TheChek News Flow

Software platform makes billing more efficient for utility companies

Octopus Energy is planning to demerge its technology arm Kraken Technologies, creating a standalone entity that could be valued at up to $10bn.

The UK-based energy supplier is set to separate from the business following rapid growth over the past few years, according to people familiar with the matter.  

Octopus Energy was founded in 2015, in part to prove the Kraken technology, and is now the UK’s largest household energy supplier, overtaking Centrica’s British Gas this year. 

Investment banks have been invited to pitch for the demerger which would happen within the next 12 months, according to Sky News which first reported the plans. 

The new entity would be owned by current Octopus Energy shareholders while new investors may also be sought for a minority stake. Octopus Energy may retain a small stake, according to people familiar with the matter. Kraken could be valued at up to $10bn, they added.

The technology platform is designed to make customer billing more efficient as well as develop new tariffs and optimise the use of electric cars, solar panels and other technology. 

Octopus, led by chief executive Greg Jackson, uses the technology itself and also licences it to other energy and water companies around the world, including rivals such as Eon and EDF. 

Bosses want the company to be serving 100mn accounts by 2027. In May it announced it was contracted to serve more than 70mn accounts, after signing up National Grid’s US business as the first large US utility to adopt the platform. 

The technology has been key to Octopus Energy’s appeal to investors, helping propel it to a valuation of $9bn in May 2024 when major shareholders such as Generation Investment Management and Canada Pension Plan Investment Board increased their stakes. Galvanize Climate Solutions and Lightrock came in a month later at the same valuation.

Veery Maxwell, co-head of innovation and expansion at Galvanize, told the Financial Times in January: “Octopus has managed to position itself as a high-trust brand and disrupter — but of sufficient scale that customers aren’t taking start-up risk. Kraken is the software platform that underpins that offering.”

Octopus Energy has steadily been making Kraken more independent, in part to try and fend off any concerns among Kraken customers about potential conflicts of interest. 

That has included appointing a Kraken chief executive, Amir Orad, and chair, Gavin Patterson, the former BT chief executive. Demerging the business would be a step further, people familiar with the matter said.  

It is also likely to fuel speculation about a possible listing for Kraken. In January, Jackson said he was “open-minded” about the company’s future.

Octopus declined to comment.

Congo Braces for HIV Surge After U.S. Funding Stops

The virus is quickly spreading in what should be the country’s most economically productive regions

Eastern Congo faces an HIV crisis due to U.S. funding cuts for antiretrovirals after Trump and Musk reduced foreign aid.

Rape victims in Congo are being turned away from clinics due to shortages of post-exposure prophylaxis treatment kits.

The U.N. reports sexual assaults in eastern Congo have spiked 38% and estimates a child was raped every half-hour.

The mineral-rich provinces of South and North Kivu along the eastern flank of the Democratic Republic of Congo should be among its most productive.

They are home to a fifth of the vast country’s population and are the site of some of its most valuable mines, where men flock to extract coltan and other critical minerals used to produce smartphones, laptops and electric vehicles. Women run roadside restaurants and bars. Millions of people live in camps, displaced by roaming militias, near the borders with Rwanda and Uganda.

Rape is rife. So is HIV.

For years, Congolese women relied on U.S.-supplied antiretrovirals such as post-exposure prophylaxis kits, to prevent infection after an assault. But the funds for those programs dried up after President Trump and his then-right-hand man, Elon Musk, cut funding for most of America’s foreign-assistance programs, including many anti-HIV initiatives.

Now, nearly six months on, the region is threatened by a destabilizing cycle of infection and death, puncturing whatever economic gains might be possible in such a volatile corner of Africa.

Health workers say they have had to start turning away sexual-assault victims looking for post-rape treatment kits. “Most of the women call me crying,” said Noella Ndoole, a protection officer for CARE International, a global charity, who receives several calls a day from distressed women. “They are very worried, but we have no drugs to give them.”

A State Department spokesman says the U.S. supports other programs such as rapid HIV testing and the provision of antiretroviral drugs in other parts of Congo, including the capital, Kinshasa. But it is unable to extend them to the conflict zones in the east, one of the worst affected regions. Humanitarian officials worry that new infections among the working-age population will soar, stirring fresh concern about the region’s future.

A fresh wave of cases is especially worrying in Congo, where PEP and other drugs have helped reduce deaths from HIV/AIDS to around 14,000 a year, from as high as 200,000 before the onset of the U.S. funding programs, according to UNAIDS, the United Nations’ HIV/AIDS agency.

Part of the reason is the level of violence, which is especially high in South and North Kivu.

Humanitarian officials now refer to the region as the rape capital of the world, with the U.N. reporting sexual assaults there spiking 38% over the same period last year after a rebel group known as M23, backed by Rwanda, staged a violent takeover of two major cities.

Before Rwanda and Congo signed a U.S.-brokered deal last week to stop sponsoring armed groups in eastern Congo, the U.N. estimated that a child was raped every half-hour in the region. It is too soon to determine whether the pact will effectively rein in the patchwork of militias operating there.

Jeremy Kahindo said that in April she was pinned to the ground by two armed men, who took turns raping her in Kibumba, a small town 10 miles north of the rebel-held city of Goma. The 42-year-old mother of three walked two hours to a CARE clinic, where a nurse gave her painkillers and antibiotics to treat wounds sustained in the attack. Then the nurse sent her home because the clinic had run out of PEP treatments, Kahindo said.

“The health workers told me there was nothing more they could do for me—there were no drugs,” she said.

Kahindo soon tested positive for HIV. CARE officials confirmed her account.

In Congo’s eastern provinces, charities distributed some 97,560 post-rape treatment kits to women and girls last year, procured largely with U.S. funds, according to CARE. Aid workers say women in the region now need nearly double that number, even as the supply is drying up.

