Yahoo Finance's Julie Hyman, Adam Shapiro, Brian Sozzi along with Tyler Noyes and Brett Johnston, Kalahari Co-Founders discuss their new product.
Yahoo Finance's Julie Hyman, Adam Shapiro, Brian Sozzi along with Tyler Noyes and Brett Johnston, Kalahari Co-Founders discuss their new product.
The British pound initially shot higher during the trading session on Friday but has been a bit noisy in the process of breaking above the hammer from the previous session.
(Bloomberg) -- At their highs, five electric-vehicle startups that went public through mergers with special purpose acquisition companies were worth $60 billion. The corrections that followed have been brutal.Three of the companies plumbed new lows this week as short-seller attacks, management turmoil and execution issues lead investors to reconsider their prospects. They’ve lost more than $40 billion of market capitalization combined from their respective peaks.The sliding valuations of Nikola Corp., Fisker Inc., Lordstown Motors Corp., Canoo Inc. and Arrival Ltd. underscore the risks surrounding the blank-check boom. Unlike in a traditional initial public offering, going public via SPAC allows companies to make forward projections to investors during their listings. This was key to ginning up interest in EV companies -- all five are still working on delivering their first vehicles to customers.Here’s a breakdown of what’s happened at each company:NikolaFounder Trevor Milton burst onto the scene last year boasting that he could “out-Elon” Tesla Inc.’s Elon Musk. Days after his battery-electric and hydrogen-powered truck maker debuted on the Nasdaq in June, it was worth almost $29 billion, rivaling Ford Motor Co. at the time.When Bloomberg News reported that Milton had exaggerated the capability of his first truck years before the company went public, it got the attention of Hindenburg Research. The small short-selling firm produced a lengthy report accusing the company of deceiving investors. The U.S. Securities and Exchange Commission opened an investigation, and Milton resigned soon after.Early this year, the company cut its projection for semi-truck production this year to 100 units, one-sixth of its earlier plan. The shares have recovered somewhat since dipping below $10 in April.FiskerThe second EV venture founded by longtime auto designer Henrik Fisker announced its reverse merger a month after Nikola’s listing. While the company was more than two years from starting production, its plan to market an under-$40,000 sport utility vehicle and outsource the manufacturing work to others turned heads. Its market value peaked at almost $8 billion in February.The catalysts for Fisker’s decline to below $3 billion this week have been less clear than some of its peers. The company appeared to lose out as investors grew more bullish about incumbent automakers’ EV prospects. Its shares are surging in early trading after an announcement late Thursday of plans to develop an EV with Foxconn Technology Group and build it in the U.S.Lordstown MotorsThen-Vice President Mike Pence attended Lordstown’s unveiling of its Endurance work truck in June at the factory the company took over from General Motors Co. While it was a risky move championing a company with just 70 full-time employees, the Trump administration was eager to embrace a startup trying to revive an Ohio plant that once employed 10,000 people.Less than six weeks later, Lordstown found a SPAC suitor. Boasts about non-binding orders gave way to another attack by Hindenburg Research, which leveled accusations similar to the ones aimed at Nikola -- that Lordstown had misled investors. The SEC has been looking into the claims. Lordstown is now valued at $1.2 billion, less than a quarter what it was worth in mid February.CanooThe startup founded by a pair of former BMW AG executives unveiled a seven-seat prototype in late 2019, struck a deal early last year to help Hyundai Motor Group develop EVs, then another agreement in August to go public. In January, the Verge reported it had met with Apple Inc. about its car ambitions.That momentum is now long gone. The company announced a hard pivot in its business plans in March, deciding to de-emphasize engineering services for other companies and the subscription business model that was part of its original pitch to investors. It has replaced top executives, including its chief financial officer, and said it hasn’t addressed material weaknesses in its financial controls identified more than a year ago. Last month, one of its co-founders resigned the CEO position.ArrivalThe company pledging to build electric vans and buses as well as so-called microfactories to manufacture them had assembled big-name backers before its SPAC deal, including BlackRock Inc., Hyundai and United Parcel Service Inc.Last week, the London-based company founded by Denis Sverdlov, a former Russian deputy minister, said it will partner with Uber Technologies Inc. to develop an EV that’s purpose-built for ride-hailing. While Arrival shares haven’t sustained the immediate gain following that announcement, the company’s valuation is the highest among the five at $10.5 billion.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.
