to list on the Nasdaq as soon as next month. The share structure would give its co-founders, John Zimmer and Logan Green, voting rights greater than their economic stake of less than 10 per cent in the company but would fall short of handing them majority control, according to a person familiar with the discussions.
Trying to strike a balance between public ownership and maintaining founder control has become a hallmark of tech IPOs, causing varying degrees of hand wringing from investors who are afraid of missing out on high-profile investments but wary of a mechanism that limits their rights as owners. Most public companies trade a single class of shares, with one vote for each share.
“The principle of one-share, one-vote is a foundation of good corporate governance and equitable treatment of investors,” Kenneth Bertsch, executive director of the Council of Institutional Investors, wrote in a letter to outside members of Lyft’s board this month. The letter also pushed for the adoption of a seven-year “sunset” period that would ultimately revert the capital structure to one share one vote.
Lyft declined to comment.
If Lyft goes ahead with its plan to issue super-voting shares, it will mark yet another point of difference with its larger rival, Uber, which is gearing up for its own initial public offering this year.
Uber stripped extra voting rights from early investors, including co-founder Travis Kalanick, who was ousted as chief executive in 2017 after a run of scandals. The move was part of a package of corporate governance reforms agreed in the terms of a $9bn investment from SoftBank. Those changes will be an important part of its pitch to investors ahead of the listing, according to a person familiar with the company’s thinking.
Proponents of dual-class structures say they allow founders to focus on longer-term goals and insulate them from attacks by activist investors. They also argue that investors are free to choose whether or not to take a stake with reduced or no influence.
“Most companies want to create something that gives them protection as they grow over the first five to seven years of public company life,” said Will Connolly, head of technology equity capital markets at Goldman Sachs, at a conference this month.
Investors generally prefer a more egalitarian approach but have accepted the concept of super-voting shares because there are examples of companies with multiple share classes, such as Google parent Alphabet, where the common stock has performed well — keeping investors of all classes happy.
Mark Zuckerberg, Facebook’s chief executive, owns about 14 per cent of the company he founded but, thanks to a special class of shares carrying 10 votes each, controls 60 per cent of voting rights. His majority control has drawn criticism, as Facebook has come under pressure over privacy practices and its role in spreading disinformation.
Still, Facebook’s common stock has performed well since its 2012 IPO: the shares currently trade at about $160, compared with its initial pricing of $38, significantly outperforming the S&P 500 over the same period.
But critics have a potent example to point to when things go wrong: Snap’s 2017 IPO, and the Snapchat owner’s ensuing abysmal share performance.
Snap pushed the envelope of corporate governance standards by selling shares with zero voting rights — the first company to do so at its IPO. As a result, co-founders Evan Spiegel and Bobby Murphy control 97 per cent of votes. That move infuriated pension funds and other big institutional investors and resulted in large index providers tightening their rules on dual-class shares.
S&P Dow Jones Indices, for example, said a few months after the listing that companies with multiple share classes would not be able to join the benchmark S&P 500, although existing constituents with such structures — including Google, Berkshire Hathaway and Facebook — were allowed to remain.
The trajectory of Snap’s price over the past two years — from $17 at issue, putting a value of nearly $20bn on the company, to less than $10 a share now and $12bn of market cap — only underscores the risks.
But despite misgivings over Snap, dual-class listings are expected to remain common among the forthcoming class of newly public tech companies.
Wall Street bankers and some investors said that, depending on how proportional the super-voting rights are to the founders’ economic interest, investors are willing to look the other way when they decide they like the long-term prospects of the business in question.
“The vast majority of companies in the technology space that go public do so with a dual-class structure. There has been no observable price for having that structure, assuming it is reasonable,” Mr Connolly said.
“The market has spoken loudly when there are deviations” from that norm, he added.
Giving founders shares that carry 10 votes each is seen as fairly standard, whereas a higher ratio is likely to meet more investor resistance.
“Does the founder have 99 per cent of the vote? I would be hesitant to own that,” said Vince Rivers, senior portfolio manager at JO Hambro Capital Management, the £28bn UK-based asset manager. “If it is a third of vote, I would be more apt to own it if I liked it otherwise.”
