German banks look to financial investors – economy – UK Parents Lounge

Financial investors, ladies and gentlemen, haven’t paid too much attention to sensitivities: at least not to the fact that Aareal Bank’s new CEO wanted to come first: know the employees, refine the strategy, rethink everything. What you do in the first hundred days, and that’s probably what Jochen Klösges had planned as well, since mid-September he’s been CEO of the aforementioned Aareal bank.

Instead, Klösges had to issue an ad hoc announcement last week – the 17th working day – with big implications: the bank, it was said, confirmed “open discussions with a group of financial investors concerning a majority shareholding ”. Specifically, three US private equity firms, all based in cities far from New York and Boston, have hunted down traditional Aareal bank with the intention of taking it over. If that doesn’t mean anything: Aareal Bank finances real estate around the world, particularly offices and hotels, has 3,000 employees and is one of only three listed German banks. With a balance sheet total of 45 billion euros, that’s significantly less than Commerzbank or Deutsche Bank, but at least it is.

In any case, the stock market deemed the offer plausible, the price jumped more than twenty percent on Friday. And the CEO must now do what corporate law requires, namely control advances, if only for the benefit of its shareholders: investors Centerbridge, Advent and Towerbrook could spend 1.74 billion euros to the bank, depending on the first offer. It would be one of the biggest bank acquisitions in Germany in years.

What does the supervisor think of the “grasshopper model”?

What exactly the three financial investors want remains to be seen. One thing is clear: To meet their expectations of higher returns, they need to come up with something, like splitting up the bank’s IT branch, cutting costs and managing it better. Even though Aareal Bank points out that this is anything but a crisis, Corona has hit the bank.

A strategy refined in January had fizzled out on the stock market and the top spot had been vacant for nearly a year. A militant shareholder had previously tried to shake up the management of the bank.

But there is also a fundamental question behind this: is it acceptable that German banks – and therefore possibly critical infrastructure – fall mainly in the hands of foreign investors? After the financial crisis, many wondered if it was not a mistake to simply hand over some of the zombie banks of the time to financial investors. The example of the American investor Lone Star is well remembered, who about six years ago simply abandoned the Düsseldorf real estate bank after various problems and ceded the remaining risks to the private banking community. The financial supervisory authority Bafin, which must approve such takeovers, has therefore long been skeptical of the “grasshopper” model, in particular vis-à-vis the big banks which, in the event of of doubt, should even be absorbed by taxpayers.

However, a lot has happened since: the American investment firm Cerberus has taken small stakes in Deutsche Bank and Commerzbank. The Americans were also involved in the takeover of the ailing HSH Nordbank, which now operates as Hamburg Commercial Bank. Lone Star has also kept a low profile, at least as owner of the Düsseldorf-based IKB, and a consortium around investor Apollo recently snatched up the Oldenburgische Landesbank. “They have shown they can do it,” said one bank lobbyist. “So why shouldn’t you invest in the German banking market? “

How relaxed politics and oversight is seen in the still struggling Commerzbank. According to Handelsblatt, financial investor Cerberus, which owns 5% of the bank, is interested in buying the state stake. The American investor could imagine resuming the participation of the federal government after the federal election, it is said. Is it true? Not clear. What is striking, however, is the frequency with which Commerzbank officials and senior Cerberus officials have met with the Secretary of State responsible for the Federal Ministry of Finance in recent months.

What’s next at Aareal? It is said that a breakup would not be appreciated in Wiesbaden. And anyway, a bank in Germany has never been taken over against the will of management or supervision. Maybe Klösges will still run his planned 100-day schedule after all.


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Ameriprise Financial: Investors Ignore Loud Week and Focus on Fundamentals

A weekend rally allowed the S&P 500® index to return to its 100-day moving average, relieving some of the anxiety caused by the 5% pullback between September 2sd and the 30e. The index was even lower for the entire week, falling 2.2%, its third weekly decline in the past four. Friday’s rally on the first day of October sparked some optimism that the market may put September’s weakness behind, historically the weakest month of the year. Friday’s rally was led by the sectors most sensitive to the economy.

Anticipation of a move on the fiscal policy front last week fizzled out as Democrats failed to reach agreement on the final size of the social infrastructure package proposed by the 3,500 president. billions of dollars. The negotiations appear to be centered on a smaller package of around $ 1.5 billion to $ 2.0 billion. House leaders were forced to postpone voting on the $ 1 trillion hard infrastructure bill that has already been passed by the Senate, until the end of October, well beyond the end of October. initial objective of September 7. Congress, however, passed a continuing resolution to maintain the federal government. government operating until December 3. No progress has been made on raising the debt ceiling as the Treasury is expected to run out of cash on October 18.

A string of negative headlines made a tough week for the Fed

It wasn’t a good week for the Federal Reserve either. For an institution that relies on the explicit trust of investors and ordinary citizens, the regional Federal Reserve bank chairmen of Boston and Dallas retired on Monday after it was reported that the two had engaged in corporate actions which, although apparently within the framework of the Fed’s ethical guidelines, raised the appearance of impropriety. And on Friday, Bloomberg reported that Fed Vice President Clarida did something similar in 2020, at the start of the Fed’s emergency response to the pandemic. And on Tuesday, Massachusetts Senator Warren called Fed Chairman Powell a dangerous man to lead the Fed due to her record of regulatory oversight of the banking system, saying she would oppose his re-appointment. Powell’s term expires in January.