Until this year, the U.S. had been Congo’s largest aid donor, providing more than $1 billion annually in assistance through charities providing medical care, food and other vital supplies to millions of vulnerable people. Worldwide, the U.S. President’s Emergency Plan for AIDS Relief had been providing the bulk of PEP kits and other antiretroviral drugs to poor countries. U.S. officials say the program, launched in 2003 by then-President George W. Bush, has saved more than 25 million lives.

PEP treatment can reduce the risk of HIV infection by more than 90% if administered within 72 hours of an assault. The drug must be taken daily for 28 days, health experts say.

“If taken correctly, it prevents the majority of rape victims from contracting HIV,” said Dr. Chris Rawlings Kaganda, a Ugandan physician.

Aid agencies now warn the funding cuts will lead to soaring HIV infection rates in Congo, especially in the east. HIV prevalence rates in eastern Congo are already as high as 3.5%, more than double the 1.4% national rate. The shortage of PEP kits is so dire that sometimes survivors of sexual violence visit several clinics, only to return home unsuccessful and exhausted, the 72-hour treatment window having passed, according to humanitarian officials.

Kanzira Kihanga says she wasn’t surprised to learn in May that she was infected by the virus that causes AIDS. The 21-year-old believes she contracted the virus after back-to-back rapes by armed men. After the first attack, she went to a clinic but was only given half a dose of the PEP medication. Two weeks later, she was raped again as she walked to the clinic to pick up the remainder of the dosage.

“I just went home to prepare my mind for the worst,” she said. “My parents are very worried. They think I will die very soon.”

A recent survey of more than 100 hospitals in eastern Congo by the International Committee of the Red Cross found nearly three-quarters of them had run out of essential medicines because of the supply issues triggered by the U.S. funding cuts.

“Even pain medicines like paracetamol and ibuprofen are running out,” said Etienne Penlap, the Red Cross health coordinator in Congo.

And while stories of suffering abound, the toll could get significantly worse. Further foreign-aid cuts in Trump’s 2026 budget proposal could result in 675,000 additional AIDS deaths across the world that year, according to the Washington-based Center for Global Development. Congo may run out of antiretroviral drugs by August, according to its Health Ministry.

Brussels to stockpile critical minerals because of war risk

Strategy part of efforts to improve bloc’s resilience to conflict and climate change

Brussels says it will build up emergency stockpiles of critical minerals and cable repair kits as concerns mount over the EU’s vulnerability to attack.

“The EU faces an increasingly complex and deteriorating risk landscape marked by rising geopolitical tensions, including conflict, the mounting impacts of climate change, environmental degradation, and hybrid and cyber threats,’’ the European Commission said in a draft document setting out a stockpiling strategy, seen by the Financial Times.

Member states should co-ordinate backup supplies of food, medicines and even nuclear fuel, the EU executive said. It would also accelerate work on EU-level stockpiles of items such as cable repair modules “to ensure prompt recovery from energy or optical cable disruptions” and commodities such as rare earths and permanent magnets, which are crucial for energy and defence systems.

Several instances of potential sabotage to underwater communication cables and gas pipelines in recent years have caused concern about the vulnerability of critical infrastructure.

The strategy is part of a wider push by the EU to improve the security and resilience of the 27-country bloc. Last month, General Carsten Breuer, the German chief of defence, warned that Russia could attack an EU member state within the next four years.

The higher-risk environment was driven by ‘‘increased activity from hacktivists, cybercriminals and state-sponsored groups”, the document said.

The EU is also more susceptible than many other regions to the effects of climate change as it is warming twice as fast as the global average. Wildfires in Crete forced 5,000 people to evacuate the island this week.

In a report commissioned by the EU in October, former Finnish president Sauli Niinistö said that security should be considered a “public good” and called for a preparedness mindset.

On stockpiling, he said that Brussels should “define targets to ensure minimum levels of preparedness in different crisis scenarios, including in the event of an armed aggression or the large-scale disruption of global supply chains”.

The EU in March also advised households to stockpile essential supplies to survive at least 72 hours of crisis.

The bloc already maintains a fleet of firefighting planes and helicopters, a medical evacuation plane, and items such as field hospitals and critical medical supplies across 22 EU countries as part of its emergency response effort for natural disasters.

But the commission said it would establish a “stockpiling network” to improve co-ordination between EU countries. There was “limited common understanding of which essential goods are needed for crisis preparedness against the backdrop of a rapidly evolving risk landscape”, it said in the document.

It would also start compiling regularly updated lists of essential supplies tailored to each region and crisis type. Member states should better incentivise the private sector to help with stockpiling, such as through tax credits, it said.

The bloc should also work with allies on “shared warehousing” and co-ordinate better on managing resources and dual-use infrastructure with Nato.

The need for investment in critical stockpiling would also be considered in proposals for its new multiannual budget, which are due to be put forward later this month.

The draft document is due to be published next week and could change ahead of its presentation.

Number of deals struck worldwide falls to lowest in a decade, outside Covid-19 lockdown period

Dealmaking slumped in the second quarter to the lowest level in a decade, excluding the early months of the pandemic, as Donald Trump’s “liberation day” tariffs extended a run of uncertainty that has forced dealmakers to pull back from all but the largest takeovers.

The total number of deals announced in the three months to June 30 fell to about 10,900, according to data from the London Stock Exchange Group. Excluding the second quarter of 2022, when Covid-19 lockdowns upended global markets and just 10,600 deals were unveiled, the figure was the lowest since the start of 2015.

Dealmakers had initially expected that a more conservative White House would pull back on regulation and unleash a wave of takeovers.

Instead, companies and investors have had to navigate a more perilous geopolitical backdrop than anticipated, with the announcement of wide-ranging tariffs by the US on April 2 and conflicts in the Middle East driving volatility in markets.

