Charlotte Street Partners

DAILY BRIEFING

DAILY BRIEFING

Don't poke the sleeping bear

Written by Li-Ann Chin, associate
Edited by Adam Shaw, associate partner

16 November 2021

Good morning,

Brown bears are known to dig dens for winter hibernation, often holing up in a suitable hillside for long periods at a time. Their respiration and heart rates slow dramatically as they “sleep” from October to December. This state of inactivity helps them to conserve energy during a time of scarce food.Born in 1950 in Stellenborcsh, South Africa, not much is known about Johann Rupert. Reclusive, media-shy and nicknamed ‘Rupert the Bear’ for his conservative approach to business, he is the chair and controlling shareholder of Swiss luxury group Richemont, which owns watch and jewellery brands Cartier and Van Cleef & Arpels. Despite owning only 9.1% of the capital, he controls 50% of the voting rights under a dual-class share structure, which has allowed him to assert tight control over the group’s strategy and managers across all of Richemont’s 26 brands. Richemont shares have edged higher ever since it was reported that activist hedge fund Third Point had taken a stake in the company in early November. While luxury brands have been targeted by activists before, they usually focus on names whose shares and voting rights are mostly in public hands. In 2017, Jana Partners demanded a board shake-up at Tiffany & Co. The same year, activist Groupe Bruxelles Lambert built a stake in BurberryHeaded by billionaire investor Dan Loeb, Third Point is known to adopt aggressive tactics in pressuring the companies it is invested in. The hedge fund urged an underperforming Nestlé to sell its non-core assets in 2017 and recently called for the break-up of Royal Dutch Shell.  Loeb’s latest move may well be good news for Richemont shareholders. Critics argue that Richemont has not kept pace with competitors during a decade-long boom for the luxury industry largely driven by Chinese consumers. Its market capitalisation has risen 79% in recent years, while those of LVMH and Hermès have roughly quadrupled. Cartier, the crown jewel of its collection, is facing stiffer competition since LVMH acquired Tiffany & Co last year; the latter recently unveiled an aggressive marketing campaign featuring celebrities like Beyoncé, Jay-Z and British tennis star Emma Raducanu. Richemont, on the other hand, has long struggled to stem losses at its ecommerce unit Yoox-Net-A-Porter. Rumour has it that it is considering selling its stake in the online retailer to rival FarFetchIt is yet to be confirmed what Loeb’s plans are, or the size of Third Point’s investment in Richemont. But if it is to elbow Rupert out of hibernation, he’d do well to thread carefully. Wildlife biologists will tell you that, despite their prolonged slumber, bears are easily woken and highly capable of defending themselves in the event that they are disturbed. 

News

The explosion outside Liverpool Women’s Hospital on Remembrance Sunday has been declared a terror incident by the police. The suspected attacker died when a homemade bomb exploded in a taxi outside the hospital, with the injured driver escaping before the car caught fire. Home secretary Priti Patel confirmed that the UK terror threat level has been raised from substantial to severe, meaning an attack is deemed highly likely, as the Liverpool explosion marks the second incident in a month. Prime minister Boris Johnson has raised the prospect of Britons possibly needing a booster jab to be considered “fully vaccinated” when going abroad or for self-isolation rules. There are plans in place to add evidence of a vaccine top-up to the NHS Covid pass. This follows an earlier announcement that the rollout of Covid booster shots will now be extended to all over-40s. Speaking to Sky News, senior Conservative MP Caroline Nokes accused Stanley Johnson, the prime minister’s father, of inappropriately touching her at a Conservative party conference held in Blackpool in 2003. This allegation prompted New Statesman journalist Ailbhe Rea to accuse Johnson of doing the same to her at a 2019 Conservative party conference. Johnson has denied both allegations, stating that he has “no recollection of Caroline Nokes at all”.

Business and economy

Royal Dutch Shell yesterday announced a plan to move its tax residence from the Netherlands to the UK and a shift away from its dual share structure in favour of just one class of shares to boost the “speed and flexibility” of shareholder pay-outs and “accelerate delivery of its strategy to become a net zero emissions business”. Business and energy secretary Kwasi Kwarteng welcomed Shell’s announcement, tweeting that it was a “clear vote of confidence in the British economy”. The Dutch government was reported to be unpleasantly surprised by Shell’s announcement. Low wind speeds pushed peak hour power prices to the second highest level in at least three years on Monday, as Britain’s grid was forced to increase reliance on gas-fired power plants as a result of calm weather this year. Power prices in the UK for the peak evening period between 5pm and 6pm on Monday surpassed £2,000 per megawatt hour, just below the levels reached at the height of the gas price crisis in mid-September, when they hit £2,500 per megawatt hour. (£) President of China Xi Jinping has warned President Biden that China is prepared to take “decisive measures” if Taiwan makes any moves towards independence that cross Beijing’s red lines. Xi also warned Biden that any support for Taiwanese independence would be “like playing with fire… and those who play with fire will get burned”, according to a Chinese state media account of the talks between the two leaders. In response, Biden stated that the US remains committed to the “one China policy” that recognises only one sovereign Chinese state, and that Washington “strongly opposes unilateral efforts to change the status quo or undermine peace and stability across the Taiwan Strait”.