It was also not a great week for the Fed in terms of mounting inflationary pressures, which the Fed continues to believe will prove to be transitory. The August PCE core deflator, the Fed’s preferred inflation indicator, has remained at 3.6% over the past twelve months, its highest level in 30 years. The overall rate reached 4.3%, down from 4.2% in July, also the highest in 30 years. Nonetheless, the surge in bond yields that began after the Fed meeting two weeks ago peaked earlier in the week, before moderating. The yield on the ten-year Treasury bill closed on Friday at 1.46%, after hitting 1.56% on Tuesday. Before the Fed meeting, it stood at 1.30%. The two-year note followed a similar path, peaking at 0.29% on Thursday, before ending the week at 0.27%. Before the Fed meeting, it stood at 0.22%. At the start of the session this week, they returned 1.50 and 0.27% respectively.

Economic activity generally appears healthy; Investors await September jobs report this week

Otherwise, it was a generally good week for the economy. Durable goods orders in August beat expectations and September’s ISM manufacturing report rose for the second month in a row, following a moderating trend since the end of the first quarter, although it remained at a low high throughout. Personal spending rebounded in August from a decline in July, and home prices remained firm in July, while pending home sales rose in August. However, all was not firmer. The Conference Board’s consumer confidence survey fell for the third consecutive month in September, although the University of Michigan’s consumer sentiment survey rose for the first month in three, following a sharp drop in August. Motor vehicle sales fell for the fifth consecutive month, leaving them 34% below April’s level. And initial jobless claims rose for the week in a row, albeit modestly.

This week’s economic calendar is headlined by the September Jobs Report. The Bloomberg consensus forecasts the creation of 470,000 new non-farm jobs, double the September total. The unemployment rate is expected to drop slightly to 5.1%. President Powell said the Fed had “almost” reached its target for progress in the labor market. This week’s jobs report will be the last the Fed sees before its November meeting, but a report that is close to consensus would appear to pave the way for the start of tapering.

Important disclosures:
Opinions expressed are as of the date indicated, may change based on market trends or other conditions and may differ from views expressed by other associates or affiliates of Ameriprise Financial. Actual investments or investment decisions made by Ameriprise Financial and its affiliates, whether on its own behalf or on behalf of clients, will not necessarily reflect the views expressed. This information is not intended to provide investment advice and does not take into account the individual situation of investors.

Some of the opinions, conclusions and forward-looking statements are based on an analysis of information compiled from third-party sources. This information has been obtained from sources believed to be reliable, but the accuracy and completeness cannot be guaranteed by Ameriprise Financial. They are given for information only and do not constitute a solicitation to buy or sell the securities mentioned. The information is not intended to be used as the sole basis for investment decisions, nor should it be construed as advice designed to meet the specific needs of an individual investor.
There are risks involved in investing, including the risk of losing capital.

A 10-year Treasury bill is a debt obligation issued by the United States government that matures in 10 years. The 10-year yield is generally used as an indicator of mortgage rates and other measures.

The ISM manufacturing index, also called the purchasing managers index (PMI) is a manufacturing estimate for a country, based on approximately 85% to 90% of total Purchasing Managers Index (PMI) survey responses each month. It is considered a key indicator of the state of the US economy.

The personal consumption expenditure (PCE) Measures of the prices that people living in the United States pay for goods and services. The PCE price index is known to capture inflation (or deflation) across a wide range of consumer spending and to reflect changes in consumer behavior.

The Consumer confidence index (CCI) is a survey that measures the degree of optimism or pessimism of consumers about their expected financial situation. It is based on consumers’ perceptions of current business and employment conditions, as well as their business, employment and income expectations for the next six months.

The Michigan Consumer Sentiment Index (MCSI) is a monthly survey of consumer confidence levels in the United States. It is a statistical measure of the overall health of the economy as determined by consumer opinion. It takes into account people’s feelings about their current financial health, the health of the economy in the short term, and the prospects for long-term economic growth, and is widely regarded as a useful economic indicator.

Past performance is no guarantee of future results.

An index is a statistical composite that is not managed. It is not possible to invest directly in an index.

Definitions of the individual indices mentioned in this article are available on our website at ameriprise.com/legal/disclosures in the Additional Information on Ameriprise Research section, or through your Ameriprise financial advisor.

The third-party companies mentioned are not affiliated with Ameriprise Financial, Inc.

The investment products are not insured by the Federal Government or the FDIC, are not deposits or bonds of, or guaranteed by any financial institution, and involve investment risks, including possible loss of principal and fluctuation in value.

Ameriprise Financial Services, LLC. FINRA and SIPC member.