“Following the initial exuberance of the first month or two, the attitude in the boardroom has been cautious,” said Lorenzo Corte, global head of transactions at the law firm Skadden. 

Despite the escalation of trade tensions since the start of the quarter in April, the LSEG data show that the value of transactions held steady from the first quarter of the year at $969bn, propped up by a handful of strategic megadeals.

Deals worth more than $10bn have risen by three-quarters this year, with top transactions in the second quarter including Cox’s $35bn takeover of Charter Communications, a $33bn take-private of Toyota Motor’s biggest subsidiary, and a consortium led by Abu Dhabi National Oil Company’s $24bn acquisition of Australia’s Santos.

“There’s pent up demand to do large strategic transactions,” said Jim Langston, partner at law firm Paul Weiss. “If companies are going to make a bet on M&A, they want it to be something that moves the needle, that the reward is worth the risk. ”

The uncertain outlook for economic growth, inflation and the dollar have also acted as a particular drag on the private equity industry, making it more difficult to value assets.

Global private-equity backed acquisitions slowed sharply between the first and second quarters of the year, from about 2,500 in the first three months to closer to 1,850 in the second. There were 1,250 fewer private equity deals struck in the first half of this year compared with the same period in 2024.

Dealmakers have focused on public company takeovers and the sale or carve-out of assets regarded as no longer core, according to Jens Welter, Citi’s head of North America investment banking coverage.

Such transactions include KKR’s £4.7bn acquisition of London-listed industrial group Spectris, and BP’s exploration of a sale for its lubricants arm Castrol. Welter said that dealmakers were adding in terms to contracts to help agree transactions in choppier markets.

“While we expect the take-private and corporate carve-out volumes to remain at record levels, transactions are highly structured involving rollovers and deferred mechanisms,” Welter said.

Some advisers remained optimistic that a stabilising geopolitical outlook would lead to a pick-up in activity in the second half of the year.

Oliver Smith, co-head of Davis Polk’s M&A practice, said the build-up in demand felt like the early days of the Covid-19 pandemic.

“People realised then that the sky wasn’t falling in and things picked up for a while,” said Smith. “It feels like that moment in time is coming once companies get used to the uncertainty.”

President Donald Trump isn’t the only one who wants to drill, baby, drill.

Left-leaning Brazilian President Luiz Inácio Lula da Silva, better known for hugging the rainforest, just greenlit oil exploration at the mouth of the Amazon.

Ideological antipode Javier Milei of Argentina lately inked a deal with Italy’s Eni to export liquefied natural gas from the vast Vaca Muerta shale deposit. Nigerian President Bola Ahmed Tinubu called out the army to fight the pipeline siphoning that has devastated his country’s crude exports.

Surging production globally will yield a surplus of eight million barrels a day as oil demand peaks around 2030, the International Energy Agency predicts. That could be an obstacle to the U.S. president’s oft-repeated plans for “energy dominance.”

“Marginal producers in the U.S. are at risk with prices below $70 a barrel,” says Jacob Mandel, research lead at Aurora Energy Research. “At least a few million barrels a day fit in that category.” U.S. benchmark West Texas Intermediate currently trades around $67.

Brazil is the rising power in world oil thanks to its giant “pre-salt” fields, unique offshore deposits left behind when South America and Africa separated. Production, which was less than three million barrels a day in 2022, should hit 4.5 million by 2030, says Monique Greco, head of oil & gas research at Itau BBA.

Break-even cost for the pre-salt gushers is around $35 a barrel, she estimates. Lula is looking to the Amazon Basin when pre-salt tapers off in the next decade.

Shares in national oil company Petróleo Brasileiro look undervalued given these hot prospects and an underrated management, Greco adds.

“Petrobras trades at a discount because of perceived risks of government influence,” she says. “We take a more benign view.”

Argentina is the sleeping giant of global oil, or one of them. Vaca Muerta is a nearly virgin formation with similar potential to the U.S. Permian Basin. Chevron and Shell joined a consortium late last year to build a $3 billion pipeline to coastal export terminals, with capacity up to 900,00 barrels a day.

“Pipeline infrastructure has been the main bottleneck there,” notes Patrick Gibson, research director for global oil supply at Wood Mackenzie.

Nigeria is an oil wild card. Tinubu’s crackdown on bandits who “tap” the African giant’s remote pipeline network has already lifted output to 1.5 million barrels a day, from about one million two years ago.

Global majors like Shell and TotalEnergies have divested assets to local players like Seplat Energy, which “understand local issues better,” says Pranav Joshi, who covers Africa for Rystad Energy. Seplat’s shares have nearly doubled in the past two years.

Further output increases may come tougher for Nigeria, though, Joshi thinks. “We need to see some execution evidence to go beyond 1.6 million barrels,” he says.

OPEC, which still pumps 40% of the world’s oil, looks more interested in protecting market share than propping prices at the moment, says Simon Henderson, director of Gulf and energy policy at the Washington Institute.

The cartel is tipping a second straight 411,000 barrel-per-day increase at its July 6 meeting, despite a 20% price drop over the past year. “The most likely candidate to be cut in the market is the U.S.,” Henderson notes.

Multiyear oil market forecasts are imprecise at best, Woodmac’s Gibson cautions, hinging on variables such as electric vehicle expansion and Chinese industrial demand.

When Hewlett Packard Enterprise got government approval to close its acquisition of Juniper Networks this past weekend, the stock soared. More often an acquirer’s stock falls on deal news. But the age of artificial intelligence is changing the equation.

For HPE, the fit is particularly good. Juniper, a networking equipment firm, puts it in a much better spot to compete against Cisco Systems and Nvidia in the market for the high-speed networking equipment that is required in AI data centers.

