US hedge fund invests in £4bn British fintech star TransferWise
US-based global investment firm D1 Capital Partners L.P. (D1) has announced it has purchased a stake in one of the UK’s leading fintech companies – online money transfer service TransferWise.
Sky News reported on Monday that D1 has bought a $200 million stake in TransferWise as part of a secondary share sale last week, which saw the start-up’s value soar to $5 billion, a $1.5 billion increase on this time last year – and roughly equivalent to £4 billion.
Both companies involved in the transaction are young blood in the industry.
TransferWise was set up 9 years ago by Kristo Käärmann and Taavet Hinrikus – an Estonian financial consultant and a former Skype employee respectively – to provide a solution to the ‘pain of international money transfer’. The company has since grown to offer more than 750 currency routes, with Forbes reporting that it had reached a generous net profit of $8 billion in 2018.
D1 is barely getting started, having been launched in 2018 by Wall Street investor Daniel Sundheim, who previously stood at the helm of Connecticut-based hedge fund Viking Global Investors until 2017. Last year, Business Insider deemed the budding firm ‘one of the hottest new hedge funds’ in the industry, and the company already has an established portfolio of stakes in Amazon, Netflix and Facebook.
The $200 million purchase will give D1 a 4% share in TransferWise’s operations, which boast over 2,200 employees nationwide and more than 8 million customers. Its impressive £4 billion valuation sets TransferWise above the vast majority of UK fintechs, joining only the likes of money transfer giant Revolut in surpassing the lofty benchmark.
At the start of this month, City A.M. reported that the Financial Conduct Authority (FCA) had granted TransferWise with a license to offer investment products, opening up its customer accounts to earn interest on their funds, although the company still does not own a full bank license.
Commenting on TransferWise’s growth, CEO Käärmann stated:
“TransferWise is evolving from being a pure payments provider, to the number one alternative for the banking needs of those living and working between countries. With £2bn in deposits we know that people want to hold their money with TransferWise, so we’re very happy to soon provide a way to make a return on that money”.
The company reportedly racks up £1 billion in savings compared to cross-border transactions made through standard high street banks.
Google to invest $10bn in India’s ‘digital future’
Tech conglomerate Google (NASDAQ:GOOGL) announced at its annual online Google for India 2020 event on Monday that it plans to invest $10 billion in India over the next five to seven years to scale up the country’s digital infrastructure.
The initiative comes as part of the company’s ongoing commitment to being ‘a part of India’s digitisation journey since 2004’, when Google opened its first offices in Hyderabad and Bangalore.
Google Chief Executive Sundar Pichai launched the new programme – named the Google for India Digitisation Fund – via video link at the company’s annual conference, focused on making information ‘universally accessible and useful’ so that Indians can ‘make a positive impact on their communities’.
The investment drive will include a mixture of private equity, partnerships, and infrastructure investments, with emphasis on four key areas:
- ‘enabling affordable access and information for every Indian in their own language, whether it’s Hindi, Tamil, Punjabi or any other’
- ‘building new products and services that are deeply relevant to India’s unique needs’
- ’empowering businesses as they continue or embark on their digital transformation’
- ‘leveraging technology and AI for social good, in areas like health, education, and agriculture’
Today at #GoogleForIndia we announced a new $10B digitization fund to help accelerate India’s digital economy. We’re proud to support PM @narendramodi’s vision for Digital India – many thanks to Minister @rsprasad & Minister @DrRPNishank for joining us. https://t.co/H0EUFYSD1q
— Sundar Pichai (@sundarpichai) July 13, 2020
Google, a subsidiary of Pichai-owned Alphabet Inc., appears to be doing well on the back of the news, adding to a year of pretty consistently good results – no doubt aided by the surge in internet use during the worldwide coronavirus lockdown. The company’s share price is up 1.98% or 30.46 to 1,569.47 USD at GMT-4 11:07 13/07/20, up considerably from its July 2019 shares which traded at just 1,145.34 USD.This morning, had an extremely fruitful interaction with @sundarpichai. We spoke on a wide range of subjects, particularly leveraging the power of technology to transform the lives of India’s farmers, youngsters and entrepreneurs. pic.twitter.com/IS9W24zZxs
— Narendra Modi (@narendramodi) July 13, 2020
G4S cuts 1,150 jobs as it adjusts strategy for cashless future
Security services company G4S (LON:GFS) saw its shares rally by around 10% on Monday morning, as the company announced that first half trading had far exceeded expectations. Despite this, the company announced it would cut 1,150 jobs from its cash-handling operations.
The move comes as the company adjusts its strategy to new consumer behaviours amid the the Coronavirus pandemic, where physical cash transactions lost significant ground to virtual payments.
As a result, the company noted that customer needs had changed during the period, and decided to undergo a full review of its Cash Solutions arm, which included the vans it uses to deliver cash to businesses across the UK.