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(Co-) investments of strategists and financial investors in technology companies

With the advancement of digitalization in nearly every world of life and business, the importance of technology M&A transactions has also increased significantly – a trend that is expected to intensify in the years to come. Established business models of traditional industrial companies are challenged by easily scalable digital offerings; and institutional and financial investors, struggling with low or negative interest rates, seek appropriate and lucrative investment opportunities while minimizing risk amid the “money glut”. As a result, companies and financial investors are welcoming emerging start-ups, especially in the IT / software and healthcare sectors: in 2020 alone, according to PitchBook (European Venture Report 2020), European start-ups have raised nearly € 43 billion in investor funds, including nearly € 20 billion from strategic investors – two records that will (most likely) be set again in 2021.

Interest and instruments

In their (co-) investments in start-ups, financial investors mainly seek the highest possible financial return, which they realize in the event of an exit, i.e. a sale or an IPO of the company concerned. Depending on the respective orientation of the industry and the phase of the business, corresponding venture capital funds are set up and invest in selected start-ups over a certain period of time. The motivations of industrial companies, on the other hand, are more complex, but mainly strategic and aim, among other things, at access to new innovative technologies, a strengthening of the innovation pipeline or, in general, “learning effects”. and / or presence in the new emerging sector ecosystem of market players. Companies can cooperate with or participate in start-ups in different ways. Depending on the strategic objective and the sector, the following may be considered: (technological) development and cooperation agreements, licensing agreements, joint ventures, incubation / acceleration programs or investments in start-ups for which companies receive a minority stake in return. Firms generally invest through specially designed investment vehicles (called “enterprise venture capital”), but sometimes also directly “from the balance sheet”. In Germany and in Europe, enterprise risk capital is now an integral part of the (external) innovation strategy of companies.

Structuring of (co-) investments

Financial investors and strategic investors who invest in technology companies typically aim for a 10-25% minority stake. Depending on the stage of development or the liquidity needs of the start-up concerned, convertible bonds are issued as an alternative, allowing the investor to become a shareholder of the company during a financing round subsequent to a valuation of capped company (plus any discount). Financial investors are primarily exit oriented in their investments and tend to interfere less in operational issues of management. On the other hand, strategic investors attach particular importance to contractual regulations that allow them to acquire the start-up completely at a later date, or at least grant them a right of veto on the sale to competing companies, as well as a right of veto on the sale to competing companies. active influence and involvement in relevant decision-making processes, which is reflected accordingly in the governance of the start-up. However, the contractual fixing of acquisition rights in favor of strategic investors is a double-edged sword: it limits the start-up to a concrete exit option and can therefore have a negative impact on its valuation (achievable in the event of exit) in the long run.

Particularities of technological investments

The essential value of technology companies lies in the technology they have developed, their know-how and their key employees. Therefore, the “protection” of these critical assets plays a major role in technology investments. This is done, on the one hand, by contractual guarantees with which the respective company (and the founders behind it) ensure that the rights to the software concerned and the source code underlying it belong to the company and that the possible use of “open source” does not oblige the company to disclose its source code (“copy-left” effect). However, such standard guarantees are often not worth much in the case of start-ups (and the corresponding W&I insurance policies are not yet in place). Depending on the size of the specific investment, it may therefore be wise to subject the start-up to in-depth IP / IT due diligence and, for example, to identify the risks associated with the use of open source software by means of back duck due diligence as well as analyzing the existing IT infrastructure (s) and data protection management systems. In order to “lengthen” the risks to a certain extent, financial and strategic investors also invest in technology companies whose technology is still in the early stages of its development and commercialization depending on the achievement of certain technological milestones and / or commercial – and it is only when these milestones are reached that contractually agreed installments of the total investment are due. Finally, creating incentives for founders and other key employees as well as their retention in the company is of particular importance in technology investments. Particular attention must therefore be paid to the appropriate provisions to bind key employees to the start-up as well as to the usual non-competition clauses (and their support by appropriate contractual sanctions) in the event of departure from the company.

Success factors for technology investments

The key structural success factors for investment strategies for technology investments, in particular by industrial companies as part of their corporate venture capital activities, are: well networked within the parent company itself; a clear investment objective aligned with the industrial company’s strategy as well as clear indicators of success by which technological investments in the company are assessed (and, if necessary, terminated); rapid decision-making processes on (follow-up) investments that are not influenced by hierarchical levels; and finally, the establishment of organizational and human “bridges” between the start-up and the company, which on the one hand allow the start-up to access critical resources and company experts, and on the other hand allow the knowledge gained from the technological investment for the company to be used in the best possible way and in the right place in the company.

Outlook

(Co-) investments in technology companies open up great opportunities for financial investors and strategic investors to participate financially and / or strategically in current growth trends. At the same time, the structuring of such investments entails a complexity that should not be underestimated. Due to lowered thresholds (according to the 17th Amendment currently in force to the German Foreign Trade and Payments Ordinance, already from an acquisition of 10% or 20% of the shares) and further expansion in related areas security – in particular technological fields such as artificial intelligence, autonomous driving, robotics or cybersecurity – depending on the origin of the investor, the obstacles of foreign trade law must increasingly be taken into account and treaties in technology investments – a development that is expected to intensify in the coming years in view of the struggle between the United States, China and Europe for global supremacy in key technology industries.