HPE shares rose 12.6% on Monday, making it the top performing stock in the S&P 500 on the day. The deal officially closed on Wednesday.

Success breeds imitation, and there may be other legacy tech companies looking to the merger market to improve their AI position. I’m not an investment banker, but here are some deals I wouldn’t be surprised to see—and that could get a good reception from the market.

Oracle and C3.ai: Oracle is a prime candidate to add AI to its software through an acquisition.

Oracle has already begun transforming itself for the AI age. With perfect timing in 2020, Oracle began running the Microsoft playbook: Transform from a legacy software maker into a cloud company. It has been moving customers to cloud-based versions of its software with annual subscriptions, while at the same time building large data centers to rent out cloud servers for AI and traditional workloads. In fiscal 2025, revenue from the cloud was up 24%, while the rest of Oracle was flat on the year.

Ironically for a software company, Oracle’s AI play to date has largely been in hardware: AI cloud servers. It could use an AI software merger that, grafted on to existing Oracle offerings, would leverage the mountains of proprietary data customers have in Oracle databases.

Enter C3.ai. C3’s offerings would fit nicely on top of Oracle’s software. C3 has 130 ready-made AI applications tailored for different industries, solving problems and helping to predict outcomes. Today, its customers are clustered in energy, manufacturing, government, and the military.

C3’s revenue grew by 25% to $389 million in fiscal 2025, but it posted a $289 million loss. The culprits were sky-high expenses, 183% of revenue. But in a merger, sales and administrative expenses, which together represented 86% of revenue, would be trimmed heavily once integrated into Oracle’s large sales force and bureaucracy.

After a sharp selloff this year, C3 has a $4.2 billion market capitalization. Oracle could use its $11 billion in cash, or its stock, which trades at a premium to its historical price/earnings ratio for the next 12 months. Paying with cash could hamper Oracle’s plans for data center investment, coming in at $21.2 billion last year, tripled from the year before, and future plans may require more debt, now at $109 billion. In the end, competing capital requirements may be the largest hurdle for this merger.

An Oracle/ C3.ai merger would face one obstacle right off the bat. The company’s founders have a history. C3 CEO Tom Siebel was among Oracle’s early employees, and became a top salesperson. In the early 1990s, Larry Ellison, Oracle’s chairman, rejected Siebel’s idea for a new product. Siebel left Oracle and took his idea to form Siebel Systems, which became successful.

As Siebel’s software got traction, a long war of words emerged between the two. In the end, Ellison and Siebel made up enough to agree to an acquisition, with Oracle paying $5.85 billion for Siebel Systems in 2005. Another deal would make sense.

Check Point Software and SentinelOne. Check Point Software Technologies is a pioneer in cybersecurity. Its software builds a wall around corporate networks, but increasingly, workers are doing things outside those walls, like working from home or using cloud applications. Check Point also has a cloud-security product that is mature and integrated with its network security.

SentinelOne’s strength is AI-driven “endpoint security,” proactively protecting employee devices no matter what network they are connected to. Check Point has its own endpoint solution, but SentinelOne’s is a more popular product.

Check Point grew revenue by 6% last year, a much slower pace than 20 years ago, but it also generates a lot of free cash flow, which has largely gone to share repurchases. Check Point has reduced its share count by 55% since 2005, becoming a classic “value” play. Now it could turn back to growth.

SentinelOne is a much younger company, growing smartly. Revenue rose by 32% last fiscal year, but, like C3.ai, it took a huge loss, with total expenses at 140% of revenue. Some 82% of its revenue went to sales and administrative costs, the kind of expenses that would be greatly reduced after a merger, also thanks to Check Point’s larger scale and existing sales force.

SentinelOne has a market capitalization of $6.8 billion, and the stock is down 12% over the past year, versus a gain of 12.5% for S&P 500.

The bet here is that a combined offering covering network, cloud, and endpoint security would allow Check Point to upsell its existing base of over 100,000 customers. Check Point had just $1.5 billion in cash and short-term investments at the end of March. The deal could be all-stock, or Check Point, which has no debt, could borrow to finance the purchase.

As with any deal, integration is expensive, so shareholders would need to be patient. It could be worth the wait.

Conor Cunningham, of Melius Research, is an “uber cruise bull.” Why he likes airlines, Booking.com, and Hyatt Hotels, too.

Let’s get the bad news out of the way first: Even travel-stock analysts don’t have secret hacks to get cheap airfare at Christmas, says Conor Cunningham, an analyst at Melius Research who has covered the travel industry for nearly two decades.

Cunningham has something else, however: insights into an industry that he says is far less cyclical than people think. Plus, he has stock picks.

“I view travel as a secular growth industry that is going to grow at a much greater rate than gross domestic product,” he says. “There is a perception that people will change their travel plans at the drop of a hat because of economic fears related to tariffs. But I see a consumer who is changing, and is willing to continue spending on experiences more than goods.”

The numbers back him up. Global air passenger traffic grew by a record 10.4% in 2023, compared with a gain of 3.8% in 2019, before the onset of the Covid-19 pandemic. And nearly two-thirds of people surveyed last year by McKinsey said they were more interested in travel than they had been prepandemic.

“People always ask me when travel demand is going to fall off, and my view is, never,” Cunningham says.

He explained why in a June 16 interview with Barron’s, and offered his views on a variety of travel companies and stocks. An edited version of the conversation follows.

Barron’s: The number of international visitors to the U.S. began declining this spring, with a double-digit drop-off from Canada and Western Europe, according to the U.S. Travel Association. Regardless of the cause, which some blame on U.S. policies, is this a concern?

