TheChek News Flow

Tara Comonte is putting fat jabs at centre of a plan to steer company through bankruptcy protection

It is time for WeightWatchers to reclaim weight loss. “Over the years, [we’ve said] we’re a wellness company. The key is re-owning weight,” says chief executive Tara Comonte.

Appetite-suppressing drugs such as Wegovy and Mounjaro are helping to remove the stigma of shedding pounds after a shortlived cultural shift towards body positivity. But the diet company whose approach has historically focused on food diaries and group meetings in church halls and community centres, is having to retool, and fast.

Comonte says the so-called GLP-1 drugs are a boon rather than “competition” for WeightWatchers, and are at the centre of her plan to rebuild the company into a primarily digital subscription business that can survive the medical revolution.

She is keen to spread the message that WeightWatchers is back, after “a lot of noise” and “wildly inaccurate” headlines proclaimed the death of the company when it filed for US bankruptcy protection last spring. If there was one positive to take from the press interest, she says, it was that WeightWatchers is “a leading global brand that drives a very high level of interest”.

Comonte was appointed interim chief executive in September 2024, after WeightWatchers’ share price crashed 97 per cent in three years, and her role was made permanent last February. On a recent trip to London, the 52-year-old who grew up in Scotland and has lived in the US for 18 years, is personable and chatty, talking about family (she has three children and so does her long-term partner).

She acknowledges the company lost its way in recent years, as dieting became a dirty word during the body positivity movement, which encouraged people to be healthy at any size. WeightWatchers changed its name to WW in 2018, intending to evoke wellness, but instead stirred confusion.

It then suffered from a wave of new competition — first from online apps that made its in-person meetings look outdated and then from the sudden rise of drugs that upended the weight-loss market.

Comonte has steered WeightWatchers through the Chapter 11 process, modernising its brand, improving digital products and integrating GLP-1 drugs into its business. “It was very obvious what needed to be done [regarding] the balance sheet. This company had accumulated $1.6bn worth of debt [and its] free cash flow all went to interest on the debt . . . It was imperative to be able to free up capital for innovation.” 

The question now is whether growth from its clinical arm can offset declines in the core dieting division, according to Nathan Feather, an analyst at Morgan Stanley.

About 12 per cent of Americans have used GLP-1 drugs for weight loss, according to research group Rand, and Comonte insists the company is now in a position for rising demand to drive — not threaten — its growth. In 2023, it bought Sequence, a telehealth business it has renamed WeightWatchers Clinic, which can prescribe drugs such as Ozempic and Wegovy, including the new pills, to members in the US.

Revenues from the clinical subscription business, which provides the drugs, were 35 per cent higher in the three months to September 2025 than the same period the year before. That compares favourably with group sales, which declined by almost 11 per cent to $172mn — but only represents about 15 per cent of total revenues. At the end of the third quarter, WeightWatchers had 124,000 clinical subscribers — 60 per cent more than a year earlier. But the number of members on behavioural subscriptions dropped by 20 per cent to 2.9mn.

“[The clinical business] is still a relatively small proportion of our membership today, but it’s a fast-growing part of the business. I expect more and more people to be on these medications over time . . . [particularly as the] price comes down.”

Interest in the drugs programme is clearly high. More than 1,000 people logged on to a recent online “GLP-1 Curious” session even though “we did no marketing”, says Comonte. It is a big shift for the company that in 2024 parted ways with its brand ambassador and shareholder Oprah Winfrey after she credited her smaller size to jabs.

The risk is that by going down the GLP-1 route, WeightWatchers becomes just another provider, losing its community spirit and focus on its core behavioural business.

For WeightWatchers to sell itself as supporting weight-loss drugs through lifestyle changes, it needs to work on its messaging, says Neil Saunders, managing director of retail at consultancy Global Data, so the consumer sees it as “more than . . . just weight loss — it doesn’t yet fully occupy that ground”.

Comonte hopes to encourage members who sign up to take drugs to also participate in a programme that advises on managing side effects, diet and exercise. A three-month trial by the company found those taking medication lost 54 per cent more weight if they also did its behavioural programme, compared with those who just took drugs.