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Ameriprise Financial: Investors Watching Fiscal Policy Changes Closely

The stimulating federal policy regime that has supported the current bull market so much is changing. The Federal Reserve is about to begin the process of removing monetary stimulus, while fiscal policy is about to refocus. Taken together, these emerging developments create a degree of uncertainty, to the point that some market watchers warn of a period of higher volatility, and perhaps a correction in the stock market. The fact that such uncertainty coincides with a period of seasonal weakness historically makes such warnings all the more troubling. Of course, it remains to be seen whether the markets react unfavorably to these developments.

The Federal Reserve has been preparing the ground for the start of its reduction in its bond buying program for some time. It is not a question of if, but when this process will begin. The Fed is meeting next week and could then present its plan. The weaker-than-expected August employment report could push that decision back to November, although the Federal Open Markets Committee (FOMC) hawks would rather not wait. But how much of a difference a few weeks makes is debatable. Either way, the weakening is coming. The bigger question for investors is how quickly the tapering ends, further setting the stage for the first rate hike of the next tightening cycle. President Powell was careful to point out that the rate cut and the rate hikes must be considered independently. And while this distinction may be important, it’s also likely that rate hikes are unlikely to start until the cut is complete. If the Fed acts faster than expected to end its bond purchases, it would advance the market’s estimate of how quickly rates might rise and how quickly the Fed would get rid of them.

Rising inflation gives the Fed a reason to act quickly; But the employment situation justifies caution

The argument for moving faster down this path is rising inflation. The Fed has stuck to its judgment that much of the increase is due to supply side constraints that will dissipate over time, and therefore a modest concern. But not all FOMC members agree. On Tuesday of this week, the August Consumer Price Index (CPI) report will be released and should show some welcome moderation from the previous month. The headline rate is expected to rise 5.3% year-on-year, down slightly from 5.4% in July, its highest level since 2008. The policy rate is expected to rise 4.2%, from 4%. 3 in July. and 4.5 percent in June.

An uneven recovery in the labor market has been the counter-argument for moving more slowly towards reduction. The Delta variant is partly responsible for this, as is the mismatch between job vacancies and skills. But it is undeniable that jobs are plentiful and working conditions are improving, despite the disappointment of August. Initial jobless claims last week fell to a new recovery low, and the July Job Openings and Workforce Turnover (JOLTS) report showed a record 10, 9 million job openings.

Fiscal policy is changing and investors are on the lookout for any surprises

Fiscal policy is also changing. Emergency spending designed to move the economy forward rapidly in the aftermath of the pandemic has been financed primarily through debt. The federal budget deficit for fiscal 2020 was 14.9% of GDP. The 2021 budget deficit, which ends in three weeks, is expected to total 13.4% of GDP. (For those with a nostalgic inclination, the budget was last balanced twenty years ago).

By contrast, the current surge in spending on both physical and social infrastructure is expected to be funded, at least in part, by higher taxes. High income businesses and individuals are in the crosshairs. Developments are moving rapidly, although Democratic Senator Manchin said yesterday that he doubts the September 27 voting deadline can be met. But a glimpse of the proposed tax increases is starting to emerge. A discussion paper released to Congress would call for an increase in statutory corporate income tax to 26.5 percent, from the current 21 percent. That’s lower than the 28 percent preferred by the White House, but higher than the 25 percent rate preferred by moderate Senate Democrats. The top individual bracket would rise to 39.6% and include a surtax on income above $ 5 million. Capital gains would drop from 20% to 25%, excluding the current increase in investment income. The proposal also contains some changes to the inheritance tax regime, although an effort to eliminate the current raised base provision has met strong opposition, even among Democrats.

There is no doubt that politics is changing and investors are on the lookout for any surprises. But it’s also important to remember that the economy remains healthy and that balance sheets, both corporate and personal, are strong. And while some tax code changes are on the way, they will come against the backdrop of yet another round of massive federal spending, even if that spending turns out to be lower than the White House would prefer.

Important disclosures:
Opinions expressed are as of the date indicated, may change based on market trends or other conditions and may differ from views expressed by other associates or affiliates of Ameriprise Financial. Actual investments or investment decisions made by Ameriprise Financial and its affiliates, whether on its own behalf or on behalf of clients, will not necessarily reflect the views expressed. This information is not intended to provide investment advice and does not take into account the individual situation of investors.

Some of the opinions, conclusions and forward-looking statements are based on an analysis of information compiled from third-party sources. This information has been obtained from sources believed to be reliable, but the accuracy and completeness cannot be guaranteed by Ameriprise Financial. They are given for information only and do not constitute a solicitation to buy or sell the securities mentioned. The information is not intended to be used as the sole basis for investment decisions, nor should it be construed as advice designed to meet the specific needs of an individual investor.

There are risks involved in investing, including the risk of losing capital.

The GDP now The forecasting model provides a nowcast of the official GDP estimate prior to its release by estimating GDP growth using a methodology similar to that used by the US Bureau of Economic Analysis. GDPNow is not an official forecast from the Atlanta Fed. It is best viewed as a running estimate of real GDP growth based on the economic data available for the current measured quarter. No subjective adjustment is made to GDPNow – the estimate is based solely on the mathematical results of the model.