Conor Cunningham: Europeans and Canadians are still traveling, but they just aren’t coming here in the same numbers. If you take a thousand-foot view, however, you haven’t seen any real change in spending on travel. Besides, a lot of companies are agnostic about where customers travel. Booking.com doesn’t care if you’re going to go to Florida or Mexico when you book a trip. Would I like U.S. inbound traffic to be better? Yes, but it doesn’t make or break the demand profile for travel.

Airline stocks soared after the Covid-19 pandemic, but most couldn’t hold their gains. Yet, they ought to be prime beneficiaries of permanently higher travel demand. What is the issue?

The near-term outlook is challenging because we have seen a pullback in corporate travel, and the oil price has spiked. [Oil prices have since retreated.] But, from a long-term standpoint, I am encouraged because the industry structure has changed for the better, demand is strong, and the strongest players are seeing expanding margins. We forecast 1% growth for airlines this year, and 6% next year.

Things changed post-Covid. Basically, the U.S. government bailed out all the airlines. Those that went into the crisis with strong balance sheets, like Southwest Airlines, couldn’t benefit from that advantage.

Also, it is difficult to operate in the current environment because of increased costs and shortages of both labor and planes. And, the ultra-low-cost carriers (ULCC) that once grew by double digits annually can’t grow that fast anymore. They don’t have the assets to do so.

Historically, if you looked at the margin structure of the industry, the ULCCs were at the high end and Delta Air Lines, United Airlines Holdings, and American Airlines Group were at the lower end. Now that order has flipped. The big carriers have all sorts of benefits connected with their loyalty programs, which gives them an advantage over the low-cost airlines.

What needs to change in the industry is a doubling down on return on invested capital, free cash flow generation, and sustained, controllable margin improvement. That is what it will take for investors to embrace the stocks, and for the stocks to shed their image as merely trading vehicles.

What are your favorite airline stocks?

Of the Big Three legacy airlines—American, Delta, and United—we like the latter two the best, but have Buy ratings on all three, with price targets of $13, $53 and $80, respectively. All three trade cheaply, for well under 10 times enterprise value to Ebitda, or earnings before interest, taxes, depreciation, and amortization. Yes, adjusted earnings per share will decline this year, but we estimate they will rebound in 2026, climbing 23% and 18% for Delta and United, respectively, and 116% for America.

Cruising is another travel-related industry that looks a lot different—and a lot better—since the pandemic. What does the future hold?

The cruise industry accounts for 2% of global travel spend. It is a niche industry with a long runway for market-share gains. It isn’t about Royal Caribbean trying to steal passengers from Norwegian Cruise Line Holdings, but about cruise companies attracting people who might otherwise have gone to, say, Orlando or Las Vegas, and getting them on a boat for the first time. We forecast 8% growth for the industry this year overall.

Product drives a lot of this growth. The Icon of the Seas, the biggest ship in the world, which Royal Caribbean launched a few years ago, is a pretty significant change in the industry. It is a ship that offers something for everybody. And at the same time, Royal Caribbean is bringing you to a private destination where they can continue to monetize a higher percentage of your wallet.

So, you have a product that is significantly different and much better than it has ever been. All the cruise companies are launching new ships with bells and whistles that appeal to a younger demographic. Royal Caribbean, for example, would tell you that 50% of people coming onto their ships are millennials or younger. People are more willing to try a cruise than in the past. Cruises are 15% to 20% less expensive than a traditional land-based vacation, so cruise operators have an opportunity to raise prices.

Which of the cruise stocks do you favor?

I cover Royal, Norwegian, Carnival, and Viking Holdings, and I have Buy ratings on every one of the stocks, with price targets of $270, $24, $28, and $51, respectively. Royal Caribbean and Viking are at the forefront of the industry and are considered best-in-breed right now: Royal Caribbean’s management is dead-set on expanding margins and Viking is a unique asset with customer demographic that make its returns much more resilient than other areas of travel.

But I see an opportunity ahead for Carnival and Norwegian, too. I never would have thought I would become an uber cruise bull, but I am. There is just an underappreciation for how good these companies became in the past couple of years. We’re forecasting double-digit growth in earnings per share for all four cruise operators in 2025, from a 44% increase for Carnival at the high end to 13% for Norwegian. We expect that growth will slow next year, but not by much.

Most people still take land-based vacations, though. Which lodging stocks are most attractive?

People think the sector is hugely consolidated, but that isn’t the case. Marriott International has the most rooms in its network, but that is still only around 8% of the total. This is a highly fragmented industry.

Within the hotel group, Hyatt Hotels has a unique opportunity. Investors tend to think they can own Hilton Worldwide Holdings or Marriott forever, and I wouldn’t fight them on that. Hilton and Marriott are good companies with a long growth profile ahead. But Hyatt is now adopting more of an asset-light business model, which Hilton and Marriott have already done. Hyatt has an opportunity to generate a lot more free cash flow as a result of this change. It trades at a discount to Marriott and Hilton on the basis of EV/Ebitda. You could argue that it should trade at a premium, given that it tends to be more high-end.

What is your view of Airbnb?

Airbnb is a unique company. They caught lightning in a bottle with short-term rentals. Now they have become a verb. But they have become overly reliant on the U.S. consumer and the U.S. market. Places like New York City have banned short-term rentals. The company is running into a lot of regulatory barriers, and its growth has slowed materially.

Airbnb needs to start growing again to command a higher price/earnings multiple. How? My view is that they should invest heavily in other markets. They are doing it now in Japan, and have had some success, but growth has been relatively slow. Other companies have made a lot of headway in alternative accommodations, including Booking Holdings and Expedia’s VRBO. We have a Hold rating on Airbnb.

Why are online travel agencies (OTAs) like Expedia so popular when booking directly gets you more perks and loyalty points? Will they be replaced by ChatGPT and other artificial intelligence chatbots? And, which companies are best positioned?

