Opec reverses its hedge fund condemnation
Secretary-general calls fund managers ‘key participants’ in the oil market
Opec once decried hedge funds as a malign influence on the oil market. Now it is seeking their opinion.
Mohammad Barkindo, secretary-general of the oil exporters’ cartel, said on Tuesday he was meeting fund managers while in Houston for an energy conference this week, giving them his time along with US shale executives and other senior figures in energy circles.
The overtures are a change for Opec, which historically lashed out at “speculators” for distorting the price of crude. But financial participants have become too large a presence to ignore.
“Times have changed; the industry has changed,” Mr Barkindo told reporters at the CERAWeek by IHS Markit conference. “We are more globalised, and the impact of the financial markets on oil continues to be magnified. And in this world we believe that we should adapt to these new changes and therefore reach out.”
Hedge funds and other money managers have built a net bullish futures position worth nearly 1bn barrels of crude oil, recently the biggest on record. The position expanded after Opec reached an agreement to cut output on November 30.
While Opec’s output decisions directly affect oil prices, its leaders have in the past blamed speculators when prices move too low or high for the comfort of producers or consumers. “Like puppeteers, they pull the strings from the wings, manipulating positions and unsettling what are already delicate and often precarious trading environments,” the official Opec Bulletin said in a commentary in 2015.
That view contradicted experts who generally say speculators serve a purpose by making markets liquid, even if they occasionally push prices in a direction at odds with data on supply and demand.
But Mr Barkindo, appointed last year, said fund managers were “key participants” in the oil market, adding that Opec, the International Energy Agency and the International Energy Forum planned to hold a workshop in Vienna next week to focus on the effects of financial players.
After meeting with fund managers in Houston “we found that thin line that probably differentiated us was just probably fictitious”, said Mr Barkindo, a longtime Opec delegate from Nigeria. “We all belong to the same industry. We sail in the same boat.”
Opec officials have recently met with hedge funds in London and New York, the Wall Street Journal reported this week. Saudi Arabia, the de facto leader of Opec, convened private talks with the world’s largest oil traders including Pierre Andurand, who runs a London-based hedge fund, before the pivotal November Opec meeting, the FT has reported.
Despite hedge funds’ massive bets, the price of crude oil has been locked in a narrow range. ICE Brent crude oil for May delivery was $55.60 a barrel on Tuesday, down 0.7 per cent.
SoftBank to sell $8bn stake in Arm to Vision Fund
Son places 25 per cent of UK’s largest tech company in $100bn Saudi-backed vehicle
Japan’s SoftBank is set to sell a roughly $8bn stake in Arm, the UK chip designer it purchased only six months ago, placing 25 per cent of Britain’s largest technology company into a new, Saudi-backed $100bn investment fund.
The decision was made as the SoftBank-led fund looks to hit its fundraising goals and secure the backing of Mubadala, the Abu Dhabi state-backed investment group, which wanted the fund to own a portion of Arm, said two people close to the situation. The two sides are closing in on an agreement that would see Mubadala commit $15bn to the fund, these people said, and help the Japanese company get closer to its stated $100bn target for the SoftBank Vision Fund.
The transaction would be the first significant move by the Vision Fund, which is intended to give Masayoshi Son, the deal-hungry billionaire who made SoftBank into a global internet and telecoms powerhouse, the firepower to pursue his blend of investing on behalf of his company and a small group of outside backers.
The biggest investor in the Vision Fund is Saudi Arabia’s Public Investment Fund, which said last year it would contribute up to $45bn after protracted talks between Mr Son and Mohammed bin Salman, Saudi Arabia’s deputy crown prince.
SoftBank is putting about $25bn into the fund — though a portion of that will be covered by the Arm stake. Others planning to invest at a smaller scale include Apple, Qualcomm and Oracle founder Larry Ellison, as well as Foxconn, the Taiwanese electronics manufacturer.