(Bloomberg) -- Billionaire George Soros’s investment firm snapped up shares of ViacomCBS, Discovery and Baidu as they were being sold off in massive blocks during the collapse of Bill Hwang’s Archegos Capital Management.Soros Fund Management bought $194 million of ViacomCBS Inc., Baidu Inc. stock valued at $77 million, as well $46 million of Vipshop Holdings Ltd. and $34 million of Tencent Music Entertainment Group during the first quarter, according to a regulatory filing released Friday. A person familiar with the fund’s trading said the company didn’t hold the shares prior to Archegos’s implosion.Archegos, the family office of former hedge fund manager Hwang, fell apart during the last week of March after amassing large leveraged positions in a concentrated portfolio of U.S. and Chinese companies. At its peak, the family office had more than $20 billion of capital and total bets exceeding $100 billion.Hwang was wiped out in just days after investments including ViacomCBS and Discovery tumbled, triggering margin calls from global banks, who then sold the stocks in the big block trades. The fiasco is expected to cost the finance industry about $10 billion, has prompted an investigation by the U.S. Securities and Exchange Commission and caused heads to roll at Credit Suisse Group AG, where the hit exceeds $5 billion.The 13F filing provides one of the first examples of how a hedge fund attempted to capitalize on the distressed remains of Archegos. It also offers an insight into Soros’s investment firm, which is run by Chief Investment Officer Dawn Fitzpatrick.She told Bloomberg in March that she was willing to jump on dislocations in the market, investing $4 billion during the pandemic-induced swoon a year ago, including buying residential mortgages on the cheap. Soros returned almost 30% in the 12 months through February and manages $27 billion across a range of strategies.“When there’s a dislocation, we’re prepared to not just double down but triple down when the facts and circumstances support that,” Fitzpatrick, 51, said in a “Front Row” interview on Bloomberg TV.Soros also increased its bet on Amazon.com Inc. and homebuilder DR Horton Inc., which is now its second-largest public equity position.The 13F, which money managers overseeing more than $100 million in U.S. equities must file quarterly, revealed that Soros held $4.5 billion of U.S. equities, down $77 million from the prior quarter.The biggest exit in the quarter was Palantir Technologies Inc. Soros sold 18.5 million shares valued at about $435 million. The firm originally revealed it owned a stake in the controversial data-mining company controlled by Peter Thiel in November, but rapidly issued a statement saying the original investment was made in 2012 and it regretted the decision.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.
China’s EV makers are not only set to grow big in their domestic market, but also have great plans to expand in Western Markets and commodity demand in these overseas markets could see huge demand for metals as a result
Not all industry participants are amused by dogecoin’s tricks.
(Bloomberg) -- The chief executive officer of a $1.7 billion Canadian private lender closed his personal bank account just days after he was questioned by investigators about receiving undisclosed payments from a client, court documents say.David Sharpe, the former CEO of Bridging Finance Inc., closed a personal checking account at the Bank of Montreal four business days after the Ontario Securities Commission questioned him about his relationship with Sean McCoshen, a Canadian entrepreneur who has proposed an Alberta-to-Alaska railway.McCoshen’s companies borrowed more than C$100 million ($82.6 million) from Bridging-managed funds. During the same period, a separate numbered company controlled by McCoshen transferred C$19.5 million into Sharpe’s personal account, the OSC has alleged. The payments took place between July 2016 and June 2019.In fact, six payments worth C$17.2 million were transferred to Sharpe within five business days of Bridging advancing funds to the railway project and other McCoshen-connected firms, according to a new document filed by the securities commission in an Ontario court.Those transactions and others are at the heart of the case, which has seen a court appoint PricewaterhouseCoopers take control of the Toronto-based firm, a private lender to small- and medium-size companies. The OSC is probing Bridging and former senior executives for allegedly mismanaging funds and failing to disclose conflicts of interest, and has claimed in court documents that Sharpe tried to mislead its investigators.Through a spokesperson, Sharpe declined to comment. McCoshen couldn’t be immediately reached for comment.Sharpe was questioned by the securities commission on Oct. 27, 2020 about his relationship with McCoshen. He closed the Bank of Montreal account on Nov. 2. In February, McCoshen dissolved the numbered company that made the transfers, the court documents say.Sharpe and his wife, Natasha Sharpe, co-founded and ran the firm together. They were fired last week by PricewaterhouseCoopers.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.
Earlier, the three major indexes rebounded after declining sharply earlier this week.
Why wait for the government to give you cash when you can do it yourself?
