France has seduced Jamie Dimon. JPMorgan Chase last month acquired a seven-storey building in Paris to house hundreds of traders. The deal was announced to coincide with an initiative at Versailles led by President Emmanuel Macron, entitled “Choose France”.
JPMorgan did — and so have other banks. They are shifting some business from London as Brexit inhibits their ability to operate across the continent.
But le tapis rouge is not laid out for just any foreign financier. Even as France tries to attract banks, insurers and clearinghouses, it is trying to repel hedge funds, activists and short-sellers.
The most fearsome layer of deterrence comes from the French regulator, the Autorité des marchés financiers, which has recently proposed swingeing fines for activist Elliott Management, probed short seller Muddy Waters and even penalised Bloomberg for publishing a story based on a fake press release.
Viewed individually, none of the interventions looks arbitrary. Elliott has been accused of misleading the market by failing to properly disclose its stake-building in Norbert Dentressangle, a French logistics firm. Muddy Waters was suspected of market manipulation over its attack on the Casino supermarket chain. Bloomberg’s sin was not to verify a document that purported to contain bad results from Vinci and sent the construction group’s shares sharply lower.
But the decisions to even open those cases were not clear cut. Each company denies wrongdoing. And some of the proposed fines look out-sized: €20m for Elliott and a staggering €5m for Bloomberg’s failure to detect what the media group called a “sophisticated hoax”.
Some foreign investors accuse the French regulator of discrimination, arguing that the AMF has not been so quick to examine stakebuilding from homegrown corporate raiders such as Vincent Bolloré.
Elliott’s general counsel Richard Zabel popped up in the French press this week to criticise the AMF and implicitly contrast its heavy-handed policing of investors with Mr Macron’s.
“The French have every right to choose not to be a major financial centre,” he told Les Echos. “And for people who expect stable and predictable rules from a jurisdiction, it is more difficult to do business in France than elsewhere.”
However aggrieved by the AMF’s investigations, Elliott is undaunted. This week it emerged that it had built a new position in Arkema, the French chemicals group, to complement its stakes in Pernod Ricard and IT services company Altran. If France wants to fend off activists, it needs something else.
Conveniently, this week the government announced that Abu Dhabi’s sovereign wealth fund Mubadala would provide €1bn to pour into a French state-backed “lac d’argent”, “lake of cash”, that would eventually reach €10bn and would be used to take strategic investments in French companies.
This follows a government report in October, which recommended a variety of steps to “level the playing field” between activists and companies — incredibly that apparently translates to giving more power to management, not less.
In many ways, all this is par for the course. It is 15 years since France declared yoghurt a natural security issue when it thwarted Pepsi’s takeover interest in Danone. But the activists and hedge funds have since started knocking on the door in greater numbers. If France really does want a vibrant global financial centre, it should let them in