The chief executive, who is slender, sees herself as the “perfect example of someone who wants to maintain my weight”. Like many members, she is using the WeightWatchers programme to restrict her calorie intake after the Christmas festivities. “It’s a particularly busy time.”

She hopes to launch an AI body scanner so users can monitor and maintain muscle mass while losing weight, and says coaches at the company have experience of being on weight-loss drugs so members can access “people who have walked in your shoes”.

Unlike online pharmacies, which “really just write your prescription and wish you luck . . . we support you the whole way through that journey”.

Sticking to the programme to maintain weight after achieving the goal may help people who are fearful of piling the pounds back on. This could allay dieters’ anxiety after recent clinical research on weight-loss drugs found that users returned to their original weight within two years of stopping.  

Beth McGroarty at the non-profit Global Wellness Institute says: “The weight-loss drug market is just so crowded and complex, constantly changing with new regulations . . . If they can pull it all together in a meaningful, deep programme, it seems like a new model that could work.”

Covid-19 forced the closure of many weight-loss meetings, which frustrated WeightWatchers members who enjoyed the conviviality and support of their peers. Some countries, including France, now only offer virtual sessions. Comonte insists in-person meetings will continue. “We’ve got 60-plus years of being in the behavioural business.” But digital meetings will continue to grow, including some tailored to dieters at different life stages, such as the recent launch of a programme for menopausal women with rapper Queen Latifah as brand ambassador. “The proportion of virtual to real life will definitely increase because that’s what people are looking for.”

With the toughest part of the financial restructuring behind her, Comonte reflects on the challenge of being unable to publicly counter premature reports of the company’s demise. “It can be really scary to read headlines.”

To buoy morale internally, she says she briefed employees regularly. “I gave a lot of context . . . I did it often and I didn’t ever do it scripted. I did it live, I took a lot of Q&As. If we locked ourselves in a room and put our heads down and hoped for [the best], not only would that have been naive, it would have been pretty selfish.”

The child of a doctor, Comonte “saw first-hand how much [my mother’s] patients trusted and valued her. She was loving but also strong and decisive, and because of that I never really questioned women in leadership. Losing my mother relatively young reinforced for me that you rarely know what someone else is carrying, and how important it is to lead with empathy.” Her father, a businessman turned Conservative MP, taught her the importance of “preparation and care”.

Her job at WeightWatchers has similarities to her stint as chief financial officer at Shake Shack, the fast-food chain, which taught her “the power of a strong culture, particularly when a company is going through significant change”.

Attempts by previous WeightWatchers chief executives to reinvigorate the business have had little effect. What makes this time different? “WeightWatchers has been around for more than six decades,” she says. “This is an iconic global brand . . . it, of course, has evolved and [been] reinvented. This is the most exciting chapter in WeightWatchers’ history, and that is not just because I happen to be part of it.”

Duty-free group Avolta bets on Michelin-starred chefs and magic tricks

World’s biggest operator of airport retail and food outlets is trying out different ways of coaxing travellers to spend more

At Avolta, the world’s biggest operator of airport duty-free and convenience stores and food outlets, some employees are as likely to do magic tricks or balloon modelling as they are to sell perfume and spirits.

What sounds like a gimmick is central to an overhaul that has helped propel the Swiss-listed group’s shares to four-year highs, although they remain far from pre-pandemic levels.

Avolta — a franchisee and operator for groups including Burger King, Costa Coffee and Starbucks — is betting that blending entertainment with shopping and dining will coax travellers to spend more and boost profitability.

For decades, the travel retail model depended largely on selling high-margin luxury goods to captive passengers. But although airport passenger numbers are recovering since the pandemic, travel retail companies remain under pressure.

Airport operators, many still repairing Covid-era balance sheets, have pushed up concession fees on retailers while online shopping and domestic duty-free markets are changing consumer behaviour, prompting Avolta to reinvent itself.

Chief executive Xavier Rossinyol, who returned to Basel-headquartered Avolta in 2022 from airline catering and retail company Gategroup, said the pandemic had exposed the limits of the old model.

“The strategy had been the same for almost 20 years — it wasn’t working anymore,” he said in an interview with the FT. After Covid, “everything was about savings. We needed a model that could grow faster than passenger numbers”.