Downing Street was notified of SoftBank’s intentions but is understood to have raised no concerns. Number 10 and SoftBank declined to comment.
Mubadala said: “We’re having ongoing, fruitful discussions over our participation in the fund.” It added: “Arm is certainly a strong technology company with great, continued potential. The Abu Dhabi group has been focused on growing its technology investments over the past decade, including in the semiconductor sector.”
SoftBank agreed to buy Arm for $32.4bn in July of last year, just weeks after the UK voted to leave the EU, fulfilling Mr Son’s desire to own a chip designer that he believes will be at the heart of the internet of things and connected devices.
The transaction, which completed in September, was announced just days after Theresa May replaced David Cameron as UK prime minister. Mrs May spoke to SoftBank before completion of the Arm deal last year and Downing Street said at the time: “This is clearly a vote of confidence in Britain.”
As part of the deal, SoftBank made a series of binding agreements to signify its commitment to the UK, including one to double Arm’s UK-based workforce over five years.
However, some questioned whether the UK was selling the crown jewels of its tech sector to a foreign investor at a low price. Hermann Hauser, Arm’s founder, described the deal as one of the “sad and unintended consequences” of Brexit.
By selling a portion of Arm to the fund, Mr Son is likely to invite closer scrutiny of his burgeoning role as a global dealmaker, especially now that his investments are made through a fund with a diverse array of investors.
Late last year, Mr Son met Donald Trump at Trump Tower in New York and pledged, without offering details, to invest $50bn in the US and to create 50,000 jobs.
The $100bn target for the fund, and the speed with which it is being assembled, represents a new frontier for venture capital and private equity.
In anticipation of the fund’s first closing, Mr Son has been striking deals. SoftBank is in talks to invest $3bn in WeWork, a shared office-space company, at a valuation of about $17bn, which would also be offered to the fund if it is agreed, according to one person close to the matter.
SoftBank invested $1bn last year in OneWeb, a satellite start-up seeking to provide internet access to remote parts of the world. In February, SoftBank said it planned to invest a further $1.7bn to merge OneWeb with Intelsat, another satellite company, if it persuades Intelsat bondholders to sign up to the deal. Those deals are set to be offered to the Vision Fund.
However, a recent $3.3bn deal by SoftBank to acquire Fortress Investment Group, the US alternative asset manager, will not be offered to the fund.
Le patron d'Iliad pourrait bientôt sortir de son chapeau une offre chez Free Mobile qui « ne devrait pas plaire à [ses] concurrents », selon lui.
Suspense. Lors de la présentation des résultats aux analystes, Xavier Niel leur a fait une confidence : une nouveauté sera dévoilée mardi chez Free Mobile, et « elle ne devrait pas plaire à [ses] concurrents ». S'agit-il d'un nouveau forfait, d'une nouvelle offre de contenus, de nouveaux services ? Impossible d'en savoir plus à ce stade.
Une chose est certaine : la spéculation va enfler dans les jours à venir. Le lancement d'un nouveau forfait semblait peu plausible selon les analystes, alors que les résultats financiers plaident pour un maintien de la stratégie tarifaire actuelle.
Free Mobile compte 12,7 millions d'abonnés et a généré un revenu supérieur à 2 milliards d'euros en 2016. De son côté, la maison mère du groupe, Illiad, a augmenté son bénéfice de 20%, et la marge opérationnelle a rebondi. Une première depuis 2012 et le lancement de l'offre mobile .
Les dirigeants de l'opérateur ont par ailleurs toujours vanté la simplicité et la clarté de leurs offres dans le mobile. Depuis cinq ans, Free en propose deux : une à 2 euros (gratuite pour les abonnés Freebox), qui offre essentiellement de la voix et des SMS, et une autre à 19,99 euros (15,99 euros pour les abonnés Freebox), qui offre 50 Go de data en 4G.
