The week in investor relations: Amazon running out of workers, the big risk to equities and small, private firms fear supply chain impact of SEC climate regulation

– With human capital management an increasing focus among investors, a leaked internal memo showed that Amazon fears it could run out of workers if turnover continues at current rates. That’s according to a report in the Guardian. ‘If we continue business as usual, Amazon will deplete the available labor supply in the US network by 2024,’ the research, first reported by Recode, stated. Describing Amazon’s staff turnover as ‘astronomical,’ the newspaper said the firm was right to be worried. ‘Before the pandemic, Amazon was losing about 3 percent of its workforce weekly, or 150 percent annually,’ it said. ‘By contrast the annual average turnover in transportation, warehousing and utilities was 49 percent in 2021 and in retail it was 64.6 percent – less than half of Amazon’s turnover.’

– ‘As global equities go deeper into bear market territory, it is important to recognize the unusual nature of this sell-off,’ according to a comment piece in the Financial Times (paywall). ‘The pain so far has come largely from a contraction on the valuation placed on the more expensive stocks and their earnings prospects. This means we have probably only seen the first phase of this bear market,’ wrote Ian Harnett, co-founder and chief investment strategist at Absolute Strategy Research. ‘With valuations having come down so far, the greatest risk to equities now comes from actual earnings falling short of current expectations. The next leg of the bear market is likely to be driven by earnings recessions, especially in the more cyclical stocks, sectors, and markets,’ he warned.

– Small businesses, ‘normally outside the domain of the SEC,’ say the regulator’s proposal on climate disclosures will saddle them with a compliance burden they won’t be able to handle, according to The Wall Street Journal (paywall). Farms, independent manufacturers and other small businesses that don’t trade on stock exchanges normally don’t fall within the SEC’s purview, but the paper said small firms now fear they will be ‘forced to cough up heaps of information’ on their roles, however small, in emitting carbon because the SEC wants large public companies to catalog emissions in their entire supply chains.

‘Small and independent businesses cannot afford the experts, accountants and lawyers needed to comply with complex government reporting regimes,’ the National Federation of Independent Business said in a comment letter filed with the SEC.

– In other related news, ‘young victims of the climate crisis have launched legal action at Europe’s top human rights court against an energy treaty that protects fossil fuel investors,’ reported the Guardian. Five people, aged between 17 and 31, ‘who have experienced devastating floods, forest fires and hurricanes’ are bringing a case to the European court of human rights, where they will argue that their governments’ membership of the ‘little-known’ energy charter treaty (ECT) is a dangerous obstacle to action on the climate crisis. It is the first time that the Strasbourg court will be asked to consider the treaty, which the paper describes as ‘a secretive investor court system that enables fossil fuel companies to sue governments for lost profits’.

The Guardian says the treaty – which has about 55 member countries, including EU states, the UK and Japan – has been described as ‘a real threat to the Paris agreement,’ because it could allow companies to sue governments for an estimated €1.3 tn ($1.37 tn) until 2050 in compensation for early closure of coal, oil and gas plants.

– Global money is ditching Big Tech for a new group of stocks, according to Nikkei Asia, which says fuel, aerospace, agriculture, nuclear and gold ‘make up FAANG 2.0’. the shift is part of an ‘emerging trend’ in global stock markets as investors move away from globalization to a ‘divided world’ after the Russian invasion of Ukraine. ‘Shares of once-highflying tech giants have slumped, while those in more mundane sectors like energy and agriculture are performing well,’ said the publication.

– Efforts in Shanghai to keep listings rolling even as the city’s strict Covid-19 lockdowns shut down daily life have paid off, according to the FT. New listings in China this year have ‘raked in more than double the amount raised on Wall Street,’ after officials camped out at Shanghai’s stock exchange during lockdown to ensure a steady flow of deals, said the paper. Total fundraising from IPOs in China has hit almost $35 bn this year, compared with just $16 bn on Wall Street, according to data from Dealogic.

– In related news, deal momentum slowed in the second quarter of 2022, said Institutional Investor, ‘amid growing global macroeconomic and geopolitical uncertainty’. Taking a midyear look at asset and wealth management deals, PwC said the slowdown could signal a continued easing in the second half of the 2022. However, the report noted that while deal markets slowed a bit in the first half of the year, asset and wealth management deal volume ‘didn’t hit rock bottom’. In fact, some 109 deals were announced by May 15 – an 11 percent increase over the same period in 2021. Notable transactions included UBS’s acquisition of Wealthfront for $1.4 bn, AllianceBernstein’s acquisition of CarVal Investors for $1.4 bn and Carlyle’s acquisition of a portfolio of collateralized loan obligations from CBAM for $787 mn, the report said.

– Kellogg’s plan to spin off its cereal and plant-based foods businesses could have wider repercussions as it renews focus on corporate breakups in the US food industry, according to the WSJ. Campbell Soup, General Mills and other food makers have for years built out their baskets of brands, acquiring newer, trend-aligned products and pushing into other supermarket segments, such as pet food, said the paper. Those acquisitions have brought new growth to food companies, while the stalwart brands that built the companies have in some cases stagnated or shrunk, dragging on the overall business, analysts said. ‘As food makers battle rising costs and economic uncertainty, some could benefit by following Kellogg in breaking apart their businesses, said stock analysts and deal consultants,’ added the WSJ.

– Back in 2015, Sarah Ingmanson, an IR consultant specializing in the Japanese market, wrote for IR Magazine that improved translation of IR materials in the country would lead to more investor interest. Seven years later and Nikkei Asia has reported that Sharp plans to adopt English as its official language next year. CEO Wu Po-hsuan unveiled the plan when asked at a briefing whether he was able to communicate with others in the company. Sharp needs to foster globally competitive talent, he said. Wu became CEO of the Osaka-headquartered firm in April and also assumed the position of president following Sharp’s general shareholders meeting this week. The company will reportedly decide later the scope and settings in which English will be used.

– The FT reported that a small group of hedge funds are profiting from turmoil in the digital asset market that has already wiped trillions of dollars off the total value of cryptocurrencies. Some computer-driven funds — which use algorithms to try to predict and trade price moves in crypto and other markets — have picked up winnings from rapid declines in assets such as bitcoin and luna – which crashed from more than $80 to close to zero in a matter of days – even as many other investors are suffering huge losses, said the paper. The investors capitalizing on such bets include former Lehman Brothers and Morgan Stanley trader Jay Janer, who is the founding partner of KPTL Arbitrage Management in the Cayman Islands. His Appia fund, which wagers on rising and falling crypto futures prices as part of its strategy, profited from the $40 bn collapse of luna last month.