Speaking on the strategic shift and job losses, G4S Managing Director of UK Cash Solutions, Paul van der Kneep, commented:
“Following a review of our Cash Solutions operational footprint in the UK, we are proposing to reshape the business to better align it with the changing needs of our customers.”
“Regrettably this will result in a reduction in headcount, and today we have entered into a period of consultation with affected staff.”
“We are working closely with unions and individuals to offer opportunities for redeployment within the group.”
As was previously suggested, the shift from physical cash to virtual payments appears to be an unstoppable tide. With Fintech offerings growing in number and range over the last few years, today’s news is a sign that the rest of society are being forced to catch up.
With either some second iteration of a lockdown, or just socially-distanced normality, being the reality going forwards, British investors and consumers will need to prepare for Fintech offerings to gain an increasing share of the payments industry.
Lamenting the G4S redundancies and the wider job losses a move away from physical cash would herald, GMB national officer Roger Jenkins noted:
“These cuts are devastating for our members and their families. GMB will fight to the end for every single job.”
“They are also another worrying step towards a cashless society – the cash industry really is on a knife edge.”
“The collapse of cash industry could have a terrible impact on the elderly and most vulnerable and wreak havoc on small and medium enterprises which rely on cash transactions.”
“GMB is calling on the government to take action to protect the cash industry and all those who will be hit hard is it disappears.”
Following the announcement of its stellar first half performance, and unaffected by the news of job cuts, G4S shares remained up 9.08% or 10.85p, to 130.30p by 13:53 BST 13/07/20.
This is down form the company’s year-to-date high of 208.00p on January 21, but a great improvement on its 81.04p nadir on April 6. G4S shares are currently sat about their consensus prediction of 127.00p.
Quiz shares dip on allegations of using underpaying subcontractor
Shares in online fashion outlet Quiz (LON:QUIZ) began trading on Monday by dropping 21%. This followed allegations by a reporter from the Times on Saturday, who claimed that one of the company’s subcontractors in Leicester had been paying its staff at levels far below the National Minimum Wage.
The company said that it had already launched an investigation, but already understood that a supplier had used a sub-contractor “in direct contravention of a previous instruction from Quiz”.
Speaking on the allegations, company Chief Executive Tarak Ramzan responded:
“We are extremely concerned and disappointed to be informed of the alleged breach of national living wage requirements in a factory making Quiz products. The alleged breaches to both the law and Quiz’s ethical code of practice are totally unacceptable.”
“We are thoroughly investigating this incident and will also conduct a fuller review of our supplier auditing processes to ensure that they are robust. We will update our stakeholders in due course.”
The news follows similar allegations being brought against fellow online shopping outlet Boohoo (LON:BOO), who were also alleged by the Times to have used subcontractors that paid staff little more than £3 an hour in factories in Leicester.
The allegations against both companies will need to undergo full formal reviews by authorities, in addition to their own internal investigations. Substantiated or not, one upshot of the news is that a spotlight has been shone on potential malpractice in the Leicester region, and we have once again been reminded to remain vigilant of potential instances of employee mistreatment in the UK.
Following the news, Quiz shares dipped by more than a fifth. Thanks to the company’s quick response in launching their internal investigation, shares recovered, now down 5.01% or 0.34p to 6.41p per share 13/07/20 12:50 GMT. The company’s p/e ratio is 20.45 and their dividend yield is 6.25%.
Going forwards, investors will be keen to have these matters put to rest. While Boohoo and Quiz have faced the brunt of criticism so far, shareholders of other online and fast fashion retailers will no doubt be wary about similar allegations being brought against other companies in the sector.
Avacta teams up with Integumen to develop waste water COVID-19 testing
Avacta (LON:AVCT) has announced a corroboration with AIM-listed Integumen (LON:SKIN) to develop an early warning testing system for the presence of COVID-19 proteins in waste water.
The detection sensors are to implemented through Modern Water’s Microtax water contamination systems which can detect bacteria in waste water through their 3,000 installations.
“Multiple international commercial opportunities exist beyond individual equipment unit sales, with all three parties standing to enjoy long-term recurring revenues generated through the supply of Affimer® reagents in each of the proprietary consumable test cartridges, AI-as-a-Service predictive alerts and maintenance contracts,” said Barry Gibb, Research Analyst at Turner Pope Investments.
Mr Gibb continued to highlight the potential size of the target market and how such a system could facilitate some parts of the economy returning to normality.
“The true scale of this opportunity is perfectly demonstrated by, for example, the global cruise line industry which handles 32 million passengers in a market annually worth US$31.5 billion, yet is likely to remain entirely disabled with passengers effectively uninsurable until perpetual coronavirus monitoring, detection and testing systems are installed.”