Facebook backed down from its attempt to create a class of non-voting shares in 2017, which would have allowed Mr Zuckerberg to sell stock to fund his charitable efforts without ceding control, after an investor lawsuit.
Alphabet also faced investor pushback when it issued shares without voting rights in 2014 but went ahead with its plans. Today, its non-voting class C shares trade within 1 per cent of its class A shares, which have one vote, suggesting investors may see little difference in value.
“Sunset” clauses, whereby super-voting rights phase out over time, can also alleviate investor concerns. Stitch Fix and Eventbrite, tech companies that went public in 2017 and 2018, respectively, both put 10-year expirations on the extra votes given to their founders and early investors.
In addition to petitioning Lyft, the Council of Institutional Investors, representing asset managers including BlackRock and T Rowe Price, has also pushed the two main listing venues in the US, the New York Stock Exchange and Nasdaq, to adopt seven-year sunset provisions as part of their listing standards.
“In or view, this moderate step would substantially mitigate the adverse effects of misalignment, which only worsen over time,” CII told Lyft. “Seven years offers a figure both commonly chosen by recent IPO companies and supported by empirical studies of dual-class company performance.”
A top London-based quant trader quit Goldman Sach after just six months for Citadel.
Vivek Upadhyay, a senior quant trader and briefly an executive director at Goldman Sachs, joined the Chicago-based hedge fund's London office earlier this month.
During his brief Goldman interlude, Upadhyay worked on the bank's 'securities execution services.' As such, he was presumably involved in Goldman's attempts to increase the efficiency of its electronic trading platforms. Tower Research describes itself as having, some of the ' fastest, most intelligent computer systems' in the world.
Citadel clearly thought Upadhyay's skills were of interest. His arrival at the hedge fund comes after a prolonged buildout of the Citadel's quant team. It comes at a time when investment banks and hedge funds are fighting over quants, throwing salaries of well over six-figures at even entry-level engineers and data scientists.
At Citadel, Upadhyay will be a quantitative researcher, suggesting that he may be moving into more of an investment-focused role than at Goldman.
Ofgem consults on plan for energy networks ‘bailout’ scheme
Mechanism could potentially provide unlimited money to companies unable to service debts
Britain’s energy regulator is drawing up plans for a “bailout” scheme for the large monopolies that run Britain’s gas and electricity networks, which would see consumers provide “potentially unlimited” money to companies that run into unexpected financial difficulty and could not make debt payments.
Ofgem has proposed slashing roughly in half the amount network companies such as National Grid, Cadent Gas and Northern Gas Networks, which own the pipelines and cables that deliver gas and electricity to homes and businesses, should be able to pay their investors from 2021.
Networks are in effect monopolies that generate their revenues from consumers, who are charged through their energy bills. Such charges — which cover the costs of maintaining pipelines and cables, and ensuring power supply meets demand, plus any new investments required — make up about a quarter of a typical bill.
In December, Ofgem, which regulates these charges by evaluating the cost of work that needs to be carried out by companies and what would be a fair return, proposed a baseline cost of equity — or how much networks can pay their investors — of about 4 per cent based on current market conditions from 2021, down from 7-8 per cent currently. This new regime will apply to all gas networks and the electricity transmission companies.
However, Ofgem has admitted lower returns may mean companies have “less headroom” over their costs of debt to deal with any unexpected problems.
In a 216-page technical document, it has proposed creating what has been described by Moody’s, the credit rating agency, as a bailout mechanism.
If triggered, consumers would provide “potentially unlimited liquidity to operating companies that would otherwise be unable to service their debt”, said Graham Taylor, a senior credit officer at Moody’s.
Networks that receive cash — which would be charged to customers via their bills — would have up to 10 years to pay it back.
Ofgem told the Financial Times that the proposal, which is open to consultation, is an alternative to setting higher returns for all networks, which it believes, would be “very costly for consumers”.
In the “unlikely event” that a network company experienced “unexpected financial downsides” and had to access the scheme, the regulator insisted they would face a number of restrictions. These would include not being able to make dividend payments, submitting a payment plan to Ofgem and potentially having a representative of the regulator sit on its board.
Ofgem said: “If we conclude that companies are adequately financeable without such a mechanism, it may not be introduced.”