As part of a strategy known internally as Destination 2027, Avolta — formerly known as Dufry — is switching up store formats, expanding dining options and providing entertainment.

The group, which operates over 5,100 outlets in more than 70 countries, has brought in Michelin-starred chefs such as Dabiz Muñoz into airports in Spain and introduced dining areas inside duty-free stores to encourage shoppers to stay there longer. It has also launched hybrid outlets such as coffee shops selling gifts in Europe, the Middle East and Latin America, with the format being rolled out across its whole portfolio.

Avolta was formed from the $7bn merger of Dufry with Italian airport and motorway caterer Autogrill in 2023. Roughly 2.5bn people now pass through airports where it is present, yet only 700mn of them make a purchase. Raising that roughly 25 per cent penetration rate is part of Rossinyol’s strategy.

“We needed to have every different thing a passenger might value,” Rossinyol said.

Entertainment is the most eye-catching element of the shift. In 2023 Rossinyol appointed Jonathan Shotton, a former magician and design developer for Legoland, as head of entertainment.

Avolta has since launched an in-house entertainment academy, training staff in origami, magic and face painting, drawing prospective customers into stores and giving them a more interesting experience while they are there. It has installed flight simulators in Toronto, Formula One simulators in Bangalore and Madrid and opened a gaming lounge at New York’s JFK airport.

For the Africa Cup of Nations earlier this year, the group built a football-themed interactive installation inside duty-free stores in Casablanca. The installations can be moved between airports and sponsored by brands, creating additional revenue streams.

There are signs the turnaround is bearing fruit. In the first nine months of 2025, Avolta reported 5.4 per cent organic sales growth with turnover of SFr10.6bn, outpacing underlying passenger growth and at a time when some competitors have reported slower growth.

After heavy cash outflows during the pandemic, the group generated SFr503mn of equity free cash flow over the period, up from SFr425mn in 2024.

Shares have climbed to about SFr48 — levels last seen during the post-Covid travel boom in early 2022.

These gains come against a mixed backdrop for rivals. China Tourism Group Duty Free has been hit by weaker domestic travel, while DFS, owned by luxury group LVMH, has been exposed to uneven tourist flows. LVMH last month agreed to sell its underperforming DFS business in Hong Kong and Macau to China’s CTG.

Analysts caution that Avolta’s turnaround is still in its early stages.

“Travel retail is still a highly cyclical business,” said Fehmi Ben Naamane at Oddo, adding that Avolta’s growth remained closely tied to recovering passenger traffic, including the gradual return of higher-spending Chinese travellers.

However, he added, the Autogrill merger had made Avolta more resilient and less exposed to emerging markets than a decade ago, while its larger size and global presence gave it “stronger negotiating power with airports over increasingly expensive concessions”.

Franc’s relentless rise alarms Swiss companies

Safe haven currency’s bull run triggers fears about impact on sales and profits

The franc’s relentless rise is “undermining the competitiveness” of Swiss exporters, trade groups have warned, as companies from Roche to Swatch warn on the hit from the currency’s trade war rally.

The franc has risen 3 per cent this year, on top of a 14 per cent gain last year, taking it to 0.77SFr to the dollar for the first time since its shock 2015 appreciation.

The surge in the haven currency — driven by volatile geopolitics and a slide in the dollar — is ramping up the pressure on an economy where exports of goods and services add up to more than 70 per cent of GDP.

Pharma company Roche and watch maker Swatch Group reported hits to 2025 sales of about 5 per cent from the franc’s appreciation, while Cartier owner Richemont has also flagged currency headwinds.

Trade associations say the pain has been particularly acute for small and medium-sized companies that generate revenues abroad while incurring most of their costs at home.

“The Swiss franc’s appreciation against both the euro and the US dollar is increasingly undermining the competitiveness of Switzerland’s machinery, electrical engineering and metals industry,” said Nicola R. Tettamanti, president of Swissmechanic, which represents mechanical and electrical engineering SMEs.

While productivity gains can offset currency moves in the short term, Tettamanti warned that “this challenge cannot be offset indefinitely”. If current exchange-rate conditions persist, he said, they risk delaying investment decisions and, over time, weakening Switzerland’s industrial base.

