The week in investor relations: Musk cashes in after Twitter poll, Austria plans crypto tax and GE’s three-way split
– The Financial Times (paywall) reported that Elon Musk sold nearly $5 bn worth of his Tesla shares in the first three days of this week, after promising he would cash in 10 percent of his stake if Twitter users voted for him to make the sale. The Tesla chief executive ‘has been silent on the possible share sales’ since he announced in a tweet on Saturday, November 6, that he would sell 10 percent of his holding – currently worth around $18 bn – if a Twitter poll backed the idea.
The paper said it was unclear whether the spate of transactions disclosed in regulatory filings after the market closed on Wednesday was the first instalment in making good on his promise but noted that ‘at least some of the disposals were planned well before his Twitter stunt’. Adding that Musk had ‘attracted huge attention by appearing to leave it to the Twittersphere’ as to whether he sold shares, the FT said regulatory filings showed that at least $1.1 bn of the sales were set in motion when he adopted a blind trading plan in September.
– Bloomberg reported on Austria’s plans to boost confidence in cryptocurrencies by taxing them like mainstream stock and bond investments. The home country to Peter Thiel-backed trading platform Bitpanda intends to apply a 27.5 percent capital gains levy on digital tokens like Bitcoin and Ethereum from March 2022 as part of a wide-ranging tax overhaul. More jurisdictions have been examining the imposition of taxes as the global cryptocurrency market’s value has swelled to more than $3 tn. Austria said its tax framework would be the first of its kind in the EU and may improve fairness among investors by streamlining conditions between different classes of assets.
– The Wall Street Journal (paywall) reported that General Electric said it would split into three public companies, breaking apart the more than century-old firm. The move is the culmination of a years-long process of shrinking the company. GE has already sold off its locomotive and home appliances business and has spun off its oil-and-gas business operations. What remain are three businesses in the aviation, healthcare and power industries. The company will now spin them off into separate publicly traded companies.
The GE board began to consider the plan in spring, CEO Larry Culp said, as efforts to cut GE’s debt and improve operations had progressed enough to consider such a move. ‘We looked at this and other options,’ he said. ‘It was clear this is the right path for GE.’ Trian Fund Management, an activist investor whose partner Ed Garden sits on GE’s board, said it welcomed the split. The FT noted that Wall Street banks had generated $7.2 bn in fees from the ‘rise and fall’ of GE.
– In related news, CityAM reported that Toshiba has also proposed plans to break up into three independent companies focused on infrastructure, semiconductors and devices. The decision follows a five-month strategic review undertaken after ‘a highly damaging corporate governance scandal’. The Japanese conglomerate argues that splitting the company is the best path to enhancing shareholder value, said the paper. Toshiba will spin off two core businesses – its energy and infrastructure business, and its device and storage business – after which it will continue to own a 40.6 percent stake in memory chipmaker Kioxia alongside other assets. It expects to complete the reorganization by the second half of 2023.
The ‘once-storied 146-year old conglomerate has lurched from crisis to crisis since an accounting scandal in 2015,’ said CityAM. Two years later, it secured a $5.4 bn cash injection from more than 30 overseas investors, allowing it to avoid a delisting, but bringing in activist shareholders including Elliott Management, Third Point and Farallon.
– AstraZeneca is moving away from its non-profit Covid-19 vaccine model, reported the FT. The Anglo-Swedish drug-maker expects to transition the vaccine to ‘modest profitability’ as new orders are received, though its vaccine, developed with the University of Oxford, will remain non-profit for developing countries. The move comes after AstraZeneca announced it was creating a vaccine and immune therapies unit, to bring together its Covid-19 products and its other treatments for viral respiratory illnesses.
AstraZeneca committed to selling its vaccine ‘at cost’ for the duration of the pandemic, though chief executive Pascal Soriot told the paper in May that he did not know when the firm would consider the pandemic over, and that transition to a payment model could be on a country-by-country basis. The FT said AstraZeneca booked $1 bn in revenues from the vaccine in the third quarter, far less than rivals that charge more. Pfizer generated $13 bn in sales from its vaccine and Moderna reported revenues of $5 bn, the vast majority coming from its Covid-19 vaccine. The profits from vaccine sales in the fourth quarter will apparently cover the costs of investment in AstraZeneca’s antibody treatment for Covid-19.
– Reuters reported that Swedish prosecutors brought charges against the chairman and former CEO of Lundin Energy for complicity in war crimes carried out by the Sudanese army and allied militia in southern Sudan from 1999 to 2003. Prosecutors said the company had asked the Sudanese government to secure a potential oilfield, knowing this would mean seizing the area by force. This made the executives complicit in war crimes that were then carried out by the Sudanese army and allied militia against civilians.
Sweden launched an investigation in 2010 following a report on Lundin’s presence in Sudan by the Dutch non-governmental organization PAX, which called for an investigation into the company’s role in human rights abuses there. ‘This is the first time since Nuremberg that a listed company will have accounted in court for war crimes,’ Egbert Wesselink, a spokesperson for PAX, told Reuters. ‘Many corporations look at human rights as a source of risk that must be managed, instead of a norm that must be upheld,’ he added.
Sweden-based Lundin Energy said in a statement that it rejected any grounds for allegations of wrongdoing
– JPMorgan turned bullish on UK stocks for the first time since the Brexit vote, announced CNBC. The Wall Street bank upgraded UK stocks to ‘overweight’, it said, ending years of caution on British equity markets that the bank said are now trading at a ‘record discount’. JPMorgan had held a long-standing ‘cautious call’ on UK equities since the Brexit referendum in 2016, before moving to ‘neutral’ in July 2020 after what CNBC described as ‘a particularly dire spell for UK stocks and after the worst of the coronavirus pandemic’. Improvements over the last 12 months against the UK’s US and European peers moved the bank to upgrade the UK in both a European and global context.
– CNBC reported that, according to campaigners, financial institutions and individual board members could be the next targets of climate litigation cases. ‘We have litigated against countries and been successful,’ said Roger Cox, lawyer for Milieudefensie, an environmental campaign group and the Dutch branch of Friends of the Earth. ‘Now we have shown that one can successfully litigate against fossil fuel corporations and I think the next step is to start also litigating against the financial institutions that make these emissions and fossil fuel projects possible. I even think… board members of these large private institutions who continue to willingly frustrate achieving the Paris Agreement might become liable in years to come under direct liability regulations.’
– Environmental activist Clara Mayer and the heads of Greenpeace Germany sued Volkswagen in a German court, accusing the company of failing to do its part to combat climate change, Reuters reported. The claimants had given Volkswagen eight weeks to consider their demands, which included ending production of internal combustion engine cars by 2030 and reducing carbon emissions by at least 65 percent from 2018 levels by then, before filing the suit. Volkswagen rejected the demands on October 28.
‘Volkswagen stands for climate protection and decarbonizing the transport sector, but it cannot tackle this challenge alone,’ a spokesperson said. ‘The task of designing appropriate measures belongs to parliament. Civil court disputes through lawsuits against singled-out companies are not the place or way to do justice to this task of great responsibility.’