Investor Relations Week: Buy-side impact of SEC’s Mifid ruling, no good or bad investments on UN SDGs and unions against takeovers

The exchange reported that the European buy-side expects to be severely disrupted by the SEC’s recent decision to allow its research no-action letter to expire in 2023. This is according to a survey by Substantive Research . Originally published in response to research unbundling requirements under Mifid II in 2018, the letter was designed to temporarily reduce the pressure on European companies on the buy side by allowing them to pay US brokers in cash for research. Its expiration means companies will now have to pay through trading commissions like their US counterparts.

In the survey conducted by Substantive Research, 40 asset managers – 85% of which were European – found that the SEC’s decision would likely jeopardize $100 million in annual research payments and reduce competition in investment markets. the already struggling search by diverting small business operations and into already bigger bulge carrier names.

– The FinancialTimes (paywall) reported that an analysis of 6,000 US funds concluded that there are no “good” or “bad” investments in terms of the United Nations Sustainable Development Goals (SDGs). Instead, the picture is much more complex, according to Util, a specialist in sustainable investing data, who calls for the decoupling of ESG factors in a report that identifies leaders and laggards according to the SDGs.

“Almost all companies, industries and funds impact some goals positively, others negatively,” Util said in its report. For example, he found that the top 10 climate action laggards were mostly utility funds. But compared to the other SDGs, each of them is among the top 100 leaders in terms of quality education; affordable and clean energy; decent work and economic growth; and measures of industry, innovation and infrastructure. The different elements of “ESG” represent such different, even conflicting, goals that it’s time to abandon the concept, the company argued.

– “The biggest US airlines are making money again,” said CNBC. And “the unions don’t want them to spend it on share buybacks.” A condition of the $54 billion in federal aid airlines received to pay workers during the Covid-19 pandemic banned carriers from buying back stock – a ban that is in effect until the end of September. Now a campaign and public petition involving some of the biggest airline unions – representing more than 170,000 pilots, flight attendants, customer service agents and other industry staff – is urging carriers to stabilize their operations and to invest in workers before spending to buy out their own. Stock.

“We cannot allow executives to send a dime to Wall Street before they resolve operational issues and conclude contract negotiations that will ensure wages and benefits will retain and attract people to aviation jobs” , quoted Sara Nelson, International President of the Association. of Flight Attendants, which represents some 50,000 cabin crew members, as noted in a statement announcing the anti-buyout campaign.

– “Meme stocks are back,” said Institutional investor, “and this time, Ken Griffin’s Citadel Advisors is on the same side as retail investors pushing stocks higher.” In recent weeks, the publication says shares of companies including GameStop, AMC Entertainment and Bed Bath & Beyond have surged on retail buys, with some of the biggest owners of those stocks being hedge funds.

And “Citadel appears to be the hedge fund winner in this latest meme stock market rally” – led by Bed Bath & Beyond. As of June 30, Citadel held 2,305,711 shares of the “struggling retailer,” increasing its position by about 5,676% in the quarter, according to Nasdaq. Since, Institutional investor says the stock price skyrocketed from around $5 to nearly $25 per share, meaning Citadel would have made over $46 million on the position had it not changed since the end of the quarter.

The FT also reported the story of Jake Freeman, a 20-year-old student majoring in applied mathematics and economics at the University of Southern California, who made a gain of around $110 million after buying shares of Bed Bath & Beyond in July for less than $5.50 per year. to share. On Tuesday, Bed Bath & Beyond jumped to more than $27 per share, the newspaper said.

The Wall Street Journal (paywall) reported that the Federal Trade Commission (FTC), under Chairman Lina Khan, was challenging mergers that would likely have gone unchallenged in previous years. “In too many areas of our economy, including agriculture, airlines, healthcare, we’ve seen a significant consolidation and reduction in competition,” Khan said. “Mergers played a part in that.”

The FTC issued 42 letters of inquiry into mergers or similar transactions in fiscal year 2021, nearly double the number in 2020 and the highest total in more than 10 years. Negotiators, antitrust lawyers and Republicans complain that in some cases the FTC is simply trying to slow down deals when there is no credible threat to competition.

Boards and bankers are more aware of the risk antitrust authorities are investigating, which has sometimes led companies to postpone merger plans, said Eric Swedenburg, co-head of M&A practice at Simpson Thacher.

Reuters (paywall) reported that Morningstar said investors deposited $120 million into U.S. sustainable funds last month, a “tepid” amount of inflows that coincided with a broader pullback from mutual funds and AND F. July marked the second consecutive month of net new deposits for sustainable funds, although they raised considerably less than the $492 million recorded in June. Funds rated as “sustainable” by Morningstar include those that incorporate ESG factors into their investment processes.

Although “demand for sustainable funds remained tepid in July,” Morningstar said in the report that “their recent weakness is not surprising as investor appetite has deteriorated across the board.” After a bumper year in 2021, funds that consider ESG criteria struggled during the market sell-off earlier this year, with widespread underperformance and weaker demand.

– DP World, the owner of Dubai-based P&O Ferries, has come under fire after celebrating record profits just months after laying off 800 of its UK-based employees without notice, reported The Guardian. The company, which is ultimately owned by Dubai’s royal family, said in March that laying off 786 P&O seafarers and replacing them with much cheaper agency workers was the only way to ensure the ‘future viability’ of the historic business. ferries. However, this week, Sultan Ahmed bin Sulayem, chairman and chief executive of DP World, announced that the company had increased first-half revenue by 60% to $7.9 billion and profit had increased by more than 50%. % to hit a record $721 million.

– Travel retail giant China Tourism Group Duty Free (CTG) has raised $2.1 billion in a “reduced” equity offering in Hong Kong, the report said. FTas a “sweeping Covid-19 lockdown” in the tropical island province known as “China’s Hawaii” wreaked havoc on the company’s biggest market.
The world’s largest retailer of tax-exempt wine, cosmetics and luxury goods sold 102.8 million shares at 158 ​​Hong Kong dollars ($20.14) each, the newspaper said, well in below a maximum offer price of HK$168 and marking a discount of more than 27%. on the closing price of the group’s Shanghai-listed shares excluding tax on Thursday. The reduction also came as shares of CTG in Shanghai fell nearly 10% over the past month. CTG had received approval to register in Hong Kong on Aug. 9, days after surging Covid-19 cases prompted mainland authorities to lock down Hainan’s top tourist destination, the main source of revenue from sales. of CTG, added the FT.

– Starbucks chief operating officer John Culver is leaving the company after two decades with the coffee chain, as part of a restructuring that will eliminate his role, reported CNBC. His exit comes amid a wider Starbucks management shake-up, the outlet said, noting that former CEO Kevin Johnson retired earlier this year, leading Howard Schultz to return to helm. of the company as interim general manager until a long term. successor is named.

Starbucks reportedly said it would eliminate the COO role, with many of Culver’s direct reports being managed by Schultz. Frank Britt, director of business strategy and transformation, will oversee the rest, including the global supply chain and technology divisions.

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