The proposal is likely to reignite debate around the sector, which has come under increased scrutiny in recent years for what consumer group Citizens Advice described as “eye-watering” profits at the expense of households.
The opposition Labour party called in its 2017 manifesto for energy networks, which are owned by a mixture of listed companies, infrastructure investors, sovereign wealth funds and investment banks, to be returned to public ownership.
Alan Whitehead, shadow energy minister, called the bailout proposal a “sweetheart deal”, saying it sent a message to networks not to worry if they ran into trouble as “the customer will pay up anyway”.
Gillian Guy, chief executive of Citizens Advice, said it was “vital Ofgem is able to demonstrate that any such mechanism delivers benefits for consumers”.
Network companies, which have contested Ofgem’s proposed levels of returns from 2021, have also given a lukewarm response to the bailout scheme, questioning the need for it.
Linde seeks revised final bids over compulsory sale of Korean asset by this week - sources
25 FEB 2019
Germany-based industrial gas giant Linde Group [ETR:LIN] is seeking to receive revised offers for the sale of its Korean arm Linde Koreafor the last time by the end of February, sources familiar with the situation said.
The sell-side has been pushing three remaining suitors Macquarie Korea Opportunities Management, IMM Private Equity and France-based Air Liquide [EPA:AI] to improve their offers for the unit, after collecting binding bids in December, the sources said.
The sell-side has been pushing three remaining suitors Macquarie Korea Opportunities Management, IMM Private Equity and France-based Air Liquide [EPA:AI] to improve their offers for the unit, after collecting binding bids in December, the sources said.
IMM PE, Macquarie Korea, US-based TPG Capital and Air Liquide placed binding bids in mid-December but TPG Capital has dropped out of the process since, previous media reports said. The Deutsche Bank-advised deal reportedly received binding bids of over KRW 1tn (USD 900m).
Linde Korea’s EBITDA in 2017 was about KRW 105.1bn, with an adjusted EBITDA of around KRW 80bn, as reported. The company posted KRW 312.4bn in sales and KRW 44.7bn in operating profit in 2017, up 16% and 21.8%, respectively, year-on-year.
Linde Korea's earnings have increased in 2018, one of the three sources said.
The Korean asset was put up for sale to comply with a regulatory requirement and was moving forward to meet the deadline for deal completion at April-end 2019, this news service reported in December 2018.
Linde’s Korean asset sale should close within six months from the completion date of its merger with the Connecticut-based industrial gas supplier Praxair, according to an officer at South Korea’s antitrust watchdog the Fair Trade Commission (FTC). This deadline can be extended by six months upon request and with regulator approval, but has not been extended yet, the officer added. Linde will face a compulsory penalty if it fails to complete the sale by the deadline, he noted.
The merger of Linde and Praxair, which was announced in June 2017, was completed on 31 October 2018, according to Mergermarket data.
The FTC asked Linde and Praxair to divest assets in the country ahead of their proposed merger, according to a regulatory statement on 2 October 2018. Linde and Praxair jointly have more than a 40% share in the South Korean market for the supply of nitrogen, oxygen, and argon, and their merger could lessen market competition, it noted.
Linde Korea sells a range of industrial gases such as oxygen, nitrogen, argon and acetylene with manufacturing facilities in Pohang, Seosan, and Giheung in South Korea.
Linde, Linde Korea, Macquarie and TPG declined to comment. Air Liquid and IMM PE did not respond by the time of publication.
Stocks climbed in Asia with U.S. and European futures and the yuan rose after U.S. President Donald Trump postponed the date for boosting tariffs on Chinese imports, in the latest sign of progress in the trade talks.
Chinese shares led the region higher, with turnover in the country’s stocks surging to the most since 2015, after Trump said he will delay the March 1 deadline. Equities in Japan, whose economy has been hit by the trade war, also jumped, though rallies fizzled in South Korea and Australia. A gain in U.S. futures also faded after China’s state-run Xinhua news agency published a commentary saying talks will be harder at the final stage. The yuan and Australia’s dollar also pared advances. Treasuries recouped a modest loss.
Macro :
- U.S.-China Said to Haggle Over How to Enforce Currency Pact
- May Pledges Brexit Vote by March 12 in Another Play for Time
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