(Bloomberg) -- Fuel that is so dirty that the global shipping industry banned its use last year is being burned at the highest level in three years in Mexican power plants.With the global shipping industry shunning sulfurous fuel oil to curb emissions, storage tanks in Mexico are overflowing with the stuff, a byproduct of its attempt to produce more gasoline domestically. The solution Mexico has chosen is to push more of it into electricity generation, replacing cleaner-burning natural gas. Consumption of the dirty fuel jumped by almost 50% in the past year to more than a 100,000 barrels a day in March, according to government data.The capital’s air quality has worsened, said Beatriz Olivera Villa, a consultant with Greenpeace in Mexico, in a phone interview from Mexico City. “It’s an unfortunate setback for the country.”Replacing natural gas, which it imports from the U.S., with fuel oil is certain to raise Mexico’s emissions. President Andres Manuel Lopez Obrador has pledged to reduce Mexico’s dependence on fuel imports but is faced with highly inefficient refineries. Historically, it’s been cheaper for Mexico to export the crude it produces to countries with more technologically complex refineries and to import refined fuels like gasoline.State oil company Petroleos Mexicanos produces copious amounts of fuel oil unintentionally because its refineries lack the technology to extract cleaner fuels from the sludge that is leftover during the initial process of turning crude into gasoline. Therefore, the more gasoline the country’s refineries produce, the more extra fuel oil they have to find a home for.“Mexico is creating a market to absorb the excess fuel oil from its refineries,” said Ixchel Castro, an analyst with Wood Mackenzie Ltd.Fuel oil is being burned at the six power plants owned by state utility Comision Federal de Electricidad, or CFE. This year, a government commission responsible for monitoring air quality in the metropolitan area of Mexico City, sounded the alarm twice amid high ozone levels. As a result, cement-makers as well as Pemex’s refinery in Tula and its associated power plant, had to reduce activity.Switching a power plant that uses natural gas to fire a turbine to fuel oil generates 16% more carbon dioxide, according to BloombergNEF calculations.The air-quality monitoring commission estimates the alarm for high ozone levels may sound 7-20 times this year, forcing industries to curtail activity to curb emissions. That compares with one time last year and six times in 2019. Victor Hugo Paramo Figueroa, head of the commission, said the increased use of fuel oil alone doesn’t necessarily translate into more emissions.“We have other culprits, including cars and even an eruption of the Popocatépetl volcano,” he said. “And a rainier season can disperse particles more efficiently, keeping the air quality within acceptable levels.”(Updates with ozone levels and government’s comment in last four paragraphs.)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.
A metal coatings plant in China's manufacturing hub has been hit by price increases of up to 30% for raw materials including steel, aluminium, thinner and paint since the Chinese New Year in February. The firm has had no choice but to pass most of these higher costs on to its clients, including those in the United States, said King Lau, who helps run Dongguan-based Kam Pin Industrial Ltd, in Guangdong province. "Our customers understand, because it is happening to many different kinds of industries including home appliances, mobile phones, vehicles," Lau said, referring to price hikes by Chinese exporters.
The hot crypto market "actually does resemble a casino" to investors, Gundlach told Yahoo Finance.
(Bloomberg) -- The U.S. is about to sell 10-year inflation-linked debt next week, keeping the spotlight on a corner of the bond market that’s rarely garnered this much attention in the almost quarter-century since its debut.Heightened fears about the risk of raging consumer-price gains as growth rebounds are driving investors of all stripes to search for cover in Treasury Inflation-Protected Securities, a market that’s grown to $1.6 trillion. Traders talk of new entrants like retail buyers and global macro strategists -- what the veterans are dubbing the “tourist crowd.” Cash has also been flowing into the largest exchange-traded fund for TIPS, part of the rabid demand that’s driven inflation expectations over the next half-decade to a 16-year high.It’s all adding up to a head-spinning stretch for inflation traders. They say they’ve been caught off guard by the burst of activity, and the speed with which last year’s pandemic-induced recession is giving way in some minds to 1970s-level angst over out-of-control inflation. Barclays Plc’s Chris McReynolds likens the volatility in TIPS pricing to “watching table tennis while sitting in the middle of the table.”Leaving aside questions over whether TIPS are overstating inflation pressures, traders see opportunity at a time when forecasts for some key data, including consumer prices, have been way out of line with actual readings. Gang Hu, at hedge fund WinShore Capital Partners, says he’s seen many traders exit TIPS positions over much of this year as market-based inflation expectations climbed. He says Thursday’s $13 billion auction of inflation-linked debt will be seen as a key gauge of investor appetite and a possible opportunity for some to re-enter.