"Un coup de communication magistral comme Free en a le secret"
Mais méfiance. Xavier Niel est coutumier du fait. En mars 2015 déjà, un buzz savamment entretenu n'avait cessé d'enfler les semaines précédant de nouvelles annonces de Free. Au point même d'inquiéter les marchés financiers et de faire chuter les titres de Numericable-SFR (-9,7%), Orange (-5,7%), Bouygues telecom (-3,5%) et même d'Iliad (-4 %), sur une seule séance boursière !
"Xavier Niel est capable de tout ", confiait alors un bon connaisseur du secteur aux "Echos" tandis que les rumeurs allaient bon train. Faisant monter le suspense progressivement, le groupe avait ensuite lancé une invitation mystère à une kyrielle de journalistes pour une conférence "surprise".
« Du calme, tout va bien se passer », avait commencé, grand sourire, le patron de l'opérateur avant de lever finalement le voile sur... une nouvelle box : la Free Box mini 4K - qui embarquait Android (le système d'exploitation mobile de Google) -, un modèle remplaçant sa box d'entrée de gamme d'alors : la Freebox Crystal.
Uber employees lose faith and explore exit
Competitors and recruiters find more job applications from car-booking app’s workers
Recruiters in the Bay Area and executives at rival companies say they have seen an uptick in job applications from Uber employees, as its workers lose faith in the company’s leadership and start to doubt the value of their stock options.
Uber has gone from crisis to crisis over the past five weeks, prompting increasing numbers of employees to explore the idea of leaving a start-up that was once considered one of Silicon Valley’s most prestigious and lucrative workplaces.
“I have seen quite a few people who have been looking to leave Uber,” said one recruiter, who previously worked at the car-booking service. “One of the main reasons is lack of faith in senior leadership.”
He said the number of unsolicited résumés from Uber employees coming across his desk spiked last week, a time when two former employees published personal accounts alleging harassment and sexism at the company. He received more résumés from Uber in one week than he had the previous month.
For employees at Uber, quitting the company often means walking away from restricted stock units or stock options worth hundreds of thousands, if not millions, of dollars in Silicon Valley’s most highly valued private company. With Uber currently worth about $70bn, a typical middle manager position comes with RSUs worth hundreds of thousands of dollars that vest over a four-year period.
“Historically, it has been incredibly difficult to recruit from Uber, which partly has to do with people being unwilling to leave their stock options on the table,” says Guillaume Champagne, president at SCGC Executive Search. “From a purely financial perspective, Uber would need to become an awful place for them to leave.”
Nevertheless, in the past few weeks, Mr Champagne has seen an increase of about 5-10 per cent in the number of people interested in leaving, particularly those who are “a bit less of a culture fit”, he says. “To be fair, people typically know what they are getting into when they join Uber. They know it is a very male-dominated, high-octane, investment banking type of culture,” he adds.
In the past two weeks a series of public embarrassments, including a video in which chief executive Travis Kalanick berates an Uber driver, have left the company struggling to recover its image. Mr Kalanick issued an unusual apology after the video was published, saying: “I must fundamentally change as a leader and grow up.”
Two senior executives quit the company last week, adding to employees’ sense of uncertainty. Ed Baker, who was vice-president of product and oversaw Uber’s rapid expansion over the past three years, resigned on Friday, attributing his departure to an interest in going into public service. Uber did not comment. Amit Singhal, vice-president of engineering, left the company on Monday.
A spokesman for Uber said the company had not seen attrition rates above normal.
Adding to Uber’s woes, the company was sued last week by Alphabet’s self-driving car unit, Waymo, which alleges that its rival stole trade secrets and infringed on patents relating to autonomous vehicles. Uber called the allegations “a baseless attempt to slow down a competitor” and said it would defend itself in court.
However, the lawsuit, and the extreme shortage of technical talent in the autonomous vehicle sector, has made the self-driving research unit particularly susceptible to poaching.