The Philadelphia Fed Poll is a survey that tracks regional manufacturing conditions in the Northeastern United States. The aim of the survey is to provide an overview of current manufacturing activity in this region, as well as to provide a short-term forecast of manufacturing conditions in the region, which can provide an indication of conditions in the region. entire United States.

The New York Fed’s Nowcast GDP Model produces a “nowcast” of GDP growth, incorporating a wide range of macroeconomic data. The aim is to read the information flow in real time and assess its effects on current economic conditions.

Past performance is no guarantee of future results.

The third-party companies mentioned are not affiliated with Ameriprise Financial, Inc.

The investment products are not insured by the Federal Government or the FDIC, are not deposits or bonds of, or guaranteed by any financial institution, and involve investment risks, including possible loss of principal and a fluctuation in value.

Ameriprise Financial Services, LLC. FINRA and SIPC member.


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More and more financial investors are getting into Icon

While there are still two weeks before any indicative offers arrive for cancer care provider Icon Group, there are early signs that it could turn into the hottest private equity shootout in the world. ‘year.

Street Talk brought down a bunch of serious suitors – Morrison & Co, Ontario Teachers’ Pension Plan, EQT Infrastructure, QIC Ltd Infrastructure Team, Stonepeak Infrastructure – and now we can add a few more to the list.

Icon Group owns 45 cancer care centers around the world and makes 80% of its profits in Australa, according to a pitch to potential buyers. AFR

There’s Baring Private Equity Asia, which is supposed to be working on the briefing memorandum, as well as Singapore’s Keppel, which is scratching a lot of Australian assets.

There are also a bunch of national pension funds that have discussed co-investment with their third-party infrastructure and PE managers.

As we said, it is still early days. Auctioneers Goldman Sachs and Jefferies are calling for first-round bids on September 7.

Goldman Sachs and Jefferies are leading the auction on behalf of the majority owners of Icon, including the Goldman Sachs core investment team, QIC’s private equity unit, and Chinese firm Pagoda Investments. Other investors include the company’s doctors and co-founders Cathie Reid and Stuart Giles.

A sales flyer sent to potential buyers earlier indicated that Icon has over 30 years of private cancer care experience, owns 45 centers around the world, and operates with an EBITDA margin of over 20%. The flyer said eighty percent of the group’s business was in Australia, in terms of revenue, while cancer care made up half of its revenue and the rest was split between membership (30 percent) and the pharmacy (20 percent).


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Fair Financial investors claim SoftBank drove startup into the ground so they could take full control of bankruptcy

SoftBank CEO Masayoshi Son.
  • SoftBank and its Vision fund have invested more than $ 300 million in Fair Financial, a car rental startup.
  • Fair is considering filing for bankruptcy, Bloomberg reported this week.
  • Some Fair investors blame SoftBank and say the Japanese giant is trying to take control.
  • See more stories on the Insider business page.

Investors in Fair Financial Corp., a struggling car rental startup once valued at over $ 1 billion, are exploring legal options to tackle SoftBank, which they say has deliberately pushed the company in the ground so that it can take full control and eliminate other shareholders.

“There was a calculated effort to drive the company into insolvency so that it could take over the business completely,” an investor told Insider. “SoftBank is guilty of putting the company in a difficult position.” Investors have asked not to be identified to discuss sensitive private matters. The current CEO of Fair and someone familiar with the matter disputed this description of Fair’s problems.

The startup was founded in 2016 by entrepreneur Scott Painter with the ambition to disrupt the $ 120 billion used car industry. SoftBank and its giant Vision fund have invested at least $ 300 million in the company, while other investors have invested around $ 170 million.

The company is now considering a bankruptcy filing that would eliminate shareholders, Bloomberg reported Thursday.

SoftBank has built up a significant position in Fair’s debt in recent years, in part by purchasing assets from lender Greensill, investors said. Greensill, also backed by SoftBank, filed for bankruptcy earlier this year.

SoftBank now hopes to use its senior credit position to come out of a bankruptcy reorganization of Fair as the startup’s new equity owner, investors said. They spoke to Insider in an attempt to thwart this plan by arguing that SoftBank is not looking after Fair’s best interests and is acting more like a lender seeking control rather than a typical shareholder.

Fair had around $ 800 million in assets on the books in 2019, mostly from the more than 50,000 vehicles he owned. In late 2019, investors said SoftBank had started selling those assets and using the cash to run the business and pay off some of the debt it held.

Investors also said that in 2019, SoftBank kicked Painter out and replaced him with its own executive, Adam Hieber. SoftBank also kicked out Painter’s brother, Tyler Painter, and cut 40% of Fair’s staff.

Under SoftBank’s new leadership, Fair appeared to abandon growing the business, investors said. The startup has increased the upfront fees it charged, which is similar to down payments. Those start-up costs went from several hundred dollars to several thousand, and new customers evaporated. Fair also ended its insurance coverage, which infuriated existing customers and led to a wave of vehicle returns, according to investors.

Now, with most of Fair’s vehicles sold, its assets have fallen far below its debt, most of which is owned by SoftBank, investors said.

“SoftBank had a clear objective: to liquidate the fleet to generate revenue,” said one of the investors.