“Nobody actually has a very good handle on where near-term inflation prints will land, and it’s thrown everyone off their game,” said Hu, a managing partner at the New York-based fund. “There’s a lot of noise in the recent prints and this is not over yet. There’s no way anyone can be very confident about what the next two or three prints will bring.”Fed TestThat’s spurring volatility in a part of the bond market that hasn’t typically seen such activity, with volumes swinging from week to week as above-estimate inflation readings test the Federal Reserve’s oft-repeated message that the pressure is likely to be temporary.This past week, the five-year inflation outlook, or breakeven rate, jumped to 2.82%, the highest since 2005, after a bigger-than-expected surge in consumer prices for April. The 10-year nominal Treasury yield touched the highest in more than a month this week.The signals from bonds have broad implications across markets. Stocks slumped by the most since February after the inflation data as traders pulled forward the timing for when they expect the Fed to lift rates, and a measure of consumer sentiment unexpectedly slumped this week. Fear of inflation is also driving a flurry of corporate issuance.“We’ve obviously been through a lot in this part of the market in the last 14 months -- going from, ‘Wow, this pandemic is deflationary’ to ‘Oops, there’s inflation,’ ” said McReynolds, head of U.S. inflation trading at Barclays in New York. “What’s different in this episode is the crazy volatility, with investors going from hating TIPs to loving them, to hating them again. We are probably going to be here for at least a couple of years,” with volatility elevated around consumer-price data releases.For much of its existence, the TIPS market has been a largely bearish one -- where traders were skeptical about the sustainability of any substantial price gains that did emerge. The few times that expectations did soar, they always retreated.2008 ReviewOne example: in the lead-up to the 2008 financial crisis, when the 5-year breakeven rate shot up to 2.73% amid a housing boom and soaring oil prices. But the rate soon fell off and has largely stayed below that level since.On Thursday, the New York Fed announced plans to reduce the amount of TIPS it will purchase over the next month. That tweak, along with Treasury’s previously stated plan to boost auctions of TIPS in coming quarters, may help alleviate any near-term shortage of the securities.For WinShore’s Hu, who trades global inflation-protected securities, next week’s auction is a must-watch event. The last TIPS auction, on April 22, was a sale of 5-year securities for which investor demand was the strongest since 2019.Hu says many traders are probably “waiting to see if they can buy something cheap” and currently trading in a zig-zag fashion -- purchasing TIPS when breakeven rates narrow and selling when inflation expectations go up.“We are stuck in a negative feedback loop on inflation, and we could easily have 4%-5% inflation in a year’s time, way more than the market is pricing in,” he said. “We have to throw all our forecasting models for the next three to six months out the window.”What to WatchEconomic calendar:May 17: Empire manufacturing; NAHB housing data; TIC flowsMay 18: Building permits; housing startsMay 19: MBA mortgage applications; Federal Open Market Committee minutesMay 20: Philadelphia Fed business outlook; jobless claims; Langer consumer comfort; leading indexMay 21: Markit U.S. PMIs; existing home salesFed calendar:May 17: Vice Chair Richard Clarida; Clarida with Atlanta Fed’s Raphael BosticMay 18: Dallas Fed’s Robert KaplanMay 19: St. Louis Fed’s James Bullard; Bostic interviewed at Businessweek/Bloomberg event; FOMC minutesAuction schedule:May 17: 13-, 26-week billsMay 18: 52-week bills; 42-day cash management billsMay 19: 20-year bondsMay 20: 4-, 8-week bills; 10-year TIPS reopeningFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.
(Bloomberg) -- Cryptocurrency-exposed stocks are recovering from a bloody four-day slide that had wiped out roughly $6.1 billion in value from a basket of companies tied to the fortunes of the volatile digital-asset world.Marathon Digital Holdings Inc.’s 17% jump led the way on Friday, as the shares halted a nine day losing streak. The gains come as Bitcoin climbs back from a slide of more than 15% on Thursday. Tesla Inc. Chief Executive Officer Elon Musk triggered the volatility late Wednesday by souring on the token’s energy demands. Microstrategy Inc. rose 6.8% on Friday, while Mike Novogratz’s Galaxy Digital Holdings jumped 16% for the best day in a month.The turnaround for companies that have ridden Bitcoin’s coattails came as more retail investors gravitated toward even greater speculative plays like Dogecoin. Bitcoin rose 2% to $50,275 at 4:01 p.m. in New York, while a Bloomberg gauge of cryptocurrencies rallied 8.3% after the worst two-day slide since late February.Riot Blockchain Inc. jumped 17% for its largest gain in more than two months while Argo Blockchain Plc and On-Line Blockchain Plc stormed back in European trading. Coinbase Global Inc. was an outlier. The largest U.S. crypto exchange slumped 2.5% as strong quarterly income failed to excite traders.While crypto bulls cheered Friday’s bounce, Jack Dorsey’s Square Inc. poured some cold water on the excitement. The company is not planning to buy more Bitcoin for its corporate treasuries after losing $20 million on a $220 million investment in the last quarter, according to a Financial News report.Elon Musk’s stunning tweet late Wednesday triggered the free-fall for Bitcoin as the billionaire brought concerns surrounding the energy usage of the mining required for the currency to light and forced Wall Street to grapple with an uncertain outlook. Worries deepened after a Thursday Bloomberg News report that Binance Holdings Ltd. is under investigation by the Justice Department and Internal Revenue Service.(Updates share movement throughout, adds detail on Square report in fifth paragraph.)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.
By Geoffrey Smith
The twin crypto trading hubs plugged into Circle’s payments and banking API Friday.
