The week in investor relations: Supply chain disclosures, UK political turmoil hits IPO plans and Russian bourse records $11 mn worth of trades in Hong Kong-listed stocks
– The Wall Street Journal (paywall) said US companies will have to disclose the terms and size of their supply-chain financing programs under a new rule from the FASB, which approved it on Wednesday. Supply-chain financing has gained popularity as companies build up inventory and push their payment terms out further. The tool allows companies to pay bills later, while suppliers get their cash more quickly. A third party – usually a bank – pays the vendor’s invoices and takes a cut. The business pays the bank what was due under the invoice at a later date than originally required. Companies previously haven’t had to report these arrangements in their financial statements.
– SoftBank put on hold plans for a London IPO of Arm because of the political turmoil in the UK, reported the Financial Times (paywall), apparently throwing doubt on Britain’s place as the future home of the Cambridge-based tech giant. UK Prime Minister Boris Johnson has personally lobbied SoftBank’s billionaire founder Masayoshi Son to secure at least a partial listing for the chip designer on the London Stock Exchange (LSE), said the paper. As Johnson’s government collapsed earlier this month, investment minister Lord Gerry Grimstone and digital minister Chris Philp resigned. They had both played leading roles in talks with the Japanese tech investor.
City AM added that the LSE said the bourse was willing to ‘fight’ to win the listing. ‘I want to win every single offering I can and I also feel very strongly there is a very compelling case for Arm to have a dual premium listing in the UK,’ CEO Julia Hoggett told Bloomberg Television.
– The St Petersburg Exchange, Russia’s second-largest bourse, recorded more than HK$87 mn ($11.2 mn) worth of trades from the first batch of Hong Kong-listed technology stocks under its trial program since last month, according to the South China Morning Post. The volume, which equaled 0.14 percent of the total trades generated on the exchange, was within expectations, according to Stanislav Martyushev, head of business intelligence at the bourse operator known as SPB. ‘The recorded trading volumes are in line with our expectations for the period of trial operation in the new segment,’ he told the paper.
The volume came from 22,291 deals involving the shares of Alibaba Group, Tencent Holdings and 10 other stocks that SPB unilaterally added on June 20. ‘We expect the trade turnover will increase’ as more brokerages and stocks are added to the initiative later this year, added Martyushev. To date, eight brokerages have provided their clients with access to Hong Kong stocks, with around 10 more expected to join.
– Wall Street is set for a ‘new ETF gold rush,’ reported Bloomberg (paywall) as the ‘single-stock era begins’. The news agency said a ‘new ETF-for-everything era may have just begun on Wall Street’, swelling an industry that already boasts nearly 3,000 products and $6.2 tn in assets. The booming world of ETFs is about to get even more crowded after the very first single-equity ETFs launched this week, added Bloomberg, ‘despite a torrent of regulatory warnings over their risks while retail investors are still reeling from the crash in speculative trades from crypto to meme stocks.’
Elsewhere, Risk.net reported that SEC commissioner Caroline Crenshaw is lobbying the agency’s chair, Gary Gensler, to review how it regulates ETFs that give investors leveraged or inverse exposure to the stock of a single company, such as electric car maker Tesla or vaccine manufacturer Pfizer.
– Companies reportedly ‘swallowed’ $2.1 bn in taxes after Congress limited deductions for executives and pay over $1 mn, said the WSJ. Companies are racking up hundreds of millions of dollars in income taxes on pay for top executives, a growing bill that in some cases makes up a sizable chunk of their annual tax expense, said the paper. Tesla, for example, booked $447 mn in taxes on executive pay over three years. Pay for officers generated nearly 20 percent of all tax costs booked by defense contractor Howmet Aerospace in the same period. At cosmetics retailer Ulta Beauty, executive pay subject to corporate tax has more than tripled since 2019.
– A key EU lawmaker is set to back calls for a formal ban on brokers selling customers’ share trades to market intermediaries, adding to momentum in favor of clamping down on the practice, reported the FT. Danuta Hübner, a senior lawmaker in the European Parliament, said in a draft statement seen by the paper that the concerns around the practice known as payment for order flow are ‘symptomatic of a broader issue’ of national EU regulators interpreting rules differently. In her note, she said ‘the rapporteur maintains the initial proposal’ of the European Commission, which is to ban the practice.
The draft highlights the growing resistance in Europe to payment for order flow even before it has become popular in the region. US brokerages earn billions of dollars a year on the process, collecting a record $3.8 bn during last year’s retail trading boom. Payment for order flow is also lucrative for high-speed trading firms that profit on the difference in their own purchase price for a share and the price at which they pass it on to clients, added the FT.
– There has been a ‘clear shift’ to focus on environmental factors within ESG initiatives in the securities finance industry, according to a sustainability expert talking to Global Investor (paywall). Nicky Heber, director and ESG campaign lead at capital markets technology firm LPA, said most ESG initiatives in securities lending have been directed toward governance matters and therefore on existing services. He told the publication: ‘Although the industry has focused on governance matters so far, recently there has been a clear focus shift to the world’s most significant environmental issues.’
– The majority of firms are not yet monitoring WhatsApp, according to The TRADE, despite several major institutions being recently served with significant fines by regulators. Citing research by SteelEye, the publication said just 15 percent of investment firms are monitoring communication on the social media channel while just 9 percent monitor Slack and 3 percent monitor Signal. Around 40 percent of firms monitor incumbent platforms such as Teams and Bloomberg Chat, while only a quarter monitor Zoom. ‘When it comes to email and desk phones – or traditional methods of communication – record keeping and supervision rules are relatively straightforward,’ said SteelEye chief executive Matt Smith.