SoftBank declined to comment, but someone familiar with the matter said Painter was responsible for Fair’s mismanagement. Employees told Insider in 2019 that Fair’s unconstrained growth was its downfall, and some criticized Painter’s leadership.

“The Vision Fund does not control its businesses; this is not their model, ”said the person familiar with the matter. “In fact, Scott had total control. He spent recklessly thinking that the Vision Fund would always be there to bail him out. Eventually it became clear that he needed to be replaced, just as he was in his old business. Painter, who is still the chairman of Fair, declined to comment.

Brad Stewart, the current CEO of Fair who joined the company last year after a career in private equity, said any suggestion that SoftBank sabotaged the company is false.

“I saw them working really hard to save and keep the business going even though it cost them substantial capital that they didn’t have to invest,” said Stewart. “The point is, the company had an extremely negative unity economy and poorly developed risk controls that were hidden from the board and investors. These missteps led to a series of credit defaults starting in mid-2019 that forced someone to step in and save the business. “

The aggrieved investors said Stewart was a puppet of SoftBank and, exceptionally, had no capital in the startup he was hired for.

Stewart told Insider he was initially given shares when he took over as CEO, but the board blocked him from getting shares. In any case, he said the shares would have been worthless.

“It doesn’t really matter because the company’s debt was greater than its enterprise value when I started, so any grant was worth zero,” said Stewart.


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Fair Financial investors claim SoftBank drove startup into the ground so they could take full control of bankruptcy

SoftBank CEO Masayoshi Son.
  • SoftBank and its Vision fund have invested more than $ 300 million in Fair Financial, a car rental startup.
  • Fair is considering filing for bankruptcy, Bloomberg reported this week.
  • Some Fair investors blame SoftBank and say the Japanese giant is trying to take control.
  • See more stories on the Insider business page.

Investors in Fair Financial Corp., a struggling car rental startup once valued at over $ 1 billion, are exploring legal options to tackle SoftBank, which they say has deliberately pushed the company in the ground so that it can take full control and eliminate other shareholders.

“There was a calculated effort to drive the company into insolvency so that it could take over the business completely,” an investor told Insider. “SoftBank is guilty of putting the company in a difficult position.” Investors have asked not to be identified to discuss sensitive private matters. The current CEO of Fair and someone familiar with the matter disputed this description of Fair’s problems.

The startup was founded in 2016 by entrepreneur Scott Painter with the ambition to disrupt the $ 120 billion used car industry. SoftBank and its giant Vision fund have invested at least $ 300 million in the company, while other investors have invested around $ 170 million.

The company is now considering a bankruptcy filing that would eliminate shareholders, Bloomberg reported Thursday.

SoftBank has built up a significant position in Fair’s debt in recent years, in part by purchasing assets from lender Greensill, investors said. Greensill, also backed by SoftBank, filed for bankruptcy earlier this year.

SoftBank now hopes to use its senior credit position to come out of a bankruptcy reorganization of Fair as the startup’s new equity owner, investors said. They spoke to Insider in an attempt to thwart this plan by arguing that SoftBank is not looking after Fair’s best interests and is acting more like a lender seeking control rather than a typical shareholder.

Fair had around $ 800 million in assets on the books in 2019, mostly from the more than 50,000 vehicles he owned. In late 2019, investors said SoftBank had started selling those assets and using the cash to run the business and pay off some of the debt it held.

Investors also said that in 2019, SoftBank kicked Painter out and replaced him with its own executive, Adam Hieber. SoftBank also kicked out Painter’s brother, Tyler Painter, and cut 40% of Fair’s staff.

Under SoftBank’s new leadership, Fair appeared to abandon growing the business, investors said. The startup has increased the upfront fees it charged, which is similar to down payments. Those start-up costs went from several hundred dollars to several thousand, and new customers evaporated. Fair also ended its insurance coverage, which infuriated existing customers and led to a wave of vehicle returns, according to investors.

Now, with most of Fair’s vehicles sold, its assets have fallen far below its debt, most of which is owned by SoftBank, investors said.

“SoftBank had a clear objective: to liquidate the fleet to generate revenue,” said one of the investors.

SoftBank declined to comment, but someone familiar with the matter said Painter was responsible for Fair’s mismanagement. Employees told Insider in 2019 that Fair’s unconstrained growth was its downfall, and some criticized Painter’s leadership.

“The Vision Fund does not control its businesses; this is not their model, ”said the person familiar with the matter. “In fact, Scott had total control. He spent recklessly thinking that the Vision Fund would always be there to bail him out. Eventually it became clear that he needed to be replaced, just as he was in his old business. Painter, who is still the chairman of Fair, declined to comment.

Brad Stewart, the current CEO of Fair who joined the company last year after a career in private equity, said any suggestion that SoftBank sabotaged the company is false.

“I saw them working really hard to save and keep the business going even though it cost them substantial capital that they didn’t have to invest,” said Stewart. “The point is, the company had an extremely negative unity economy and poorly developed risk controls that were hidden from the board and investors. These missteps led to a series of credit defaults starting in mid-2019 that forced someone to step in and save the business. “

The aggrieved investors said Stewart was a puppet of SoftBank and, exceptionally, had no capital in the startup he was hired for.

