Week in Review

A round up of some of the week’s most significant corporate events and news stories.

Snap sheds fifth of value as earnings disappoint

The company behind Snapchat this week found out just how unforgiving Wall Street can be to highly valued, heavily lossmaking internet companies, writes Tim Bradshaw in San Francisco.

New York Stock Exchange before the initial public offering of Snap Inc, the parent company of Snapchat, at the New York Stock Exchange in New York

Investors disappeared faster than one of its video messages on Thursday, as Snap lost more than a fifth of its value, or about $5bn in stock market capitalisation.

When Snap posted its first results since March’s initial public offering on Wednesday evening, it revealed revenues and user numbers that were below what many analysts were expecting.

Net losses for the quarter were $2.2bn, largely because of one-off costs related to its initial public offering and stock-based compensation.

Even though revenues were up 286 per cent to $149.6m and daily active user numbers jumped 36 per cent year on year to 166m, several analysts downgraded their price targets and forecasts after the report.

Sceptics saw the user figures, which represented only 5 per cent growth over the previous quarter, as evidence that copycatting by Facebook and its Instagram app was stealing away Snapchat’s audience.

Evan Spiegel, the company’s founder and chief executive, countered that argument by pointing to the 3bn “snaps” that are shared on its app every day, up from 2.5bn in the third quarter of last year.

Despite seeing hundreds of millions of dollars wiped off his net worth by its tanking shares, Mr Spiegel laughed off the idea that he was scared of Facebook, which has aped Snapchat features including photo-diary “stories” and augmented-reality selfie masks.

“Just because Yahoo has a search box, it doesn’t mean they are Google,” the 26-year-old said in response to an analyst’s question, during his first earnings call as the chief executive of a public company.

“Overall I feel we have executed well on our priorities for this quarter.”

Even after Thursday’s slump, Snap is still valued at about $20bn.

Analysts do not expect it to turn a profit until 2019 at the earliest.

Chart: Snap profits

Analysis: Snap investors yet to see long-term picture
Lex: Snap, puppy love
Analysis: Four things to note in Snap’s earnings

Chinese chemical heavyweights plan tie-up with sales of $100bn

China’s biggest chemicals groups — ChemChina and Sinochem — are gearing up for a merger next year that will create the world’s largest chemicals group with annual revenues of $100bn, write Don Weinland in Hong Kong and Lucy Hornby in Beijing.

ChemChina and Sinochem logo
© Reuters/Bloomberg

Senior banking sources in Asia said that the merger of the two domestic groups was aimed at ensuring ChemChina has the financial strength to absorb its $44bn acquisition of Swiss agrochemical heavyweight Syngenta, which is in its final stages of closing this month.

The combination will also seek to rein in control over ChemChina’s aggressive dealmaking in recent years after its handling of the Syngenta takeover was received poorly by China’s leadership, according to people familiar with the matter.

Group chairman Ren Jianxin is said to have made enemies by initiating the deal without clearance from the country’s most important decision makers. The merger pits him against Sinochem chairman Ning Gaoning, another of China’s top dealmakers.

The deal will be driven by the state-owned assets supervision and administration commission, the government entity that controls the two companies.

Senior corporate and investment bankers with knowledge of the deal say that they are preparing to compete for the combined group’s business.

Some lower-ranking empl­oyees at both companies told the FT they are fretting about their future as the consolidation grows closer. The state-brokered merger has been rumoured for months but denied by both groups.

Podcast: Industry editor David Oakley discusses what’s behind the merger
Lex: Lean manufacturing
Due Diligence: A giant state-planned merger

Vivendi chairman moves to consolidate his empire

Vincent Bolloré, chairman of Vivendi and its dominant shareholder, has moved to consolidate his media empire by offering €2.3bn in cash to buy a 60 per cent stake in communications group Havas from his own family holding company, writes Harriet Agnew in Paris.

Vincent Bollore, billionaire and chairman of the Bollore Group, speaks during an interview at the Autolib' car-sharing headquarters in Vaucresson, France, on Monday, March 9, 2015. Bollore is targeting Los Angeles and Singapore as the next markets for his Autolib' electric-car sharing service after its debuts later this year in London and Indianapolis. Photographer: Marlene Awaad/Bloomberg
Vincent Bolloré © Bloomberg

The two-step transaction will first see Vivendi, the French media group, acquire Groupe Bolloré’s holding in Havas for €9.25 per share, a premium of 8.8 per cent over the closing price for Havas shares on Wednesday.