Booking is a great company; we have a Buy rating and a $5,300 price target on the stock, and expect the company will grow earnings per share by 16% this year and 14% next year. Long term, the opportunity set remains significant as the company broadens out its travel offering.

Most leisure travelers are looking to book a trip once or twice a year. They don’t care about loyalty; they’re going purely on price, which makes OTAs attractive.

Is that person willing to pick up a new app, one based on AI, and book on a platform like that? That would be a change in consumer behavior, and many people aren’t there yet. People are willing to use AI when an AI company such as ChatGPT partners with an OTA. We are already seeing this with Booking and Expedia to some degree. You can use AI to plan trips or summarize reviews. Still, OTAs are entrenched in the public consciousness, and I don’t regard the growth of AI as an existential crisis for them.

OTAs need to expand beyond their reliance on lodging, however, and invest in other areas of travel, whether experience or attractions, or bundling–that is, booking your hotel and rental car both on their platform. How does a company get more of the overall travel wallet? By reducing friction and making it seamless to do it all on their platform.

What is your dream vacation?

For our honeymoon, my wife and I went on safari in Tanzania, and that was so much fun. I would love to go back again and maybe see the gorillas in Uganda.

Happy travels, Conor, and thanks.

In the last quarter of 2024, exchanges’ share of trading fell below 50% for the first time.

A trading platform called IntelligentCross has gotten under Wall Street’s skin.

This year, it passed UBS to become the largest of “dark pools”—those off-exchange platforms where institutions can trade without broadcasting their buying or selling intentions to the world. In February, IntelligentCross handled nearly 3% of the nation’s stock trades.

Some of those trades were for Wells Fargo Securities, which reported sending almost 75% of its market orders for S&P 500 stocks to IntelligentCross in March. By comparison, the big market maker Citadel Securities only got 2.5%, while Nasdaq got less than 1%.

A subsidiary of Stamford, Conn.-based fintech Imperative Ex, IntelligentCross has even bigger ambitions. With the backing of the industry self-regulator Finra, it has been asking the U.S. Securities and Exchange Commission to let it set national stock prices, like an exchange does. Instead of running dark, IntelligentCross prices would become part of marketwide quotes. Then SEC rules would oblige brokers to send it their orders if it has the best prices.

An array of Wall Street players oppose its request, including the market maker Citadel Securities, founded by billionaire Ken Griffin, Nasdaq, and some leading trade groups. Their letters to the SEC say that IntelligentCross handles trades in ways that can favor some traders over others.

With no explanation, the SEC has sat on the proposal for two years. It declined any comment to Barron’s.

“We don’t agree that the IntelligentCross matching process provides either side to a trade with any form of advantage,” says Imperative Ex CEO Roman Ginis. “But it is no surprise that certain detractors of the proposal are claiming so, to maintain their status quo under the current landscape.”

If IntelligentCross gets the SEC’s nod, and gains order flow, then other pools might follow its example. Their combined share of market volume has stayed around 15% for the last five years. Additional flow might come at the expense of stock exchanges. In the last quarter of 2024, the exchanges’ share of trading fell below 50% for the first time, with big market makers handling the rest.

Running a trading venue is a profitable business. This year, analysts expect Nasdaq to earn a cash operating margin of 57% on $5 billion in revenue. Market maker Virtu Financial is expected to earn a 58% margin on $1.8 billion in revenue this year.

Exchanges and pools have different ways of providing traders with liquidity—which is the ability to immediately trade something at the price and amount that you want.

On an exchange, much of the liquidity comes from market-makers, who hold inventory in a stock, with the exchange displaying the prices at which they will buy or sell. A spread between the bid and offer is their profit. The quotes from all 28 exchanges get reported on the consolidated “tape,” so brokers can see the best available price in a stock.

Pools get some of their liquidity from market makers, but mostly they match the order flows of institutional customers. Buy and sell orders typically get matched at the midpoint of the best public quote, with the pool charging a fee per trade. Only the pool’s subscribers see the price of offered trades.

Pools are supervised by Finra and operate under loose rules that the SEC created in 1998, when electronic networks like Instinet began taking some trading volume from exchanges.

Stock exchanges regulate their members and must get SEC approval for operational changes, says Haoxiang Zhu, a finance professor at MIT’s Sloan School of Management who was a top SEC official between 2021 and 2024.

The rules for dark pools allow flexibility, says Zhu. Pools can merely file a note informing the agency of a change in their operations. While an exchange must provide fair access to anyone who wants to trade, a pool can discriminate as long as its trading in any stock remains below 5% of the stock’s total market volume.

That leaves pools freer to innovate. IEX was a pool when it launched the fiber-optic-fenced refuge from high-speed trading that Michael Lewis made famous in the book Flash Boys. Later on, it became an exchange.

OneChronos uses a formula that matches stock trades at the prices where the most volume traded. At PureStream, orders are matched at a percentage rate of market-wide trade events, creating a concurrent stream of filled orders.

These complex protocols are designed to let fund managers accumulate or unload shares without attracting notice. That allows them to get in or out of a big position without moving a stock’s price.

To avoid tipping off predatory traders, institutional traders often split their big orders into pieces that they scatter across trading venues. They will even stagger the orders by fractions of a second, so they hit distant venues simultaneously.

Others in the stock market are watching out for those trades. High-frequency trading firms use algorithms to sniff out the start of an institutional trading program, and then try to front-run the remaining pieces—like people who buy land where they learn a theme park is planned.

Market makers also watch for the waves of an institution’s orders, which can move stock prices and can cause a loss on the market maker’s share inventory. That is why wholesale market makers like Citadel Securities and Virtu Financial make deals to get a retail brokers’ orders. Those orders of small investors generally lack direction, so the market maker can provide better prices to the retail brokers’ customers.