Similar concerns are emerging in the chemical and pharmaceutical sector, one of Switzerland’s most important export engines. Roche, which generates most of its revenues outside the country, said it now expected a 4 percentage point hit this year.

Stephan Mumenthaler, director of scienceindustries, the chemical sector trade body, said the rise in cost pressures made it even more urgent to address the factors that Switzerland itself can influence, such as market access and innovation-friendly regulation.

Swiss exporters have faced a double whammy of tariffs and currency strength over the past year. Switzerland and the US agreed in principle last year to cap additional US tariffs on Swiss exports at 15 per cent, down from a rate of 39 per cent, but the deal was set out in a framework understanding rather than a fully binding treaty.

Officials on both sides are still negotiating the legal text, implementation and other details to turn that political agreement into a final, enforceable arrangement.

The FX hit has restrained Swiss stock prices, investors say, with the benchmark Swiss Market Index’s 2 per cent rise this year trailing the 4 per cent increase for the Stoxx Europe 600 index and 5 per cent jump for London’s FTSE 100 index. This continued a pattern of Swiss equity underperformance from last year.

UBS estimates that for every 1 per cent gain in the franc across currency pairs, listed Swiss companies suffer a profit hit of an average of 0.9 per cent.

“The Swiss franc is a perpetual tariff for Swiss companies,” said Cedric Jacque, partner at Zurich-based Lloyd Capital.

A drop in valuations has led the asset manager to take bets on companies including dental implant manufacturer Straumann, construction and chemical group Sika and Swiss-Dutch chemical company DSM-Firmenich, leaving the firm with a record number of positions in Swiss stocks.

The franc’s surge has posed an increasing problem to the Swiss National Bank, which could cut rates to restrain the currency. However, as its benchmark interest rate stands at 0 per cent, cutting would mean a return to negative rates, which policymakers have said they do not want to repeat.

Swaps traders are putting a roughly 30 per cent chance that the SNB will cut below zero this year.

“Swiss equities were among the worst-performing markets last year because of the strength of the Swiss franc and the weakness of European importers,” said Charles-Henry Monchau, chief investment officer at Swiss bank Syz. “We need this to change, for sentiment to turn.”

The TV deal bringing Israel’s media closer to Netanyahu

Sale of stake in news channel critical of Israeli premier is latest move to prompt questions about media independence ahead of elections

Evening news broadcasts on Channel 13 stand out in Israel’s boisterous media market for one reason: their open, deeply reported and often controversial criticism of Benjamin Netanyahu.

Home to star journalists such as Raviv Drucker — whose investigative reporting makes him a hate figure for the Israeli premier and his allies — and partially owned by UK billionaire Sir Leonard Blavatnik’s Access Industries, the channel has often faced fierce pushback. Employees showed up to work last November to find graffiti labelling them “traitors”.

For a small group of some 20 Israeli tech entrepreneurs, led by the billionaire Assaf Rappaport, Channel 13’s combination of growing losses and hard-hitting news shows presented an opportunity to leverage their wealth into saving what they saw as one of the final bastions of independent TV reporting.

Each promised to chip in $1mn of seed capital to buy an initial stake in the channel, an “impact investment [designed] to fortify an independent media outlet as a democratic necessity,” said a person familiar with their deliberations.

Rappaport, who once threatened to move the finances of his $32bn cyber security firm out of Israel to protest the prime minister’s overhaul of the judiciary, led the negotiations.

He had met Blavatnik multiple times — not just in New York, but in St Bart’s, a Caribbean island that has become a favoured playground for the wealthy. Rappaport’s group had appreciation for Blavatnik’s record as an owner and worked to strengthen their relationship, said a person familiar with the situation.

But such connections were not enough to seal a deal. Despite Rappaport’s renowned deal-making prowess, his group was pipped to the post this month by the French-Israeli media magnate Patrick Drahi — another billionaire who felt it worth tussling over a minority stake in a loss-making TV channel in a tiny media market.

Unlike Rappaport and his co-investors, Drahi — who has increasingly been spending time in Israel — already owns a right-wing Israeli news outlet that echoes many of Netanyahu’s positions.