“There are definitely more people thinking about leaving,” says Alex Rodrigues, who co-founded Embark, a rival driverless trucking start-up, last year. Several employees in Uber’s advanced technology group, which is based in Pittsburgh, have left to join rivals in the past month.
More than anything, Uber’s recent stumbles have taken the shine off a company that many in Silicon Valley once saw as being invincible, and employees who had planned to stay with Uber through its eventual initial public offering are reconsidering.
While a public offering typically offers an attractive financial prize to employees with equity, Mr Kalanick has said publicly that he wants to delay an IPO as long as possible, meaning that employees’ shares will remain illiquid.
“People were lured in with the promise of equity . . . but now they are realising that they won’t see a return on that for a long time,” says the recruiter who previously worked at Uber. “There is a lot of resistance in upper management to doing an IPO.”
Others say that doubt is starting to sink in. “Previously it was difficult to get them [Uber employees] because of their stock. Now they don’t seem so confident about what that’s worth,” says an executive at one of the largest tech companies in the Valley.
After Hours Summary: AVAV +8%, HRB +7%, CLNE +6% following earnings/guidance, RH +1.9% on WSM M&A speculation ... URBN -5%, BOJA -4.6%, AERI -2.6% following earnings/guidance, several names lower following offeringsAfter Hours Gainers:
Companies trading higher in after hours in reaction to earnings/guidance: MFIN +29.8%, BIOC +21.2%, REXX +11.3%, AVAV +7.8%, HRB +7.3%, CLNE +6.2%, ZAGG +5.1%, NCS +3.4%, TLGT +3.1%
Companies trading higher in after hours in reaction to news: PRKR +32.8% (continued strength following favorable patent ruling), SHIP +15.8% (enters into a definitive agreement with one of its senior lenders for the early termination of a credit facility, which is expected to result into a material gain and equity accretion), EXTR +6.6% (to acquire Avaya's networking business for ~$100 million), TSL +5.4% (still checking), RH +1.9% (UK Betaville blogger suggests Williams-Sonoma [WSM] is 'stalking Restoration Hardware')
After Hours Losers:
Companies trading lower in after hours in reaction to earnings/guidance: ALQA -6.4% (thinly traded; also initiated a process of identifying strategic alternatives for the contract manufacturing business), EDIT -5.3%, URBN -4.8%, BOJA -4.6%
Companies trading lower in after hours in reaction to news: HIIQ -11% (launches a secondary underwritten public offering of shares of its Class A common stock), GEO -5.1% (commences offering of 6,000,000 shares of its common stock), FOXF -3.7% (announces secondary offering of 5,108,718 shares by one of its existing stockholders), LAND -3.4% (ticking lower - to sell ~1.4 mln shares of common stock in an underwritten public offering), LADR -2.9% (announces secondary public offering of 3 mln shares of Class A common stock by certain affiliates of Alberta Investment Management, GI Partners, Northgate Capital and TowerBrook Capital Partners), FCSC -1.9% (Fibrocell Science entered into securities purchase agreement with existing investors for sale of $8.0 mln Series A Convertible Preferred Stock and accompanying warrants), APC -1.2% (announces 2017 initial capital program of $4.5-4.7 bln)
Suez taps Quebec pension in GE Water bid, sources say
07 MAR 2017
Suez [EPA:SEV] has teamed up with Caisse de dépôt et de placement du Québec (CDPQ) to bid for General Electric’s [NYSE:GE] water technology business, two sources briefed on the matter said.
The French environmental services group and Canadian investment fund are competing against several private equity firms, Blackstone Group, Warburg Pincus, CD&R and Bain Capital, as previously reported.
Kurita Water Industries [TYO:6370] has also been reported by this news service as interested in the assets. The Tokyo-based water treatment company is roughly the same size as GE Water.
GE has asked suitors to submit final offers for the business by early this week, several sources briefed on the matter said. Bids are expected to be around USD 3bn, as reported.
GE, Suez, Bain, Blackstone and Warburg declined to comment. CDPQ and CD&R did not return requests for comment.