Stewart told Insider he was initially given shares when he took over as CEO, but the board blocked him from getting shares. In any case, he said the shares would have been worthless.

“It doesn’t really matter because the company’s debt was greater than its enterprise value when I started, so any grant was worth zero,” said Stewart.


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Financial investors are pressuring companies to reduce their carbon emissions. Could art collectors do the same at galleries?

The art collector and billionaire at the head of investment firm Blackrock Larry Fink had a clear message in his annual written address to CEOs last January: “No issue is higher than climate change on our clients’ priority lists. They ask us about it almost every day.

Although the letter was stamped with environmental concerns, Fink’s main point was that greener approaches are good for business.

“This is the start of a long but rapidly accelerating transition, one that will unfold over many years and reshape the prices of assets of all types,” Fink wrote. “The climate transition presents a historic investment opportunity,” he said, adding that “climate risk is an investment risk”.

In the art industry, where Fink is living his second life, galleries have taken notice. Many are by making net zero carbon commitments. Dealers participate in symposia to discuss new sustainability strategies. Christie’s has announced that it will go down to zero by 2030, and multinational gallery Hauser & Wirth has announced the same. Both hired dedicated staff to meet the challenge.

“Any organization that wants to continue to exist and perform its function 10 years from now must take this seriously,” said Danny Chivers, climate change researcher and environmental advisor at the Gallery Climate Coalition, which was founded in October to encourage individuals and businesses in the art world to halve their emissions by 2030.

BBut there are major differences between the investment industry and the art industry. In the financial world, investors are under significant pressure: they injected $ 288 billion into sustainable assets in 2020, an increase of 96% compared to 2019. In addition, increasingly standardized rules and rankings make it easier for customers to buy in or out of business — a business based on its sustainability merits. Nothing like this exists in the art industry.

In addition, the pressure in the art world comes mainly from artists and dealers, not collectors, who have been less vocal. Are they finally going to show up and start pushing?

Hauser & Wirth, Durslade farm, Bruton, Somerset. Photo: Jason Ingram.

Where are the collectors?

In October 2020, the founders of the Gallery Climate Coalition started with only 14 members. Six months later, they numbered 500, including merchants, advisers, fair managers and auction houses. Yet no collector is listed on the organization’s website. (Circle of CCG supporters requires a one-time donation of at least £ 1,000). [Update, June 24: There are a few collectors, GCC tells Artnet News, who have donated but who did not want to be listed.]

Resellers told Artnet News that the imperative to act largely comes from within. Ewan Sales, CEO of Hauser & Wirth, said it is the artists who have been a major catalyst towards greener business practices. But little is said about collectors demanding low-carbon shipments, and no dealer has mentioned that their business would be compromised if they failed to clean up their gallery’s carbon footprint. (One dealer said his gallery would first organize itself internally before offering customers the option to “green” the way they buy and ship artwork.)

On the other hand, Tineke Lambooy, professor of corporate law and member of the advisory board of Art / Switch, a non-profit organization that promotes sustainability practices in the art sector, told Artnet News that in the financial world, investors are asking companies to “comply with OECD guidelines which are in line with the principles of the United Nations Global Compact.

“Business leaders and CFOs need to be guided by the attitude of investors towards a greener environment. How this fact translates into the art world is not yet completely clear ”, Venters said. (This year, the gallery hired a full-time environmental sustainability manager.)

“We are in a climate emergency, and if we don’t do things differently, the planet will be in trouble,” he added. “Every sector seems to understand this. “

The founding members of the Gallery Climate Coalition.  Courtesy of GCC.

The founding members of the Gallery Climate Coalition. Courtesy of GCC.

Where are our green labels?

When it comes to those who engage, transparency is key: promises are only worth the numbers. As Fink wrote: “Data and disclosure issues”.

Tom Woolston, global operations manager for Christie’s, told Artnet News the company is seeking validation from the Science Based Targets (SBTi) initiative, an independent body that helps private companies achieve sustainability goals. based on science to align with the Paris Accord, and gives certifications to companies that meet the qualifications.

“You see a lot of organizations making promises without necessarily always following them,” Woolston said. “We are very sincere in our ambition. Christie’s now plans to publish an annual environmental impact report.

“It can be a very complicated and technical field and we are all on a learning curve,” added Woolston, suggesting that the complex issues made it essential to partner with an organization specializing in the subject such as SBTi.

Another point of progress would be a gallery ranking system.

“It’s relatively easy for investors in other industries to find companies through rankings and make decisions based on them,” Lambooy said. The ESG rankings (environment, social and governance) for most actions is a click on Google. “It’s time to formulate them” for the art market, she said.

Image courtesy of Christie's.

Christie’s has committed to be net-zero by 2030. Image courtesy of Christie’s.

A green art market

Things are improving rapidly. Just a few years ago, you would have struggled to find climate talks at an art fair, let alone see sustainability as a top concern for art dealers. But the pandemic has made the world smaller and more fragile. This also led to the the largest drop in CO2 emissions since World War II, up to 7.5 percent. What will the behaviors look like when the world returns to some sort of normalcy?

In a recent article by the editorial board of the Financial Time, the editors warned that as the world emerges from this pandemic, we may see the second largest to augment in carbon emissions.