Vivendi will then seek to buy the remainder of Havas from public shareholders at the same price.

By adding Havas, a specialist in advertising and communications, Vivendi wants to profit from opportunities around data analytics and branded content for Vivendi’s portfolio of companies, which includes Universal Music Group and pay-TV business Canal Plus.

Mr Bolloré wants to turn Vivendi into a southern European media and telecoms powerhouse, in an environment where content, distribution and communications are converging.

Billionaire Mr Bolloré owns just over 20 per cent of Vivendi. The long-awaited deal ends months of speculation on when Vivendi would buy Havas, where Mr Bolloré’s son, Yannick, is chief executive.

The proposed deal has fuelled suggestions that Mr Bolloré is positioning Yannick to succeed him in running Vivendi as part of a wider focus on succession planning.

Mr Bolloré has pledged to step down from running Groupe Bolloré in 2022.

Lex: Eyes wide shut

Tory price-cap pledge dims outlook for energy groups

The lights dimmed for the UK’s energy suppliers when the Conservative party confirmed for a second time that it would pledge a price cap in its manifesto to protect families against “unfair” standard tariffs, writes Nathalie Thomas in London.

Embargoed to 0001 Monday March 13 File photo dated 26/03/08 of electricity pylons as around £180 million was wasted on standby power stations after overblown warnings of blackouts, according to energy experts. PRESS ASSOCIATION Photo. Issue date: Monday March 13, 2017. Claims that the lights would go out increased in the face of a string of cold winters, low power imports and plant maintenance work. But a reserve power scheme put in place to deal with emergencies was not used once, the Energy and Climate Intelligence Unit (ECIU) found. It claimed an individual was around 10 times more likely to be struck by lightning than the National Grid supply failing. See PA story ENVIRONMENT Power. Photo credit should read: Gareth Fuller/PA Wire
© PA

These tariffs, which affect about two-thirds of households, have long been hated by politicians as they tend to be more expensive than fixed contracts and change periodically when utilities raise or lower prices.

Five of the big six utilities have raised prices this year, by up to 10 per cent. Critics often accuse energy groups of either raising bills unnecessarily to improve profits, or of not passing on all the savings when wholesale gas and electricity prices fall.

Greg Clark, energy secretary, said the cap would be set every six months by the regulator, Ofgem, and could potentially save households £100 each a year, although neither he nor Theresa May, the prime minister, could rule out that bills would not rise under the regime.

The announcement knocked shares in Centrica and SSE last week, adding to losses since October, when Mrs May first signalled she was planning further action against energy companies.

Centrica’s shares have lost nearly 16 per cent since the start of October, while SSE is down 8 per cent.

Energy companies warned the cap would hit investment and could cost jobs. Iain Conn, chief executive of Centrica, also cautioned that the policy would probably lead to higher average prices. This is because companies are likely to scrap their cheapest fixed-price deals to mitigate the effect of the price cap.

Lex: Price cap may benefit Centrica

Liverpool FC takes on China fakers with cut-price shirts

Liverpool Football Club launched a cut-price version of its new shirt in China to compete with the ubiquitous counterfeits that sell for just a few dollars, writes Ben Bland in Hong Kong.

The Story :Former Liverpool football stars highlight fan meeting in Hong Kong 2nd March 2017
© Mayokyo HK/Imaginechina

European clubs are eager to boost their revenues in this fast-growing market, which has seen a surge in appetite amid President Xi Jinping’s calls for a football revolution.

But the widespread availability of fake shirts and pirated live streams of matches make it hard for clubs to monetise the high level of interest in European football.

After Liverpool unveiled its kit for the 2017/18 season last month, the English Premier League club also launched a cut-price version in China that sells for $30, compared to $87 for the normal shirt.

It looks similar at first glance but is made of simpler materials and is not produced by New Balance, Liverpool’s kit supplier.

A person close to the club said that the idea was to promote official merchandise “at a competitive price for fans in that part of the world”.

The person added: “The club does not condone counterfeit goods and hopes fans will chose an official product rather than a copy.”

Simon Chadwick, a professor of sports enterprise at Salford Business School, said that although clubs had been targeting China since the early 2000s, they had failed to understand the behaviour of Chinese consumers.

He said that Liverpool was right to try this new approach but warned that it may upset UK fans, who are already unhappy about the high cost of replica kits.

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