Suez confirmed its interest in GE Water late last month after this news service exclusively reported the company was pursuing the unit. The Paris-based company has not detailed how it plans to finance an offer. Suez has a EUR 7.7bn market cap and EUR 8bn in net debt.
Montreal-based CDPQ manages CAD 270bn in assets invested in public markets, private equity, infrastructure and real estate on behalf of pension and insurance funds.
GE, the Boston-based industrials conglomerate, has been shopping its water unit to help finance a plan to combine its oil and gas business with Baker Hughes [NYSE:BHI] and address potential antitrust concerns.
CD&R owns a similar water business, Solenis, and it could not be learned if the financial sponsor plans to bid for GE Water through its portfolio company.
GE likely prefers to sell its water assets to a buyer with minimum antitrust risk given its pending transaction with Baker Hughes, the third source briefed said. Earlier this week the Department of Justice launched an extended antitrust review of the deal.
Closing Market Summary: Stock Market Finishes Tuesday Modestly LowerTuesday's session was largely uneventful as market-moving catalysts were in short supply. The major averages trended just below their flat lines for the majority of the session, but a late afternoon sell-off left them near their worst levels of the day. The Nasdaq (-0.3%) finished in line with the S&P 500 (-0.3%) while the Dow (-0.1%) closed with a slight advantage.
Despite the equity market's minimal movement, House Republicans mixed things up beneath the surface after unveiling their first attempt at replacing the Affordable Care Act, also known as Obamacare, on Monday evening. The proposed legislation was a hit with President Trump, but other members within the GOP have demonstrated resistance to the bill, indicating that its implementation may be somewhat challenging. Investors are keeping an anxious eye on Washington, knowing that any delay in health care reform also postpones the impending tax reform, which has been a key catalyst to the stock market's huge post-election rally.
The health care sector (-0.7%) finished the day behind the broader market as investors digested the latest news from the nation's capital. The biotechnology industry showed relative weakness within the group, evidenced by the 1.7% drop in the iShares Nasdaq Biotechnology ETF (IBB 294.75, -5.08).
At the bottom of Tuesday's leaderboard, energy (-0.9%) and telecom services (-0.7%) struggled throughout the day. The energy space didn't find much support from crude oil, which finished 0.2% lower at $53.13/bbl, as futures traders displayed caution ahead of the American Petroleum Institute (API) data release on Tuesday evening.
Conversely, utilities (unch) and technology (+0.2%) finished at the top of the day's sector standings with the technology group profiting on gains from large-cap components like Apple (AAPL 139.52, +0.18) and Alphabet (GOOGL 851.15, +3.88). Chipmakers also ‘chipped' in to help the tech sector's outperformance, evidenced by the 0.3% increase in the PHLX Semiconductor Index.
The remaining sectors--financials, consumer discretionary, industrials, materials, consumer staples, and real estate--finished with losses between 0.1% and 0.6%.
U.S. Treasuries had a rather range-bound session, failing to deviate much from their flat lines throughout the day's action. The 10-yr Treasury note finished modestly lower with its yield closing one basis point higher at 2.51%.
Tuesday's economic data included January Trade Balance and January Consumer Credit:
- The January trade balance showed a deficit of $48.5 billion, which is in line with the consensus. The previous month's deficit was left unrevised at $44.3 billion.
- The key takeaway from the report is twofold: (1) it will feed the White House's concerns about unfair trade dynamics and (2) it presents a negative input for first quarter GDP forecasts as the real goods deficit of $65.3 billion widened from the fourth quarter average of $62.2 billion.
- The Consumer Credit report for January showed an increase of $8.8 billion while the consensus expected growth of $17.0 billion. The prior month's credit growth was revised to $14.8 billion from $14.2 billion.
- The key takeaway from the report is that consumer credit decelerated in January, which is apt to contribute to subdued expectations for the pace of consumer spending and GDP growth in the first quarter.
