The week in investor relations: Just Eat warned on Twitter spat, China crackdown boost for small caps and tougher rules from the SEC
– Chief executives are being warned to ‘think twice before they tweet,’ reported The Guardian after the boss of takeaway company Just Eat Takeaway was told his Twitter spat with Uber threatened to undermine the firm’s reputation. Cat Rock Capital Management, an activist investor with a 4.7 percent stake in Just Eat, highlighted Jitse Groen’s Twitter battle in April with Uber boss Dara Khosrowshahi in which the Just Eat founder accused Uber of trying to depress the company’s share price. He also told Uber in another tweet to ‘start paying taxes, minimum wage and social security premiums before giving a founder advice on how he should run his business.’ In a presentation on Just Eat, published this week, Cat Rock said Groen’s tweets had partly led to the firm being ‘deeply undervalued and vulnerable to takeover bids at far below its intrinsic value.’ Rather than challenging the labor practices of its competitors, ‘which is highly ineffective’, Cat Rock said Just Eat should have pointed ‘to the clear evidence of [its] operational and technical acumen’ when so publicly challenged on tech and ops.
– Emerging-markets veteran Mark Mobius told Bloomberg Television that the Chinese government’s crackdown on some of its biggest companies could boost the prospects of smaller rivals. Bloomberg (paywall) reported that Mobius, who spent three decades at Franklin Templeton before starting Mobius Capital Partners, believes small- and medium-sized companies in the technology, education and medical industries are likely to see better growth prospects as a result of increased regulatory scrutiny. Following the announcement of new regulations for online education firms last weekend, the MSCI China index fell more than 11 percent this week, ‘driving it toward the steepest two-day drop since the 2008 financial crisis,’ reported the news agency.
– in related news, China’s securities regulator sought to ease concerns among international investors and banks after the tough new restrictions on private education companies sent shockwaves through markets, reported the Financial Times (paywall). Regulators in Beijing held a call with executives from global investors, Wall Street banks and Chinese financial groups on Wednesday night, noted the paper, citing three people familiar with the matter. One of the people said there were about 12 attendees, including executives from BlackRock, Fidelity, Goldman Sachs and JPMorgan. The call sought to reassure the groups after China issued what amounted to a ban on the country’s $100 bn private tutoring industry at the weekend, which led to concerns of a broader regulatory crackdown on Chinese tech companies listed abroad.
– Companies should brace for a tougher stance from the SEC’s enforcement division under its new leader, Gurbir Grewal, according to Reuters. Grewal is the first enforcement director without recent ties to corporate America since 2005 and is not afraid of the courtroom. He sued ExxonMobil, DuPont and Unilever as part of an environmental justice initiative while serving as the New Jersey attorney general. ‘As a career prosecutor accustomed to the courtroom, [Grewal] won’t be afraid to aggressively push matters to trial,’ said John Carney, who ran New Jersey’s economic crimes unit from 2002 to 2005 – the same unit Grewal ran from 2014 to 2016.
– Robinhood – which went public this week with shares falling 8.4 percent on the first day of trading – introduced a feature aimed at protecting investors from crypto volatility, according to Bloomberg. The stock and cryptocurrency trading app is reportedly exploring a way for users to be better protected from volatile crypto prices and is working on a feature called ‘price volatility protection’, which would modify certain crypto orders depending on fluctuations in price. A message in the feature’s code says Robinhood ‘may sometimes skip your recurring orders or buy less than your chosen amount’ to protect trades from price volatility, but will inform users before taking such action and never purchase more than the amount selected. ‘We’ve been doing a lot of work behind the scenes to provide our crypto customers with the functionality they’ve been asking for,’ said Robinhood CEO Vlad Tenev.
– In more Robinhood news, the app revealed that it has received inquiries from US watchdogs asking whether employees traded GameStop and AMC Entertainment shares before the online broker publicly announced it was restricting trading in those and other meme stocks on January 28. Reuters reported that the company is also being probed over whether it complied with personnel registration rules. Earlier this month, Robinhood revealed a swathe of government and regulatory investigations in its IPO filing, just a day after FINRA hit the firm with a $70 mn penalty.
– The FT reported that some of the biggest names in asset management are preparing for a major shift to an era in which investors demand the customized equity portfolios that have traditionally been the preserve of wealthier clients. Suggesting the shift will ‘mark the next stage in the democratization of finance’, the paper said Vanguard, JPMorgan, BlackRock and Morgan Stanley have all done deals since 2020 to bolster their offerings in so-called direct indexing. The more bespoke approach to off-the-shelf products allows investors to own a group of stocks that mimic the performance of an established index, and to customize the portfolio to manage tax losses or to include ESG preferences. This has long been a service available to wealthy investors, but new technology is now making personalized portfolios possible for a broader audience.
– UK regulator the Financial Conduct Authority (FCA) is considering adding requirements for public companies to report on progress toward board diversity targets, Pensions & Investments reported. The proposed ‘comply or explain’ rules would require companies to report on progress toward 40 percent female board representation, having at least one woman in a senior position – chair, CEO, CFO or lead independent director – and at least one board director from a non-white ethnic background. The FCA will take input on the proposals until October 22.
– Aon and Willis Towers Watson called off their planned $30 bn merger, The New York Times (paywall) reported, a little more than a month after the Department of Justice (DoJ) sued to block the deal. The merger was proposed in March 2020 and faced scrutiny from regulators around the world, but it was the US regulator that ultimately caused the deal to hit the rocks. The DoJ’s lawsuit would have gone to trial in November at the earliest, which would have postponed the deal until at least the first quarter of 2022. A spokesperson for Aon told the New York Times that the delay was untenable. ‘This is a victory for competition and for American businesses and, ultimately, for their customers, employees and retirees across the country,’ said Attorney General Merrick Garland in a statement.