With elections expected in Israel within months, the sale to Drahi — made public earlier this week — provoked an immediate backlash. Ha’aretz, the liberal newspaper of record, ran an editorial demanding the sale be blocked, calling it part of “Netanyahu’s media destruction project”.

The Movement for Quality Government, an Israeli advocacy group, wrote to the attorney-general asking for the sale to be investigated, citing “concerns over improper political involvement and conflicts of interest”. The deal, it warned, “may be driven by political motives rather than public interest”.

Blavatnik’s Access Industries denied any political motivations for rejecting the tech entrepreneurs’ offer.

“Patrick Drahi’s proposal was selected because it represented the better deal for Channel 13,” it said, adding that Drahi’s offer injected immediate funds into the channel. “Of the two proposals, it was the higher confirmed sum, and ultimately the stronger, faster option prevailed.”

Having underwritten hundreds of millions of dollars of the channel’s losses over the past decade, the third-richest Briton simply took the best offer, the people familiar with the transaction said.

But in Israel any media transaction attracts immediate and vocal scrutiny, particularly as Netanyahu’s critics track efforts to curb independent coverage.

The administration has recently sought to shutter the state-funded Army Radio, and vowed to cut funding for the state broadcaster Kann, while advocating for a boycott of Ha’aretz, which is staunchly critical of the premier.

For Israel’s embattled news outlets — especially those critical of the country’s longest-serving prime minister — these moves are part of a decade-long Trumpian assault on the leftwing media and its once vociferous journalistic corps.

Attempts to tame the media have already yielded some success. A little-watched state-owned government heritage channel was transformed into the upstart Channel 14, a pro-Netanyahu mouthpiece.

And the 2007 arrival of the free Israel Hayom newspaper undercut the advertising and subscription market of more critical daily rivals. Launched by Netanyahu’s ally, the late US casino billionaire Sheldon Adelson, Israel Hayom now dominates the print market.

But the campaign has also landed the prime minister in legal peril. In two of the three corruption cases that Netanyahu is currently battling in court, prosecutors allege he attempted to trade regulatory favours for favourable coverage in a major newspaper and a popular online news outlet.

Netanyahu denies the charges, but his lawyers have argued that it is normal for a premier to seek to shape favourable coverage, even on a near-daily basis.

Drahi’s purchase of a 14.99 per cent stake in Channel 13 further deepens his foray into Israeli media. He created the lossmaking i24 news outlet, which has shrunk from English, Arabic and French channels to a single Hebrew broadcast, and owns a cable TV and internet business called Hot.

Drahi has spent almost $500mn propping up i24, said a person familiar with its finances. The outlet, widely seen as supportive of Netanyahu’s right-wing agenda, “was a grand, crazy, philanthropic project”, the person said, to present an Israeli point of view in the Middle East.

Haim Har-Zahav, the head of the journalists’ union in Israel, reckons his motivation is Zionism. “It makes him feel as if he’s contributing to the country,” he said, arguing that Drahi believes “that if he helps Netanyahu, he helps Israel”.

“But if he wants to help Netanyahu, Netanyahu wants the media to go right-wing — then buying Channel 13 makes sense,” said Har-Zahav, who works for Channel 13’s news operation.

Drahi declined to comment on his personal purchase of the stake, which comes at a time when his heavily indebted telecom empire has faced severe strain.

Current Israeli regulations prevent him from owing more than 14.99 per cent of Channel 13 because of his ownership of Hot, but Netanyahu’s government already has a bill in the Knesset seeking to change that rule. There may be too little time before elections for it to pass, however.

The government is also considering further changes, including setting up a separate broadcast regulator more closely controlled by the government and letting the government take over the crucial task of measuring television audiences — a metric that determines advertising rates and hence directly affects TV channels’ revenues.

Spokespeople for Israel’s communication minister, Shlomo Karhi, and the regulator overseeing television and radio did not return requests for comment.

If Karhi succeeds in changing the regulations through measures described by Reporters Without Borders as “the nail in the coffin of Israeli broadcast independence”, the French-Israeli billionaire is widely expected to increase his stake in Channel 13, even as he battles creditors in Europe and explores asset sales.

A person familiar with the transaction said Drahi’s interest in Channel 13 was “purely commercial”, but turning the channel around could require a significantly higher investment than the $40mn he has agreed to pay for a minority stake.