As the art world recovers, many in the business are saying it’s time for collectors to start voting with their dollars.

“The art sector, private and public, is where the imagination of society resides,” Chivers said. “If we want to imagine and build a better future, we need everyone in art to be on board. “

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UK Watchdog: Protecting Retail Financial Investors

Britain’s Financial Conduct Authority (FCA) has instituted a new consumer obligation designed to provide consumers with greater protection when dealing with companies in the retail financial markets.

While the FCA already has consumer protection rules for these companies and notes that many of them “deliver the right results for consumers,” the watchdog group said on Friday it saw evidence of harmful practices.

This includes companies providing misleading or hard-to-grasp information, which makes it more difficult for consumers to properly rate the product or service.

“This may give an idea of ​​why one in four respondents to the FCA’s 2020 Financial Life Survey said they lacked confidence in the financial services industry, and only 35% of respondents agreed. that companies are honest and transparent in their dealings with them, ”the authority said in a press release.

The FCA says it is proposing an extension of its rules to ensure a higher and more consistent level of consumer protection.

The new consumer obligation, which businesses will follow or risk taking regulatory action or even enforcement investigations, requires businesses to take “all reasonable steps to avoid foreseeable harm to customers” and to “allow customers to pursue their financial goals and act in good faith. . “

The FCA published a study earlier this year which found that young traders are increasingly engaging in risky investments without realizing the consequences.

The group’s research looked at how and why people invest in cryptocurrency and foreign exchanges and found that many of these investors are younger, more diverse, and comfortable with riskier offers. They were also motivated to invest in part because of the accessible investment applications.

But there is significant evidence that these investments are not the best solution for less experienced investors, with more than half of those polled saying a loss would negatively affect their lifestyle.

Last year, the FCA tightened its rules governing payment companies following the collapse of Wirecard AG, which excluded millions of customers from their accounts.

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NEW PYMNTS DATA: SELF-SERVICE SHOPPING ROUTE TODAY – SEPTEMBER 2021

On: Eighty percent of consumers want to use non-traditional payment options like self-service, but only 35 percent were able to use them for their most recent purchases. Today’s Self-Service Shopping Journey, a PYMNTS and Toshiba Collaboration, analyzes more than 2,500 responses to find out how merchants can address availability and perception issues to meet demand for self-service kiosks.


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The surge in claims shakes Provident Financial

  • The surge in claims threatens the solvency of the consumer credit division
  • Door lender faces new watchdog investigation

In an unscheduled trading update this morning, Financial foresight (PFG) said fourth quarter results for 2020 will likely be ahead of analysts’ expectations.

What fell short of market expectations, however, was the news that the subprime lender intended to enter its consumer credit division (CCD) into a scheme of arrangement, following an increase in customer complaints. .

Management say the program will allow it to distribute £ 50million set aside in redress for what it describes as legitimate customer claims, a process that will result in additional operating costs of £ 15million. However, the Financial Conduct Authority (FCA) opposed the program in its current form, arguing that creditors could receive less than the full value of their claims.

If the regulator rescinds the plans at a court hearing in April, Provident says the division will likely be “placed under administration or into liquidation,” leaving all customer complaints unfunded. A scheme of arrangement is a temporary, court-approved measure that helps a business restructure its capital, assets, or liabilities.

The effect of this on the Vanquis Bank credit card division and the subprime auto loan arm Moneybarn “would not be significant,” management said, while acknowledging that relationships with customers, suppliers and regulators could be damaged by the episode.

Relations with the latter already seem strained. In addition to news from the possible administration, Provident revealed that the FCA opened an investigation into the affordability and sustainability of Caisse centrale’s lending and claims handling practices during the year through February. . While no rule violations have been determined so far, news that the review is set to last until 2022 is making the headache for investors even worse.

CCD, which serves hundreds of thousands of customers through Provvy’s traditional home loan arm and online-only Satsuma loans, was on track to break even “on a monthly basis” before that Covid-19 hit last year.

But a surge in write-downs has been followed by a surge in complaints in the mortgage market, fueled by what management is calling increased activity from claims handling companies. This translated into payments of £ 25million to customers in the second half of the year, while an additional £ 11million in balance cuts added to the bill.

Echoing 2017 – when an overhaul of the consumer credit division seriously backfired and precipitated a dilutive capital raise – shares of the FTSE 250 group fell 30% on this news to 184p, as investors weighed the prospect of spending the next few months placed in regulatory headache.

The Lesson of the Guarantor Loan Group Amigo (AGGO) which, like Provident, pursued a plan of arrangement after witnessing an increase in ombudsman-backed customer complaints and successful claims, is that high-cost credit promises a rate of return Inordinate internals should be compared with a higher risk of shock.

While the industry’s claims to serve underrepresented client groups are not entirely unfounded, high interest loans rightly come with greater regulatory and policy scrutiny. We have long argued that investors have no choice but to accept this, and even invite oversight.

They are also expected to apply big discounts to the industry’s book values ​​and a big pinch of salt to analysts’ earnings forecasts – which Provident says is 10.9 pence per share for the current year. Hold / avoid.

Last seen IC: Hold, 222p, Aug 26, 2020


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