“In this respect, Avacta, Integumen and Modern Water appear to have not only rapidly recognised one of the world’s most pressing needs, but are also combining their core competencies and well-established worldwide marketing reach to develop and distribute a unique, seemingly unmatched technological package of potential global significance,” Mr Gibb concluded.
Avacta’s Affimer technology will be evaluated over the coming weeks with test being held at the University of Aberdeen. If proved successful, Integumen will commercialise the detection sensors.
“Affimer reagents are ideal for applications such as this, not only because of their sensitivity and specificity, but also because of their robustness, which is essential when being deployed in real-world situations, such as real-time waste water analysis,” said Dr. Alastair Smith, Chief Executive of Avacta Group.
“With the spread of COVID-19 continuing to accelerate globally, we are proud to work with partners like Integumen to provide our Affimer reagents for development on a range of platforms to combat the pandemic. This collaboration has the potential to deliver a product that will play a crucial role in the early detection of COVID-19 hotspots around the world.”
Virgin Atlantic set to receive £1bn rescue deal
Virgin Atlantic is set to announce a £1 billion rescue deal from Atlanta-based financial services firm First Data, in a last-ditch attempt to avoid collapse without relying on taxpayers’ money.
The airline, launched in 1984 by British business tycoon Richard Branson, has struggled to stay afloat during the coronavirus pandemic due to almost universal travel restrictions which grounded its planes and drove the wider travel industry into paralysis.
First Data is a subsidiary of NASDAQ resident Fiserv (NASDAQ:FISV). The financial services provider has allegedly made “stringent” demands in return for its support for the struggling airliner.
Sources told Sky News on Sunday that the firm has requested to hold onto all future bookings revenue in a bid to “protect itself” if Virgin should indeed collapse. Virgin Atlantic Chief Executive Shai Weiss is reportedly trying to “moderate” First Data’s demands.
Lloyd Bank’s Cardnet has already “broadly agreed” to the terms put forward in the proposal.
The deal would pave the way for a £200 million cash injection from Atlantic’s parent company Virgin Group, as well as an additional £400 million in fee deferrals and waivers from Virgin Group and Delta Air Lines (NYSE:DAL) – which owns 49% of the company.
If the deal goes through, thousands of British jobs could be saved. Virgin announced back in May that as much as a third of its 10,000 UK employees could expect to lose their jobs over the next few months.
A number of other airline giants have been forced to make mass redundancies, including United Airlines (NASDAQ:UAL), who is set to lay off almost half of its global workforce.
Global airlines are projected to suffer an $84 billion loss due to the pandemic over the course of 2020.
Primark rejects £30m coronavirus job retention bonus
Fashion retailer Primark, an Associated British Foods (LON:ABF) subsidiary, has turned down a £30 million offer from the UK government for bringing back its 30,000-strong furloughed workforce.
The high street clothing chain stated that it “should not be necessary” to take the government up on its offer, which includes a £1,000 bonus for each employee that companies bring back from furlough.
The initiative was designed to offset the “tragic projections” for unemployment expected this autumn when the government’s furlough scheme comes to an end in October.
Since swathes of Primark stores reopened in mid-June, all staff have returned to work, with the company expecting to generate a modest profit by the end of the year – although significantly less than usual.
An Associated British Foods spokesperson stated:
“The company removed its employees from government employment support schemes in the UK and Europe in line with the reopening of the majority of its stores. The company believes it should not be necessary therefore to apply for payment under the bonus scheme on current circumstances”.
Although losing around £800 million in sales since the lockdown began in March, Primark has remarked that reopening profits across its 375 UK stores have been largely encouraging. Photographs of lengthy queues outside Primark stores when they first reopened were featured across the front of national newspapers.
Without the support from the government’s furlough scheme, Primark has admitted that as many as 68,000 of its employees in the UK and Europe may have had to be laid off. The company was one of dozens of high street chains that struggled to stay afloat during the peak of the pandemic, with stores shut nationwide and trade essentially paralysed.
A source close to Primark commented on the company’s decision to turn down the £30 million bonus, saying:
“The stores are open, they’re trading, cash is coming in, if you don’t need the money why take it? But those circumstances don’t apply to other retailers or other industries”.
Other high street brands have been weighing up their options, with M&S (LON:MKS) “welcoming” the government’s ongoing support for businesses, although the company has not yet confirmed if they will be taking up the furlough scheme bonus.
Fast food giant McDonald’s (NYSE:MCD) has not yet commented as it is “still working through the details of the chancellor’s announcement”.
EasyJet accused of using sickness records to decide on job cuts
Airline giant easyJet plc (LON:EZJ) has been accused by prominent pilots’ trade union, the British Airline Pilots’ Association (BALPA), of using staff sickness records to calculate which employees to make redundant as the company pushes ahead with plans to axe 4,500 jobs.