The tech entrepreneurs led by Rappaport had pledged to invest as much as $120mn over the next three years while taking a 74 per cent stake in the business, said a person familiar with their offer.

Rappaport was the public face of the high-tech industry’s opposition to Netanyahu’s plans proposed in 2023 to weaken the judiciary. That opposition was shared by swaths of the public: protests against it convulsed Israel until they were interrupted by the war in Gaza.

The goal of the consortium was to stop “standing on the sidelines” of tectonic shifts in Israel’s political landscape, which have been accelerated by the Gaza war, said the person familiar with the offer.

The tech entrepreneurs — who collectively had money to spend after lucrative exits and IPOs of their companies — considered that their offer represented “immunity from conflicts of interest”, given none had stakes in any other regulated industries, said people familiar with their approach to Blavatnik.

Rappaport himself is set to make billions selling his cyber security firm, Wiz, to Google parent Alphabet, a transaction that will also result in a large tax windfall for the Israeli government.

But now, as crucial elections approach later this year, and Netanyahu’s corruption trial continues, Channel 13’s journalists fear lay-offs, editorial interference and a merger with i24 that could further dilute their dogged reporting.

People close to Drahi point out that a similar furore accompanied his French media purchases, of the newspapers Liberation and L’Express, where his ownership ultimately proved relatively benign, if unprofitable.

For Yaniv Goldberg, head of the Movement for Quality Government’s economic department, the plan is to challenge the deal, including potentially in the courts.

“This seems to be some kind of master plan” by Netanyahu, he said. “All the red flags are there.”

Investors reluctant to ‘buy the dip’ after AI scares

Sectors including wealth management and trucking have been hit with sudden share price declines

Investors are shying away from buying the dip in a volatile sell-off of perceived “AI losers”, choosing instead to stand on the sidelines until the full scale of the economic disruption becomes clearer.

The launch of a number of new AI tools in recent days has threatened to disrupt traditional business models in sectors including trucking, real estate, wealth management and advertising, with violent share price moves highlighting a market wracked with nerves about what comes next.

Despite companies rushing to reassure investors that AI will enhance their business and that plunging share prices are an overreaction, many portfolio managers are resisting the temptation to buy the dips that emerge.

“The world is changing very, very quickly . . . we wouldn’t have the conviction to try and bottom-fish,” said Robert Schramm-Fuchs, portfolio manager at Janus Henderson. 

“The AI models today are substantially more powerful than the ones from six or 12 months ago. What seems protected as a business model today might not be [in the future],” Schramm-Fuchs added. “It makes it even harder to buy the dip.” 

The Nasdaq Composite gave up 2.1 per cent this week and the broader S&P 500 shed 1.4 per cent. But the relatively measured index-level declines mask far more violent moves beneath the surface, with trucking giant CH Robinson falling 12 per cent and investment firm Charles Schwab down 11 per cent. Commercial real estate firm CBRE dropped 16 per cent and insurance broker Gallagher declined 13 per cent this week.

While billions of dollars were wiped from market caps, newly slashed valuations and share prices have largely failed to recover in subsequent sessions.

“Hesitation” had characterised markets this week, said Valérie Noël, head of trading at Syz Bank. “There’s been very little willingness to defend sharp moves the way you’d normally expect,” she said, and the market was “prioritising uncertainty management over dip-buying”.

While some of the biggest software stocks have sold off significantly in recent weeks, most investors are so far continuing to sell the sector rather than choosing to buy the dip, according to custodial markets data from State Street, which the firm uses to provide a snapshot of investor appetite.

“We see no sign of institutional investors trying to buy the dip in the [software] sector,” said Marija Veitmane, head of equities strategy at State Street, adding that money was instead going to the hardware end of the tech sector.

Goldman Sachs last week launched a new pair trade combining long positions on software “that AI cannot realistically displace because they require physical execution, regulatory entrenchment . . . or human accountability” with short bets against “software-tilted workflows that AI could increasingly automate or rebuild internally”.

“We expect [the former] to recover from the recent software sell-off while [the latter] lags behind,” the bank’s equity strategists said in a note on Thursday.