Columns of note

Today, nearly half of FTSE 100 companies set measurable environmental, social, and governance (ESG) targets for their chief executives and have begun to introduce ESG targets in executive compensation packages, a recent global survey by Willis Towers Watson reveals. However, critics remain sceptical this will amount to meaningful change in reducing emissions and combatting the climate crisis. This piece by the FT’s editorial board makes for an interesting read. Held in the York Art Gallery, the Yorkshire Tea Ceremony is a stunning exhibition of approximately 3,600 pots – the single most extensive collection of British studio pottery in the country – gathered in the years after the Second World War by a librarian from Wakefield called WA Ismay. Writing in The Guardian, Rachel Cooke uses the exhibition as an example of London not being the only global capital of music, art, design and theatre – the north is equally full of exquisite treasures. The only thing it lacks is the funding, attention and media coverage that London quite unfairly receives the lion’s share of, she argues.

Markets

What happened yesterday?

London stocks ended the day little changed yesterday amid worries about inflation and rising Covid cases in Europe, and as investors mulled the latest comments from Bank of England governor Andrew Bailey. Bailey commented that he is “very uneasy about the inflation situation”, an indication that interest rates could rise as soon as December. The FTSE 100 ended the day up just 0.05% at 7,351.86 while the FTSE 250 was 0.27% firmer at 23,621.58. Wall Street stocks ended the session much the same as they started on Monday morning. At the close, the Dow Jones Industrial Average was 0.04% weaker at 36.087.45, while the S&P 500 was flat at 4,682.80 and the Nasdaq Composite was down 0.04% at 15,853.85. In company news Jamie Dimon, chair and chief executive of JP Morgan Chase, said he was “not swayed by geopolitical winds” as he arrived in Hong Kong on Monday, becoming the first boss of a major Wall Street investment bank to visit the city or mainland China since the start of the pandemic. Coinbase co-founder Fred Ehrsam and former Sequoia Capital partner Matt Huang have completed a $2.5bn fundraise for Paradigm One, the largest new venture capital fund in cryptocurrencies.

What’s happening today?

Finals
FocusriteImperial BrandsRev Bars

Interims
Adept Tech.Gear4musicHomeserveMckay SecuritiesPremier FoodsVodafone

AGMs
CranewareDunelmNew Star Inv

UK Economic Announcements
(07:00) Unemployment Rate(07:00) Claimant Count Rate

Int Economic Announcements
(10:00) GDP (Preliminary) (EU)(13:15) Industrial Production (US)(13:30) Import and Export Price Indices (US)(14:15) Capacity Utilisation (US)(15:00) Business Inventories (US)

Source: Financial Times

did you know

In 1909, Pierre Cartier, the grandson of Cartier’s founder Louis-François Cartier, moved New York to open Cartier’s first ever store in the US. Despite not having enough funds to afford the building, he secured Cartier its current flagship location of 653 Fifth Avenue, the neo-renaissance mansion of banker Morton Plant, by successfully bartering a double-strand pearl necklace and $100 in exchange for the six-story apartment building.

Parliamentary highlights

House of Commons

Oral questionsBusiness, Energy and Industrial Strategy Ten Minute Rule MotionFlooding (Prevention and Insurance) LegislationFinance (No.2) Bill: Second reading AdjournmentFunding for autism and neurodiversity research

House of Lords 

Oral questionsVarious LegislationSocial Security (Up-rating of Benefits) Bill – consideration of Commons amendmentsDormant Assets Bill [HL] – report stage Short debateRecommendations in the report by All Party Parliamentary Group on Dementia ‘Fuelling the Moonshot’

Scottish parliament 

First Minister’s Statement: COVID-19 Update

Ministerial Statement: COP26 Outcomes

Scottish Government debate: Celebrating the First Anniversary of the Scottish National Investment Bank

Committee Announcement: COVID-19 Recovery Committee – COVID-19: preparing for winter and priorities for recovery

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