Tomorrow's economic data will include the weekly MBA Mortgage Index at 7:00 ET, February ADP Employment Change (consensus 180,000) at 8:15 ET, fourth quarter Productivity ( consensus 1.5%) & Unit Labor Costs (consensus 1.6%) at 8:30 ET, and January Wholesale Inventories (consensus -0.1%) at 10:00 ET.
- Nasdaq Composite +8.4% YTD
- Dow Jones Industrial Average +5.9% YTD
- S&P 500 +5.8% YTD
- Russell 2000 +1.3% YTD
Fiat/GM tie-up still unlikely following Opel divestiture - sources (MergerMarket)
A potential merger between General Motors (GM) [NYSE:GM] and Fiat Chrysler Automobiles [NYSE:FCAU] could still face hurdles even after the former separates its Opel subsidiary, said a source familiar with the Opel transaction and several industry sources.
Earlier this week, GM announced an agreement under which it will sell its Opel and Vauxhall subsidiaries, based in Germany and the UK, respectively, to France-based Peugeot (PSA Group) [EPA:UG]. It also sold GM Financial’s European operations, for a combined total of EUR 2.2bn (USD 2.33bn), which will render PSA, post-closure, the second largest auto group in Europe.
At separate points in 2015, FCA’s CEO Sergio Marchionne publicly invited both GM and PSA to merge with the Italy-based automotive giant, but the invitations were rejected. He stressed that a link-up with GM would end needlessly redundant capital spending on automotive technology. As recently as last week, in a conference call to analysts, Marchionne said he still had hopes for creating a mega-US car company.
But on Monday morning, a spokesperson for GM told this news service that such a deal “made no sense for the company, our customers, shareholders and employees. Our conclusion is still the same” as in 2015.
FCA declined to comment.
Even though GM has now exited Europe to a substantial degree, the company could benefit from taking its Buick and Chevrolet platforms and using FCA’s extensive distribution network in Europe to sell into that continent, a Fiat minority shareholder said. It would be able to do this, he continued, without worrying about the punishing operative costs that entailed running Opel.
FCA has significant production holes due to certain brands, such as Fiat Punto, that have not been refreshed in years, and GM could fill in those gaps with its own brands, the shareholder explained.
Furthermore, Fiat is in great need of more capacity in the US, and a deal with GM could create more production of vehicles there, and thus more potential jobs, said the shareholder.
An FCA/GM combination would help increase scale for FCA and Chrysler brands in the US while allowing GM to fill in FCA gaps abroad, said a Germany-based sector advisor. Also, the sale of Opel will now eliminate potential competition hurdles to such a deal, this advisor, a US-based industry source and a US-based sector advisor said.
However, a GM/FCA merger would create a massive Chrysler and GM dealership footprint in the US, the industry source and US-based sector advisor said. That would necessitate consolidation and, in turn, the potential shuttering of plants and jobs, they said. On the other hand, the Motor Vehicle Franchise Contract Arbitration Fairness Act, passed in the US in 2002, imposes very strict regulations on such closures, so an overabundance of dealerships might be the end result, they said.
Brand overlap is another likely concern, the industry source, the US-based sector advisor and source familiar said. FCA’s Ram Truck and Jeep brands, for instance, would overlap with GM’s similar Silverado and GMC vehicle lines.
Furthermore, the industry source continued, FCA has been focusing more on minivans and SUVs over passenger cars in recent years, and a GM tie-up would indicate a major change in course, back into the passenger market.
At a joint press conference presented by GM, Opel/Vauxhall and PSA on Monday, PSA CFO Jean-Baptiste de Chatillon stated that Opel/Vauxhall is expected to be profitable by 2020. It aims to improve its “purchasing plan, synchronicity of product planning and R&D savings” through “increased bargaining power and capex gains.” Meanwhile, GM CEO Mary Barra said her company will have a “clear different strategic priority and different geographic footprint.”