The logistics sector plunged in erratic trading on Thursday, when an announcement by a little-known $3mn karaoke-turned-freight company in Florida triggered one of the worst ever sell-offs for the trucking sector, wiping billions of dollars from the value of some of the industry’s most established names.

The tiny company at the heart of that sell-off — once the Singing Machine Co, now Algorhythm Holdings — released a white paper on Thursday that said its AI platform could scale freight volumes by up to 400 per cent without a corresponding increase in headcount.

The note ignited fears that new technology would destroy the market value of some of the industry’s leaders, sending logistics companies CH Robinson and Landstar both down by about 15 per cent in a single day.

Wealth management giants suffered similar moves earlier in the week, when AI tax planning firm Altruist released a suite of tools — sending FTSE 100 wealth manager St James’s Place 13 per cent lower — with insurance names similarly hit by a model from AI start-up Insurify. 

For some fund managers, however, the size of the stock falls looks like an overreaction.

“There is a lot of irrationality in markets at the moment,” said Alex Wright, a portfolio manager at Fidelity International. Wright said he had picked up some bargains in the recent sell-off because “a lot of stocks are not being priced appropriately”.

But others remain reluctant to jump back in.

“I think the [software] sell-off is totally logical,” said Charles Lemonides, the founder of hedge fund ValueWorks. “Valuations were absurd coming into this. Companies that were trading at 50 times earnings have come down to 30 times earnings because they will be hit by some AI disruption.”

Dan Hanbury, a portfolio manager at fund firm Ninety One, said that a lot of “great companies” had been swept up in the recent sell-offs.

“[But] I think the disruption is real, and you have to be very careful,” he added. “AI is going to get a lot more powerful — how can I guarantee that the moats around these companies are still going to be here? I’m not trying to trade that bounce.” 

Manufacturers rethink US strategy in pivot back to petrol and hybrids

A reversal in electric vehicle ambitions has resulted in a hit of at least $65bn for the global car industry in the past year as executives warned of more pain ahead in resetting their strategies.

Carmakers were forced to overhaul their EV product and investment plans following a radical reversal in climate policy in the US, with companies that had made the biggest pivot away from petrol hit the hardest. 

This month Stellantis took a $26bn charge to scrap some fully electric models and revive the popular 5.7-litre “Hemi” V8 engine in the US. It also recently decided to revive diesel engines for several European models. The write-off triggered a share sell-off that cut its market value by about $6bn.

The owner of the Peugeot, Fiat and Jeep brands had previously set a goal that EVs would account for all its European passenger vehicle sales by 2030 and half the total in the US.

The cancellation of EV credits in the US and President Donald Trump’s determination to further roll back regulations to cut vehicle emissions mean industry executives now expect EVs to account for just 5 per cent of America’s new vehicle market in the coming years — about half the current level.

Rival Ford recently disclosed a $19.5bn writedown as it cancelled its electric F-150 pick-up truck, while Volkswagen, Volvo Cars and Polestar have all suffered hits to their EV programmes over the past year.

In addition to sweeping regulatory changes in the US, Bernstein analyst Stephen Reitman said Stellantis and other carmakers left consumers behind as they tried to replicate the early success Tesla had when it revolutionised the EV market in the US. Their shortcoming was failing to offer vehicles that met drivers’ price and range expectations, while charging infrastructure was also lacking.

Since then, Tesla too has suffered a significant decline in EV sales due to competition from Chinese rivals and backlash to Elon Musk’s political activism, prompting it to end production of its top-end Model S and X cars.

“Everyone got caught up in the kind of euphoria of ‘look at the valuations Tesla was getting’ . . . and they didn’t bring the customers with them,” Reitman said. 

Analysts warned there could be more writedowns for Stellantis ahead as the group aims to improve its US market share with a renewed focus on hybrid and petrol models.

“The prospect of further one-off costs, with unknown cash implications, give us reason to remain cautious,” Michael Tyndall, senior global autos analyst at HSBC, wrote in a report this month. 

Honda — the only Japanese carmaker to say it planned to stop making petrol and diesel vehicles by 2040 — this week forecast $4.5bn of annual losses related to EV models, including $1.9bn of writedowns.