Among IntelligentCross’s lures for big traders are “private rooms”—where a customer like Wells Fargo can set its own rules for trading, and admit only the counterparties it chooses. By screening out high-speed traders, the private room host hopes to get better prices on bigger trades.

“With Intelligent Cross Hosted Pools, you can design a personalized trading environment tailored to your needs,” IntelligentCross advertises. “You decide the who, how, and when.”

A number of buyside firms and brokers have mentioned using private rooms on IntelligentCross or OneChronos, including: Raymond James, Evercore ISI, Jefferies, and XTX Markets.

The exclusivity of private rooms bothers some trading desks. “That liquidity isn’t accessible for the rest of the market,” says Joe Saluzzi, who heads the institutional trading firm Themis Trading.

In an April memo to the SEC, Citadel Securities complained that private rooms can discriminate and run trades in ways they need not disclose, because they keep their volume in a stock below 5% of the market. It said the SEC should lower the 5% threshold that triggers the fair-access rule. The agency had no comment on the matter.

Amid the fuss over its private rooms, IntelligentCross marketing chief Lorna Boucher told Barron’s that well over 90% of the platform’s volume is done in “all-to-all” matching among its subscribers.

“For the last couple of months, we’ve been the No. 1 venue for midpoint executions, across all [pools] and exchanges,” she said. Those trades happen outside of private rooms.

Another innovation at IntelligentCross is its ASPEN matching engine. That is the system whose quotes the pool wants the SEC to make part of nationally displayed prices. Then IntelligentCross will have a “protected quote,” meaning that brokers trying to buy or sell a stock will have to send orders to the pool whenever it posts better marketwide prices than exchanges.

“Not including IntelligentCross-displayed quotes as a protected quote has allowed market participants to effectively ‘ignore’ the IntelligentCross quote, even when it is the best displayed quote in the market,” said Roman Ginis of Imperative Ex.

Finra first asked the SEC to give IntelligentCross a protected quote in December 2022, saying the quotes would appear on a little-used Finra quote display facility. SEC staff members agreed, and recommended approval in August 2023. The next day, SEC commissioners put the proposal on hold, so they could receive additional industry comments.

In the two years since the SEC stayed the approval order, Ginis says that exchanges and other venues have traded some 27.6 billion shares, worth $1.95 trillion, at prices worse than those that were displayed at IntelligentCross ASPEN.

Comments received by the SEC during that time mostly oppose forcing traders to route to the pool’s quotes, because ASPEN has two unusual features: It only matches orders after a delay, and lets traders cancel their order during that interval.

On the surface, ASPEN’s delay is a speed bump like the one pioneered by IEX 10 years ago. At IEX, a fiberoptic coil delays all traffic into its exchange by 350 millionths of a second. That small fixed delay is enough to foil computerized traders who otherwise might see one piece of an institution’s trade on IEX, and then race to other venues to move a stock’s price before other pieces get there.

IntelligentCross delays matching trades by an interval that can vary between 150 and 900 millionths of a second, based on the prior day’s trading.

Generally, the delay is at the longer end, said Citadel Securities in a comment to the SEC. It said that Citadel’s studies of ASPEN’s delay found it was hardly ever shorter than 500 millionths of a second, and 75% of the time it is as long as 800 or 900 millionths of a second. Longer delays make front-running a trade easier, Citadel said.

“In electronic trading, this is an eternity,” said Citadel in an April 3 letter to the SEC. In less than 500 millionths of a second, a computerized trader can see if prices have moved at other venues, then act.

Among the potential actions is canceling a quote. A problem with protecting the pool’s quotes, say Citadel and others, is that IntelligentCross lets traders cancel orders during its delay.

A firm that posts a quote on ASPEN has time to see if prices move at other venues. It can then back out before the ASPEN match. Traders on the other side of the match would have been obliged to send orders to the pool, under the protected-quote rule, but those traders won’t have time pull back their order, say Citadel and other commenters.

A speedy trader posting protected quotes on ASPEN would have a one-sided advantage to avoid losses and front-run others, said Citadel in its April 3 letter to the SEC. That is a valuable subsidy for the dark pool and some of its customers, Citadel said.

Intelligent Cross disagrees. ASPEN doesn’t give an advantage to one side in its matching process, says IntelligentCross founder Ginis, because any trader can cancel his or her order. Those opposing IntelligentCross’s request to join the club of protected national quotes are trying to avoid competing with its better-priced quotes, he suggests.

Finra wouldn’t comment to Barron’s when asked about the IntelligentCross proposal and the fees Finra might earn from hosting the pool’s quotes on its underused display facility. In a March 13 update to its SEC application, Finra says IntelligentCross has tweaked its matching process and addressed all critics’ concerns.

The IntelligentCross proposal has supporters.

Giving the pool a protected quote would bring out more liquidity, says an April comment letter from Point72 Private Investments, an affiliate of Steven Cohen’s hedge fund firm, which describes itself as one of the first investors in the pool’s parent.

The IntelligentCross delay doesn’t favor one trader over another, the SEC was told in an April letter from Eric Swanson, who heads the American unit of XTX, a quantitative market maker based in London.

“The proposal reflects the type of innovation the Commission should be encouraging to make our equities market fairer and more efficient,” he wrote. Swanson told Barron’s that his firm is an investor and customer.

The enthusiasm of XTX for the IntelligentCross proposal fuels suspicion among trading industry executives, who tell Barron’s that the highly automated XTX would be positioned to benefit as a trader posting protected quotes in IntelligentCross’s delayed setting. In white papers, XTX disputes that, saying that delayed-matching venues can promote liquidity for all legitimate fund managers and market makers.

One last concern about forcing orders into the pool is that pools are relatively unregulated.

