Liquidity under spotlight
Bank of England governor Mark Carney called for a change in the regulation of funds to better reflect the liquidity of the assets underpinning them. Mr Carney told the Treasury Select Committee that fund investors should not necessarily expect to have access to their money daily, saying that open-ended funds were built on a “lie” that they had daily liquidity. For assets that “fundamentally aren’t liquid” or become illiquid in a market downturn, that could mean investors’ expectation is that “it’s not that different from having money in a bank”.
Consolidation continues
Rising generic competition
Abbvie secured a deal to buy Botox manufacturer Allergan in a $63bn (£50bn) deal aimed at boosting the US pharma giant’s drug development pipeline. Under the terms of the offer, Abbvie will pay $188.24 per Allergan share, $120.30 of which will be in cash and the rest in shares, valuing its target at a 45 per cent premium to its undisturbed closing price. Abbvie’s Humira product, the world’s best-selling treatment for inflammatory diseases, will soon face competition from generic versions as its US patent expires. However, news of the deal sent shares in Abbvie down around 15 per cent, but boosted Allergan’s stock by more than a quarter.
Steaming ahead
Shares surge
Travel booking app Trainline (TRN) began trading on London’s main market, with the shares surging by as much as a quarter on the day they debuted and putting the group’s market value at close to £2bn. The offer comprised new and existing shares, the latter of which were sold by certain existing shareholders, directors and employees. The company, which was bought by private equity firm KKR in 2015, aimed to cut net debt to two times adjusted cash profits upon listing. The company doubled ticket sales from £1.6bn in 2015 to £3.2bn in 2019.
Patisserie probed
Arrests made
Eight months after accounting irregularities were uncovered at Patisserie Valerie five people were arrested as part of the police investigation into the alleged fraud. The identity of those arrested remains unclear. The café chain’s former finance director, Chris March, was arrested and released on bail last October without being charged. The chain went into administration in January after failing to renew its bank facilities after it found the accounting problems were worse than feared. The Serious Fraud Office opened an investigation into the group’s operations after allegations that fraud had contributed to the group’s failure emerged.
Brexit prep
Buyback rejigged
Ryanair (RYA) has changed the terms of its €700m (£627m) share buyback programme to limit the number of shares held by non-EU shareholders in case of a no-deal Brexit. The share buyback – which is slated for between May 2019 and May 2020 – would allow block purchases of shares from EU shareholders. EU rules currently require more than half of shares in European airlines to be owned by EU citizens, to which UK shareholders will not count following Brexit.
Gold rally
Haven demand
Gold cracked $1,400 (£1,098) an ounce for the first time in five years amid a weakening US dollar and rising US-Iran tensions. Several London-listed gold miners are up over 10 per cent since the Fed’s most recent meeting, including Petropavlovsk (POG) and Hummingbird Resources (HUM). At the same time, traders went net long on silver for the first time in two months, according to the Bank of Montreal. Gold’s strength has so far not pulled silver up, with the ounce-to-ounce ratio (signalling how many ounces of silver it takes to buy one ounce of gold) sitting above 90:1 since mid-June.
Monzo mania
Fresh fundraising
Monzo raised £113m in new funds to support its ambitions to grow in the US, where it launched earlier this month. The funds helped more than double the digital bank’s valuation since its last capital raising eight months ago to just over £2bn. The investment was led by start-up accelerator Y Combinator Continuity, which also helped launch Airbnb and Dropbox. Demand for new accounts has been ferocious – with the bank on track to sign up 250,000 new customers this month. However, it made a pre-tax loss of £33.1m during the year to February 2018.
A downturn in footfall at UKdepartment stores coupled with unseasonably cold weather led to a 0.5 per cent drop in retail sales in May, compared with the prior month, according to data from the Office for National Statistics.
While that was in line with market expectations, it was behind the 0.1 per cent fall suffered the prior month and sales expansion in March.
During the three months to May, sales grew by 1.6 per cent, but that was below the 1.7 per cent increase recorded over the three months to April.