The group warned investors there might be more charges to come as it reassessed its EV strategy and negotiated the end of its EV partnership in the US with General Motors, which itself has written down $7.6bn on its EV operations.

“The EV market is dramatically changing,” said Honda’s executive vice-president Noriya Kaihara. “So we would need to monitor our sales volume trends and then we might have to take some [further] actions if needed.”

GM chief executive Mary Barra said its “end game” would remain electric vehicles, echoing other carmakers that have pledged to continue longer-term investments in the shift away from internal combustion engines.

As the pace of the electric transition diverges in the key markets of the US and China, it will become even more costly for carmakers to offer a variety of models, from EVs and hybrids to petrol.

Ford chief Jim Farley told investors last week that the regulatory environment globally was the “wildcard” as the carmaker refined its strategy and investments.

However, he added: “There’s enough choice around the world on electrification for us to cherry-pick customers’ choices around the world and come up with the right strategy, not only in the US but around the world.”

Third Point and DE Shaw attack real estate data group’s multibillion-dollar bet on lossmaking listings site Homes.com

One of CoStar’s largest shareholders has thrown its support behind the real estate data company’s strategy as it stares down a fierce proxy battle with activist hedge funds including Daniel Loeb’s Third Point. 

Third Point, quickly followed by DE Shaw, went public in recent weeks with grievances about founder and chief executive Andy Florance’s multibillion-dollar investment in lossmaking listings site Homes.com, calling for an overhaul of the board. 

The activist attacks set the stage for a fight for the future of CoStar when the board nomination window opens in mid-March. Loeb has called for the majority of the board to be replaced, suggesting he would propose a rival slate.

UK fund manager Baillie Gifford, CoStar’s seventh largest shareholder, told the FT that CoStar had “repeatedly demonstrated” its ability to reinvest to deliver shareholder returns, arguing that Homes.com was the company’s “next major growth engine”. 

CoStar shares have dropped 38 per cent over the past year and are broadly flat over the past five years, dating back to when it acquired Homes.com. CoStar declined to comment. Third Point and DE Shaw did not respond to requests for comment. 

In letters published in recent weeks, both hedge funds called for CoStar to consider divesting Homes.com in order to refocus on boosting earnings from its core commercial real estate data business. Homes.com has so far delivered annual revenue of just $90mn and is not expected to turn profitable until 2029.

The funds portrayed Homes.com as an obsession of Florance’s that is distracting him from the core business. Third Point called the project “ill-conceived and hopelessly executed”, while DE Shaw said that under Florance’s leadership CoStar “continued to dedicate disproportionate attention and resources” to the site, which was acquired in 2020. 

Baillie Gifford said Homes.com could replicate the success of offshoots Apartments.com and LoopNet.

“In just two years, it has become a national brand with a rapidly expanding audience and subscription base, connecting agents and buyers,” said Baillie Gifford. “The new AI capabilities launching this month will further strengthen its position and help establish CoStar’s next billion-dollar business.”

Third Point and DE Shaw’s fierce criticism of Homes.com and its association with Florance suggests their ambitions may go further than board change to dethroning the executive who founded the company from his university dormitory in 1987.

Squaring off with founders who remain as chief executives has led to some of the most high-profile and volatile activist fights in recent years. 

In 2020, Paul Singer’s Elliott Management pushed for the removal of Twitter’s founder and then-chief executive Jack Dorsey, before agreeing to a brokered peace in exchange for a board seat.

Three years later, Salesforce and its co-founder Marc Benioff narrowly dodged a proxy fight against Elliott by agreeing to a raft of strategic changes, including share buybacks. 

Baillie Gifford said: “As shareholders of CoStar for nearly a decade, we have been patient backers of founder Andy Florance’s ambition to build the ‘Bloomberg of real estate’.”

The fund manager added: “We remain supportive shareholders as CoStar’s management team pursues disciplined, sustainable growth across commercial, residential and international real estate markets.”

As one of CoStar’s biggest actively managed investors, Baillie Gifford’s support ahead of a likely proxy fight will be a huge boon for the company.

Passive fund managers Vanguard Group and BlackRock are CoStar’s two largest shareholders with 24.5 per cent ownership of shares collectively.