(Bloomberg) -- There’s an unwritten rule in global bond markets: never short Germany.But when Europe’s safest asset is in the midst of a retreat that threatens to push yields on bunds above 0% for the first time in more than two years, a paradigm shift may be underway.Toronto-Dominion Bank was forced to close its recommendation for investors to buy German bonds last week, after yields climbed above their stop-loss level. NatWest Markets are calling for investors to sell bunds, hailing the end of the “supercycle” that has seen the securities rally for the best part of two decades. Goldman Sachs Group Inc. and ING Groep NV are among banks who see yields rising to 0% by the end of the year.“The accelerating selloff in Germany is probably the defining feature of the market right now,” said Richard McGuire, head of rates strategy at Rabobank International.As the vaccine rollout gathers pace across the region, bets are on for a remarkable economic comeback -- and an accompanying spike in inflation. That, and the prospect of reduced bond buying by the European central bank, has eroded the haven appeal of bunds, while simultaneously threatening to sap appetite for high-yielding notes of debt-loaded nations like Italy.“The two cannot coexist happily with each other,” McGuire said. “There is a tension between bund yields rising as the market prices out ECB support and, at the same time, it putting upward pressure on peripheral borrowing costs.”Long-term investors have had to pay up for the privilege of holding German debt, which is seen as some of the safest that money can buy -- a reflection of its scarcity and the ECB’s extraordinary package of stimulus measures. That process was turbo-charged by the pandemic, pushing 10-year yields down to within touching distance of minus 1% last year.But expectations are growing that the ECB could start tapering its pandemic program this summer, potentially removing a key pillar of support, even as borrowing needs remain high. While quantitative easing helped cover the growing deficits of Italy and Spain during the pandemic so far, that might not be the case this year, HSBC Holdings Plc said.There’s also a political dimension to the rising yields.The growing strength of Germany’s Green party is feeding through into bets elections later this year could trigger a break with the nation’s traditional fiscal caution. Germany has historically maintained a so-called debt brake over the years, keeping the budget balanced and bond issuance limited.The 30-year swap spread -- which is sensitive to expectations of bond supply -- narrowed last week by the most in more than a year as investors prepare for increased spending and less monetary support.“It’s a quiet revolution,” wrote Giles Gale, head of European rates strategy at NatWest. Although the ECB “are buying at a stonking pace, they aren’t soaking up all the gross supply.”Reflation FrenzyWhile U.S. Treasuries have been caught in the reflation frenzy since the start of February, the fact that yields are catching up in Germany -- a bastion of tepid price increases -- is sending ripples across markets.The world’s stock of negative-yielding investment grade debt -- of which Europe made up the bulk -- has fallen to around 12 trillion dollars, the lowest level since June last year. As a share of outstanding debt, it’s now below 20%, compared with more than 30% at its peak in 2019.In equities, investors are rotating out of more expensive growth stocks and into cheaper value securities, according to Kasper Elmgreen, head of equities at Amundi SA.And European corporate bonds are feeling the effects too. The latest jump in yields has pushed about 80% of high-grade notes sold this year below their issue price, based on data compiled by Bloomberg. That’s up from earlier this month when the share of post-issuance losers stood at just under 50%.Traders have accumulated the largest short position in junk bonds since 2008 and high-grade short-selling has risen to its highest level since early 2014.The pickup in reflation bets in markets matches the outlook among economists surveyed by Bloomberg. The latest data show them raising their forecasts for consumer-price growth in the euro to 2.3% in the fourth quarter from 2.2% previously, and clearly above the ECB’s medium-term target of just under 2%.Positive bund yields would also have a psychological impact.In BofA Global Research’s latest European credit investor survey, 15% of respondents said the rally in corporate bonds will be done when 10-year German yields turn positive, making it the second most-cited bearish trigger after central bank tapering.“Everyone is at peak inflation panic,” said Charles Diebel, a money manager at Mediolanum SpA. “It’s psychologically important.”This Week:German, French and Spanish bond auctions totaling about 29 billion euros. The U.K. Will sell 3-, 15- and 20-year giltsPreliminary manufacturing and services PMIs for May in euro-area, Germany, France and U.K. will be in focus on FridayECB President Christine Lagarde speaks twice, as does chief economist Philip LaneFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.
