IIt’s a Chinese technology and it’s somewhat similar to Uber, so it should be very valuable. We have to assume that was the analysis of those US investors who piled into Didi last week as a New York-listed ride-sharing app with a mighty valuation of $80 billion (£60 billion). If anyone read the warning in the prospectus for the initial public offering about regulatory risks in China, they likely dismissed it as normative material.
They are wiser now. Seemingly intimidating, China’s cyberspace administration hit Didi by ordering it to remove its app from local online stores, a move the company said with a remarkable reduction that “could have a negative impact” on its revenue in China, its largest market by far. That points to a 25% drop in the stock price at one point on Tuesday, on just the fourth day of trading, a farcical case.
The short-term question is whether the Diddy administration and its Wall Street advisers had the idea that a crackdown was coming amid well-publicized Chinese paranoia about consumer data falling into the hands of US officials. Reports on Tuesday said the Chinese regulator had urged Didi to delay its listing without actually ordering it to do so. New company investors may want to have a full account.
Still, it’s easy to read the tale’s long-term moral: Beijing is deeply troubled that many of the biggest tech companies are heading to New York to raise money, rather than sticking to stock markets in Shanghai or Hong Kong. Two other companies that were taken over by the latest cyber investigation were brought up in New York last month: Full Truck Alliance, a shipping app, and Kanzhun, the recruitment firm. The timing of the crackdown seemed designed to attract maximum attention.
Just to be safe, Beijing made its message clear later on Tuesday by announcing stricter rules on “information security responsibilities” for Chinese companies listed abroad. This appears to cover most of the data-intensive businesses that have caught the eye of US investors.
34 were listed in the US this year, which is a staggering number. Beijing appears to have decided that “data security,” which threatens it according to US scrutiny rules, trumps its previous desire to view its technology companies as global champions. If so, the Didi case represents a significant change in investment policy.
Sainsbury’s is safe from capture… for now
Simon Roberts, CEO of Sainsbury’s, dismissed talk of the takeover with the boring but correct reply that, if the board had anything to announce, it would have done so. A more insidious boss could have said he was offended by being so far inferior to sweeping the private equity supermarket.
Asda has fallen into the hands of TDR Capital and the Issa Gas Station brothers, and Morrisons’ days of independence are numbered. Why wasn’t Sainsbury’s first in the frame? It’s a bigger company than Morrisons, but with a market capitalization of £6.2 billion, roughly the same value as the Bradford-based rival’s recent bid.
The larger Sainsbury’s debt (mostly lease obligations) is not an appropriate answer because the group’s freehold property, although a small percentage of the total versus the Morrisons, is also worth much more.
The main factor may be Sainsbury’s ownership of Argos and a bank, making it a more chaotic proposition for private equity buyers who prefer clean lines. In that regard, though, Roberts’ strategy of “putting food back into the heart of Sainsbury’s” (which, coincidentally, appears to be an implicit criticism of his predecessor) should keep things simple. In essence, this approach means that the terminal bits are meant to generate cash to invest in the food trade, rather than consuming it.
The best defense against a takeover bid is a higher stock price. Sainsbury’s prices have risen from 230p to 280p since the start of the year, and Tuesday’s full-year profit outlook adjustment from £620m to £660m will help the mood. Keep going. Given the current appetite for private equity, one wouldn’t say Sainsbury is in safe territory yet.
Your debt predicament in a nutshell
“It was just as governments could balloon their debts away. It’s an issue less and less as we go forward,” Richard Hughes, head of the Office of Budget Responsibility, said on Tuesday, as the agency unveiled its annual report on budget risk.
There is, in short, essential insight into the UK’s finances. Quantitative easing and the pandemic bill have shortened the maturity of the UK’s debt profile. The financial impact of a one percentage point increase in interest rates is six times greater than it was in 2007, the Balance Sheet Office estimates. It’s the counselor’s biggest restraining jacket and he barely mentions it. he has to.