The week in investor relations: California to sue Tesla, ESG not a strategy and ‘US day to start in Seoul’ after new trading deal
– According to Reuters, Tesla said the California Department of Fair Employment and Housing intends to file a lawsuit against the company alleging systematic racial discrimination and harassment. The lawsuit seems to be focused on alleged misconduct at its factory in Fremont, California, between 2015 and 2019, Tesla said in a statement. The company said it will ask the court to pause the case once the state’s civil rights regulator files its lawsuit. Tesla said that, despite several requests, the regulator declined to provide the company with the specific allegations or the factual bases for its lawsuit. The department did not immediately respond to a Reuters request for comment.
– ESG-themed indices are ‘all but indistinguishable’ from traditional benchmarks, said Institutional Investor, citing research from Research Affiliates. Instead, it says ESG is an investment preference. The top five ESG benchmarks ‘look a lot like the Russell 1000 Index’ in terms of holdings, valuation and performance, found the study. The ESG indices have all placed huge bets on technology giants like Apple, Microsoft and Alphabet – just like the traditional benchmark. In fact, all of the top 10 holdings of the five ESG indices and the Russell 1000 are the same, except for Johnson & Johnson, Berkshire Hathaway and PayPal, according to the research.
– Asian investors can now buy and sell US stocks during Korean business hours in real time through a partnership between Samsung Securities and US-based off-exchange trading venue operator Blue Ocean Technologies, reported Reuters. It quoted Brian Hyndman, president of Blue Ocean, as saying: ‘This is the first time in the history of the US markets where Asia-Pacific investors are going to have the ability to trade US stocks before US investors. The US day is going to start in Seoul.’
– The BBC reported that oil giant BP rejected calls for a windfall tax on energy companies’ bumper profits, arguing that it would reduce investment in UK gas and renewables. BP posted a profit of $12.8 bn for 2021 after oil and gas prices surged in the second half of the year. That prompted calls for a one-off tax to help support families struggling to pay their energy bills. The UK’s Labor Party said it was ‘only fair and right’ that energy firms making higher profits should pay more tax. But BP said: ‘Generally, a windfall tax on UK oil and gas producers would not encourage investment in producing the UK’s gas resources.’
– The Guardian reported the news that Nvidia’s takeover of UK chip-maker Arm collapsed due to insurmountable regulatory hurdles, with Arm apparently exploring a stock market flotation as an alternative. The deal, which would have been the largest in the semiconductor industry, ‘had become mired in red tape on both sides of the Atlantic and in China,’ said the paper, and faced opposition from industry players since it was announced in September 2020. The Financial Times (paywall) added that Arm’s owner SoftBank is looking to list the firm on Nasdaq rather than in the UK. The paper said SoftBank’s plans had ‘sparked a furor in the UK at a time when the country is experiencing deep insecurities about its ability to retain homegrown technology champions.’ Further legal issues have already cast a shadow over the firm’s flotation plans, added the FT on Friday morning.
– Buy now, pay later company Affirm was forced to release results early after a since-deleted tweet was sent from its official Twitter account detailing some financial performance metrics. CNBC reported that the tweet, which said sales had grown 77 percent, suggested Affirm would beat revenue expectations. Analysts polled by Refinitiv had expected a 61 percent rise and the news agency said the stock was briefly up as much as 10 percent on that tweet. But when it was then forced to release quarterly results early, the company had missed analyst estimates on revenue, driving down the stock 21 percent. Affirm, which went public in January 2021, said in another tweet that the inadvertent release of financial results was due to human error.
– Hedge funds and other activist investors would have to disclose significant investments in US public companies within five days under proposed new SEC disclosure rules, reported the FT – a move that would halve the time they currently have to amass a secret stake. The change would force funds to reveal a stake of 5 percent or more and to amend that disclosure more quickly if the holding changed materially. The move is part of a larger effort to shine a light on what big private investors are doing. It will also make it harder for activists to profit from secret stakes.
– The Wall Street Journal (paywall) reported that Peloton Interactive co-founder John Foley, who has led the company for its entire 10-year existence, is stepping down as CEO and will become executive chair. Barry McCarthy, the former CFO of Spotify Technology and Netflix, will become CEO and president and join Peloton’s board. The company will also cut roughly 2,800 jobs, affecting 20 percent of its corporate positions, to help cope with a drop-off in demand and widening losses.
Activist investor Blackwells Capital recently called for Peloton to fire Foley and explore a sale of the company. It reiterated its call on Tuesday, saying Foley should leave the company rather than become executive chair. ‘We are open to exploring any opportunity that could create value for Peloton shareholders,’ Foley said in an interview before Blackwells’ Tuesday release. He declined to comment further.
– Companies will no longer be able to force employees and customers into arbitration proceedings to address claims of sexual assault and harassment under legislation passed by the Senate, the WSJ reported. The legislation will now go President Joe Biden’s desk for his signature. The White House said in a statement earlier this month that Biden strongly supports the bill and wants to work with Congress to pass legislation addressing mandatory arbitration more broadly, including on claims regarding racial discrimination, wage disputes and labor practices.
Mandatory arbitration clauses block consumers and employees from raising claims in court. The companies that put such clauses in their contracts say arbitration is more efficient, but consumer advocates say the confidential system helps businesses evade public accountability.
– Korea’s fast-growing $200 bn wealth fund is ‘betting on the metaverse and Silicon Valley start-ups,’ according to the South China Morning Post. It reported that Korea Investment Corp (KIC) has almost doubled in size over the past five years, after a slow start when it was created in 2005 to contribute to South Korea’s finance industry. KIC’s focus on US start-ups means it is now looking at expanding its San Francisco office as it explores investments in tech, health and green ventures in Silicon Valley, as well as artificial intelligence and alternative assets.