(Bloomberg) -- Sanjeev Gupta’s plans to save his embattled industrial empire suffered a major setback as the U.K. opened a fraud investigation, prompting a potential financial partner to walk away.For two months, Gupta has been scrambling to refinance after the collapse of his group’s main lender, Greensill Capital, and recently looked close to winning a reprieve -- helped along by a surging commodity prices.But on Friday, the Serious Fraud Office announced a probe into Gupta’s GFG Alliance, including into the financing arrangements with Greensill. That prompted White Oak Global Advisors LLC -- which had recently offered a lifeline with terms for a 200 million-pound ($282 million) loan for Gupta’s U.K. steel business -- to walk away. White Oak was also behind funding for part of Gupta’s Australian assets, the Australian Financial Review has said.“As with any regulated financial institution, we are not in a position to continue discussions with any company that is under investigation by the Serious Fraud Office for money laundering,” White Oak said in a statement.GFG said Friday it will co-operate fully with the SFO investigation. It declined to comment on White Oak’s decision.The fraud probe also puts other efforts to replace about $5 billion Gupta had borrowed from Greensill in question.On Thursday, Gupta had conveyed a much brighter outlook, expressing confidence of a “new future” for his sprawling group of companies. On a podcast for employees, he said it had been “relatively easy to get refinancing” for the Whyalla mill in Australia. He also said that GFG had been “inundated by offers to help and to finance,” partly due to strong commodity markets.The picture is now bleaker in the wake of the SFO investigation, which follows months of scrutiny from lawmakers and the media over Gupta and Greensill’s financing practices. GFG has come under the microscope after the collapse of Greensill in March revealed it had been a recipient of financing based on expected future invoices, for sales that were merely predicted.Trading ActivitiesThe exact scope of the SFO investigation isn’t yet clear. Bloomberg has reported four banks stopped working with Gupta’s Liberty House Group trading business, starting in 2016, amid concerns about what they perceived to be problems in paperwork provided by Liberty, Bloomberg News has reported. In one example, the company had presented a bank with what seemed to be duplicate shipping receipts. A spokesman for Gupta has denied any wrongdoing.The two-month period it took from starting to covertly look into GFG and its financing by Greensill to announcing a formal probe is a quick turn-around for the SFO, which often takes years to publicly confirm it’s taking action against a company.It will now start to gather evidence, including securing devices and documents. However, it’ll likely take years for the office to make any tangible updates to the investigation, including whether it decides to charge individuals as part of the probe.The funding from Lex Greensill’s eponymous firm helped GFG expand at an astonishing rate in the past five years by targeting old, unwanted assets. His loose collection of companies now employs some 35,000 people worldwide, with steel and aluminum plants in the U.S., U.K., France, Romania and Australia.Staying afloat would enable Gupta to enjoy some of the best times his industrial businesses have seen. Steel prices are near an all-time high as demand recovers from the coronavirus pandemic and China cuts capacity to curb pollution. Aluminum, Gupta’s other major business, hit a three-year high this week amid a broad commodities boom.Still, Greensill’s collapse has already taken a major toll on Gupta’s businesses. On Thursday, his Wyelands Bank said it would be wound up if it can’t find a buyer. His steel units in France and Belgium have started creditor protection procedures, he’s approached buyers for some of his engineering assets, people familiar with the matter have said, and also sought buyers for two steel plants in France.For governments too, there is much at stake. Countries that once feted him as a savior for buying decrepit assets may have to pick up the pieces, due to the jobs at risk and some assets’ strategic importance to industry.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.
(Bloomberg) -- Bond markets are famous for pushing their agenda, and in east Europe right now, they’re pushing for rate increases, never mind what central banks have to say on the matter.Yields on bonds of Hungary and Poland are rising faster than anywhere else in Europe. Hungary’s jumped 32 basis points last week, signaling traders are primed for rate liftoff as inflation roars back to life ahead of widespread economic re-openings this summer.Like peers in Frankfurt, central bankers in Hungary and Poland have signaled they’re in no rush to curb inflation that may turn out to be temporary, preferring to wait and foster still-fragile economic recoveries from the pandemic.Traders are less patient. In Hungary, market-implied pricing shows expectations for 130 basis points of rate hikes in two years, according to Bloomberg data.“The central bank is walking a tightrope here,” said ING economist Peter Virovacz. “If it manages to communicate in a credible way that it believes CPI would return to its 2%-4% tolerance band next year, it can wait out the spike and avoid a hawkish cycle.”The situation brings to mind the quip by political adviser James Carville that when he dies he wanted to come back as the bond market because “you can intimidate everybody.”Carville was talking about traders who pushed up yields in protest against a ballooning budget deficit in the mid-1990s, but there are parallels with the Hungarian and Polish bond selloff on concerns that an economic boom will create an inflation spiral.These latter-day vigilantes may be gaining the upper hand, with strategists at JPMorgan Chase & Co. reiterating their advice to stay underweight bonds in central and Eastern Europe.A premature end of purchase programs is a big risk for Poland, where the central bank has bought the equivalent of 48% of issuance and in Hungary where it accounts for almost a third of purchases, according to JPMorgan.QE ConundrumIf Polish policy makers bring forward their timetable for raising rates, the central bank would also have to wind down its quantitative-easing program, potentially removing the current backstop for the market.One Polish policy maker, Eugeniusz Gatnar, recently called for a rate increase in June. Yet his voice remains in the minority on the 10-person panel. Polish central bank Governor Adam Glapinski has said that rates will stay at their record low until the end of the current policymakers’ term, which ends in early 2022.Still, the inflation threat may be real: in Hungary the pace of annual consumer prices recently accelerated to 5.1%. In Poland it’s running at 4.3%. Both blew past the upper limit of the central banks’ tolerance range, and compare with an inflation reading of 4.2% in the U.S. that sent markets into a tailspin last week.“With inflation surprising to the upside and growth on the mend, we think the market narrative will increasingly focus on the sustainability of QE in CEE,” according to JPMorgan emerging market strategists including Saad Siddiqui.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.