The firm is preparing for 727 pilot redundancies as well as shutting down operations at its Stansted, Southend and Newcastle bases, following a mass restructuring drive in response to the economic impact of the coronavirus pandemic.
A number of airlines, including AirAsia (KLSE:AIRASIA) and United Airlines (NASDAQ:UAL), have been forced to cut costs and lay off staff after worldwide lockdown restrictions ground the travel industry to a halt.
While easyJet has acknowledged that historic staff absences will form part of its assessment, the company has defended itself by stating that it has only put forward initial proposals to BALPA and that talks are still at an early stage.
BALPA General Secretary, Brian Strutton, rejected the airllne’s statement:
“Flight safety is built on a culture of openness and not fear of repercussions. This is a well understood and fundamental tenet for everyone involved in ensuring our skies are safe. It is unnecessary and wrong that easyJet is intending to use sickness as a stick to beat its safety-critical staff”.
He has alleged that easyJet intends to use absences during the start of the coronavirus pandemic – when staff may have been sick, shielding themselves, or working from home for the safety of a family member – as part of its absenteeism timeframe.
The airline has since responded that these claims are untrue, stating:
“We would never put forward proposals which would compromise safety as we have an industry-leading safety culture, as BALPA acknowledges. Safety is our number one priority and we are focused on doing what is right for the long term health of the company and our people so we can protect jobs going forward”.
With talks still ongoing, easyJet has confirmed that sick days may be considered as part of the company’s redundancy criteria, but overall conduct and attendance rates will form the bulk of the decision.
Sick leave taken during the coronavirus pandemic will not be included in the airline’s assessment, easyJet has assured.
The company concluded that it is taking all necessary steps to protect the health and safety of its staff, as it resumes its summer schedule with reduced flights to reflect less travel demand. EasyJet is reportedly planning to run 50% of its 1,022 routes in July and 75% in August.
Despite the controversial news, easyJet’s share price remains steady, up 1.72% to 664.00p at BST 16:39 10/07/20.
Airlines to battle turbulence as quarantine measures ease
As quarantine rules are relaxed for travellers from dozens of countries arriving in the UK, the airline industry faces a grim few months ahead.
The relaxing of lockdown measures around the globe may have seen an initial “explosion” in holiday bookings, but airlines are expecting cautious travellers to opt to stay home for the summer instead, dampening hopes of reviving the usual busy holiday season due to fears of a second wave of coronavirus.
Today, the UK government eased restrictions which had previously required everyone arriving in the UK from abroad to self-isolate for 14 days upon arrival.
After mounting criticism and a legal review launched by leading airliners easyJet (LON: EZJ), British Airways (LON:IAG) and Ryanair (LON:RYA), it was announced last month that quarantine rules would be relaxed for a select number of countries deemed to be at “low-risk” of spreading the coronavirus.
Meanwhile, even as the UK and Europe begin to build the long-awaited “air bridge” between destinations, the US is battling a sharp rise in virus cases that threatens to pour cold water over the whole ordeal, and send travellers rushing back to safety of their homes.
A number of major airline companies have struggled to stay afloat during the pandemic. Big names such as United Airlines (NASDAQ:UAL) and British Airways were forced to lay off thousands of employees, with their planes grounded due to globally-enforced lockdown restrictions and a free-fall in travel demand.
The near-paralysis of the airline industry helped drive oil down to its lowest recorded price since 1982 – a mere $11.01 – at the peak of the pandemic in April.
Commenting on today’s progress, IG Senior Market Analyst Joshua Mahony stated:
“Airlines are on the slide in early trade today, as the first day of quarantine exemptions did little to boost sentiment after a dismal June.
“While May saw Heathrow passengers down by almost 97%, the recent step to reduce hurdles for those seeking to travel abroad will hopefully provide some precious income for airlines at one of the most testing periods in history for the industry.
“Nevertheless, with fears of localised lockdowns around the globe, there is a good chance that it will take many months and even years to see air travel return to pre-Covid levels”.
Investing in fine wine to beat the pandemic wobble
Speaking to the UK Investor Magazine, Vindome Consultant and Master of Wine, Roderick Smith, MW, offered his insight into investing into an asset he thinks has the ability to ride out economic instability.
He says that fine wine emerged as one of the most robust investments following the 2008 financial crash, and though it’s hard to predict the outcome of the current economic uncertainty, fine wine‘s status as ‘a finite, luxury product with increasing demand’ gives it the ability to maintain something of a consistent performance versus other asset classes.
“Wine consumption continues to rise, and even in markets where future tax implications may have an effect on the wealthy, there remains a healthy appetite for fine wine. It may be time for introspection when it comes to investing in real estate, fine art, classic cars, or even the stock market, but wine seems to remain a safe bet”, said Mr Smith.