Traders shouldn’t be forced to use the lightly regulated pools, the capital markets advocacy group Healthy Markets told the SEC. Unlike an exchange, “IntelligentCross wouldn’t need regulators’ blessings to implement changes to its operations, governance, or fees,” wrote the group’s CEO Tyler Gellasch.

Nasdaq, in its comment letter, calls Finra’s proposal a regulatory arbitrage. If a pool wants the quote protection of an exchange, Nasdaq says it should become one—like IEX did—and assume the regulatory burdens of an exchange, too.

“If a pool can just pop up, put its quote on Finra’s display facility and get order protection, why would anyone be an exchange anymore?” a trading firm executive told Barron’s.

Amrize, spun off from Swiss building-materials company Holcim, is a bet on the U.S.

Sticks and stones may break your bones, but for Amrize, recently spun off from Switzerland’s Holcim, cement and rocks are a pathway to profits—for the company and investors.

Amrize, whose name is an amalgam of “ambition rising,” is the top North American cement producer and a leader in “aggregates,” the crushed rock used in construction. It also has a large commercial roofing business. All three have favorable dynamics. It was cast off by Holcim, an international building materials company, on June 23, when it began trading on the NYSE.

The company aims to generate mid- to high-single-digit annual revenue growth over the next three years and produce roughly 10% gains in pretax cash flow, while steadily expanding margins. This would represent some of the best growth in the industry. The company’s stock, at around $49, trades for about 19 times projected 2025 earnings and a more reasonable 16 times projected 2026 earnings of $3 a share. The appealing narrative, combined with a reasonable stock price, could make Amrize a winner.

“In our view, Amrize offers an attractive, all-American growth story,” RBC Capital Markets’ Anthony Codling wrote in initiating coverage. “The story has only just begun.”

The story starts with Holcim. Climate-conscious European investors have penalized the company since cement production is carbon-intensive, and Holcim figured its North American business would get a better reception in the U.S. market, where investors are less wedded to sustainable investing.

Amrize is one of the larger spinoffs in the past few years, with a market capitalization of $28 billion, plus about $5 billion in debt. Based in Chicago, the company has a sufficiently large market value to be eligible for inclusion in the S&P 500 index . The minimum now is $22.7 billion. Amrize’s Swiss domicile is not an obstacle to index inclusion. Insurer Chubb, for instance, is domiciled there.

The 58-year-old Jan Jenisch, Amrize’s CEO, is considered a management star in Europe, where he delivered market-beating results at Sika, a Swiss industrial company, from 2011 to 2017, and then as CEO of Holcim starting in 2017.

“This is the world’s most attractive construction market, and we feel there is no company better positioned than Amrize,” Jenisch tells Barron’s in an email. “Now as an independent, publicly traded company, we have the focus, financial firepower, market-leading operations, and broad range of advanced branded solutions to unleash our full potential organically and with value-accretive M&A.”

The aggregates market has long been an investor favorite in the U.S. Cement, which is mixed with water, sand, or aggregates to make concrete, is economically sensitive, but suppliers benefit from favorable supply/demand dynamics. It’s nearly impossible to get the permits to build a new plant due to environmental roadblocks and community opposition. The last new cement plant was Amrize’s facility in Ste. Genevieve, Mo., which is the largest in the country, with over five million tons of annual capacity, about 20% of its North American output. The centrally located facility on the Mississippi River was completed in 2009. As a result, imports fill the gap and account for about 20% of U.S. cement demand.

“The North American cement market is attractive, misunderstood, and undersupplied,” RBC’s Codling tells Barron’s. He has an Outperform rating and price target of $61 on Amrize shares, up 22% from Wednesday’s close.

It’s a similar situation with aggregates, where local producers dominate due to the high cost of transportation relative to prices of just $50 a ton. Amrize has 1,000 sites and facilities throughout North America, including 18 cement plants. In aggregates, it’s No. 1 or 2 in 85% of its markets, with 462 operations.

Codling isn’t the only bullish analyst. Several have Buy ratings and price targets around $60 a share, including Keith Hughes of Truist Securities, who wrote that the U.S. listing could help Amrize’s valuation. Hughes cited European companies like CRH, which specializes in building materials, and Ferguson Enterprises, which is focused on plumbing supplies, that shifted their primary listings to the U.S.

At its investor day in March, Amrize made financial projections through the end of 2028. It sees 5% to 8% annual revenue growth, 8% to 11% growth in earnings before interest, taxes, depreciation, and amortization, or Ebitda, and over $8 billion of free cash flow, an average of $2 billion a year, up from $1.7 billion in 2024. There was no projection of earnings per share. Codling says revenue and Ebitda projections are some of the higher ones among peers. And as an independent company, Amrize can focus on growth “without having to compete internally for capital within a group where cash returns and sustainability rank above growth,” he wrote.

The company’s priorities, in order, are capital expenditures, acquisitions, dividends, and stock buybacks. The company hasn’t declared a dividend yet or given guidance on a payout ratio. Codling sees a payout ratio of 30% and an initial annual dividend of 82 cents a share, resulting in a yield of 1.6%. Codling estimates about $300 million of annual buybacks, or about 1% of the shares outstanding. If the stock languishes, Amrize could get more aggressive with buybacks.

Institutional investors tend to value cement and aggregates makers based on Ebitda. Amrize trades for about 10 times projected 2025 Ebitda and nine times next year’s estimate, well below Martin Marietta Materials and Vulcan Materials, U.S.-focused aggregates producers that trade at about 15 times 2025 Ebitda and 30 times earnings. CRH has a comparable valuation to Amrize, but differs because it has operations in Europe.

Spinoffs don’t generate the hype of IPOs, and Amrize doesn’t fit hot themes like artificial intelligence. But that shouldn’t detract from a company well situated in three attractive businesses that is still building an investor base.

It may be wise to buy now before Amrize gets better discovered.