(Bloomberg) -- The U.S. company that just paid a $5 million ransom to East European hackers has been quietly making hundreds of millions of dollars a year providing a vital service with little competition and a safety record that has raised concerns.Colonial Pipeline, based in the Atlanta suburb of Alpharetta, Georgia, operates the largest fuel pipeline in the country, transporting more than 100 million gallons a day from Houston to New York City, half the region’s needs.While it began six decades ago as a proud joint project of big oil companies -- the U.S. commerce secretary was present for the 1962 groundbreaking -- today it’s mostly owned by an arm of Koch Industries and several Wall Street investors, and is run as much like a financial asset as a major piece of infrastructure.Over the past decade, Colonial has distributed nearly all its profits, sometimes more, in the form of dividends. In 2018, for example, it paid nearly $670 million to its owners, even more than the $467 million net income. Last year, it returned to investors over 90% of its $421.6 million in profits.It’s an approach that’s made plenty of money for its owners. Last year’s $421 million in net income was a gain of nearly 32 cents for every dollar of revenue. Investors are getting an annual return of about 10%.Meanwhile, its aging pipelines have suffered a series of accidents. Last August, a segment of a conduit was interrupted for almost a week after more than 28,000 barrels of gasoline spilled for days in a North Carolina nature preserve, discovered by two teenagers riding all-terrain vehicles.That was caused by a failure in a sleeve repair installed 16 years earlier. In March, a federal regulator said similar threats exist throughout the system and the continued operation without corrective measures “would pose a pipeline integrity risk to public safety, property, or the environment.”Three other spills due to cracks have been reported since 2015. In September 2016, a line was shut for 12 days, cutting supplies to millions of customers. Two months later, a fatal blast nearby led to another interruption.“Colonial’s inability to effectively detect and respond to such releases has potentially exacerbated the impacts of numerous releases over the operational history of Colonial’s entire pipeline system,” Pipeline and Hazardous Materials Safety Administration said in a notice of proposed safety order sent to Colonial Chief Executive Officer Joseph Blount.Colonial Pipeline disagrees with those statements, is working with the regulator to more fully address any concerns and began to implement lessons from the incident almost immediately after it occurred, a company spokesperson said in an emailed response to questions. “While one gallon released to our right of way is one too many, our safety culture is focused on zero operational events,” the company said.Some have also accused Colonial, like much of the rest of the industry, of insufficient attention to cybersecurity. Matias Katz, founder of the cybersecurity firm Byos, estimates that less than 25% of the U.S. oil and gas industry has adequate cybersecurity in place.In a response to questions, Colonial said it has increased overall spending on information technology by 50% since 2017, when a new chief information officer was appointed. Colonial uses more than 20 different and overlapping cybersecurity tools to monitor and defend the company’s networks, and its third-party investigator “has acknowledged many of the best practices we had in place prior to the incident,” it said in a statement.Colonial Pipeline’s capacity has increased marginally since the early 2000s yet reliance on it has grown markedly as refineries along the East Coast have shut down due to competition from shale sources in Texas and North Dakota.Read More: How a Key U.S. Pipeline Got Knocked Out by Hackers: QuickTakeFuel makers in New Jersey and Pennsylvania depend on pricier oil from Europe and West Africa, or domestic crude shipped on trains or on U.S. flagged-tankers, both expensive propositions. In 2019, Philadelphia Energy Solutions Inc., the largest refining complex on the East Coast, shut after a gasoline-making unit was almost destroyed by an explosion and fire.“The pipeline is 60 years old, but its importance has only increased as Mid-Atlantic refining capacity has decreased, and historically operating refineries in Virginia, Pennsylvania and New Jersey have shut down,” said James Lucier at Capital Alpha Partners LLC, a Washington-based consultant.Tougher regulation and fierce opposition from environmental activists have made it increasingly costly and more complex for companies to pursue major pipeline projects, according to Alan Gelder, vice president of refining and oil markets at Wood Mackenzie, a consulting firm. In January, President Joe Biden blocked the $9 billion Keystone XL project. Even during the Trump administration, energy companies such as Williams Cos. and Dominion Energy Inc. were forced to scrap major pipeline projects.“Building pipelines is complicated,” says Gelder. “Shareholders would be very careful about capital investments.”If in the 1960s, pipelines made clear economic sense in a country rapidly expanding its industrial economy, in 2021, with demand flattening and gasoline-burning cars being gradually replaced by electric ones, it’s become much harder to make the case for massive investment in fossil fuel infrastructure.“Colonial continues to actively explore growth opportunities, which are subject to confidential protections,” the company said. “Refined product consumption in the United States has remained relatively flat, but our commercial affairs team is constantly evaluating expansion opportunities to meet shipper and market demand.”The reliance on Colonial Pipeline is also a result of regulation like the 1920’s Jones Act, a federal law that requires goods shipped between U.S. ports to be transported on vessels that are built, owned, and operated by U.S. citizens or permanent residents. The limited number of vessels that meet the criteria makes it extremely expensive for refiners to get oil supplies from the Gulf of Mexico by sea.“Is this the way it’s supposed to be? I would say ‘no’,” Gelder said. “I don’t think U.S. energy infrastructure has ever had a particular plan.”It didn’t start out this way.In 1961, nine energy behemoths including Texaco, Phillips Petroleum, Continental Oil and Mobil joined to build what was then the country’s largest-ever privately-funded construction project. The pipeline costing $370 million (about $3.3 billion today) would allow them to haul gasoline and other fuels from Houston to New York Harbor and points in-between. Colonial was operating fully by 1964.After making massive investments that more than doubled the system’s capacity over the 1970s and 1980s, the oil majors that held and ran the pipeline eventually sold their stakes as depressed oil prices through the end of the century forced them to shed assets and combine operations.The pipeline’s ownership profile then began to change completely. Today, a unit of Royal Dutch Shell PLC is the only oil major among the five firms which split the control of the pipeline.A unit of the industrial conglomerate owned by billionaires Charles and David Koch emerged as Colonial’s largest shareholder after acquiring BP Plc’s and Marathon Oil Corp.’s interests from 2002 onward. A joint venture between private equity firm Kohlberg, Kravis Roberts & Co. and South Korea’s state-run National Pension Service bought Chevron Corp.’s stake in 2010. A year later, Caisse de dépôt et placement du Québec, a Canadian fund manager, bought out ConocoPhillips. IFM Investors, an investment firm owned by Australian pension funds, holds a stake since 2007.Private equity firms and pension funds are attracted to pipelines because they are natural monopolies and typically provide steady income streams even during economic downturns. Investors led by EIG Global Energy Partners LLC last month paid $12.4 billion for a stake in Saudi Aramco’s pipeline proceeds.Although simply known as the Colonial pipeline, it’s in reality a network of several pipelines, running in parallel, and extending in branches across the Southeast and East Coast. Measuring all the parallel lines and branches, it reaches 5,500 miles. The main two pipelines, known as Line 1 and Line 2, go from Houston to Greensboro, North Carolina. From there, two smaller pipelines, known as Line 3 and Line 4, extends to Linden, New Jersey. The pipeline has a capacity for about 2.5 million barrels a day -- more than the total oil consumption of Germany.Tom Garrubba, chief information security officer at Shared Assessments, said the oil industry “just wasn’t sexy” enough for hackers to go after historically. But the rise of ransomware as a billion-dollar business has made it more attractive to go after other vulnerable industries like energy.“This is very big black eye,” Garrubba said. “It’s going to start inviting other threat actors to be copycats. That’s what my concern is.”For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.
(Bloomberg) -- Toshiba Corp. plans to return an additional 150 billion yen ($1.37 billion) to shareholders and establish a strategic review committee to examine options for the business, including proposals to take it private.The move comes after weeks of takeover discussions sparked by private equity firm CVC Capital Partners’ $21 billion acquisition bid. The Japanese energy-to-electronics conglomerate has been pressured by 3D Investment Partners and other investors to conduct a full strategic review and explore any serious interest in the company in order to rebuild shareholder trust.Toshiba, which deemed the CVC proposal insufficiently detailed to evaluate, said Friday it has appointed UBS as financial adviser and will consider potential offers, without committing to a transaction. It made the announcement while releasing its quarterly earnings.Chief Executive Officer Satoshi Tsunakawa, who stepped into the role in April after former CVC dealmaker Nobuaki Kurumatani stepped down, said the firm will do its utmost to improve relationships with a wide range of shareholders and will consider any proposals that improve shareholder value, including going private.“There’s big opportunity ahead of us focusing on infrastructure, energy and renewables -- as tackling global warming is a global trend,” the CEO said, declining to specify what he would consider a good proposal for taking Toshiba private.Read more: Toshiba Investor 3D Calls for Strategic Review After CVC BidThe company’s stock has seen large swings since the CVC bid, with the shares closing as high as 4,895 yen on April 15 before falling in recent weeks. It closed at 4,510 yen after Friday’s announcement.It’s not clear whether other reported bidders will proceed with a formal offer. After CVC’s initial approach, private equity firm KKR & Co. and Canadian investment giant Brookfield Asset Management Inc. began exploring potential offers, Bloomberg News has reported. Bain Capital has entered into discussions with Japanese banks, including units of Mizuho Financial Group Inc. and Sumitomo Mitsui Financial Group Inc., to secure funding for a potential bid, Reuters has reported.Separately, Toshiba is investigating a claim by the hacker group DarkSide that it breached the computer systems of affiliate Toshiba Tec Corp. The group is claiming to have stolen information on management, new businesses and personal information. General Executive Masaharu Kamo said no other Toshiba units were affected by the cyberattack.Toshiba will provide specifics on how it intends to execute the shareholder return plan in June. It has not yet decided its dividend plan for the year ahead, but will maintain its basic policy and look to increase, it said.(Updates with CEO comments from fourth paragraph)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.