The week in investor relations: Apple’s $3 tn valuation, China Mobile’s Shanghai listing and investor pressure over vaccine distribution
– Apple briefly became a $3 tn company this week – the first firm to hit the milestone – before valuation slipped back a little to $2.99 tn, reported CNBC (and just about everyone else). Apple broke the barrier when its share price rose 2.5 percent on Monday to hit $182.86, though it closed at $182.01. Apple has tripled its valuation in under four years. Although the ‘milestone is mostly symbolic’, the news site said it shows that ‘investors remain bullish on Apple stock and its ability to grow’. Later in the week, CNBC said Warren Buffett’s ‘out-of-character bet’ on Apple – Berkshire Hathaway began buying Apple stock in 2016 and by mid-2018 had accumulated a 5 percent stake in the iPhone-maker – had made him more than $120 bn on paper.
– China Mobile began trading in Shanghai this week, after raising $7.7 bn in what the BBC said was China’s biggest public offering in a decade. The firm’s shares opened 9.4 percent higher before ending the first day of trading flat at just 0.5 percent higher. China Mobile – along with smaller rivals China Telecom and China Unicom – was delisted from the NYSE in January 2021 after ‘a Trump-era decision to restrict investment in Chinese technology companies.’ The two other mobile companies had already made the move to domestic exchanges.
– A group of top international investors said drug companies need to prioritize global access to Covid-19 vaccines and tie management pay to equitable distribution, the Financial Times (paywall) reported. Sixty-five institutional investors representing more than $3.5 tn in assets under management wrote to leading pharmaceutical companies urging them ‘to make the global availability of vaccines part of the remuneration policy of managers and directors.’
The investors said in the letter: ‘It is clear that currently a large part of the world population still does not have sufficient and equitable access to vaccines. A pandemic [that] remains out of control in many parts of the world is and should be at the top of our agenda as global investors, and also for governments and the companies in which we invest.’
– Investors dumped shares in many of the technology companies that had surged during the pandemic, reported the FT on Wednesday, as what it described as the ‘looming specter of higher interest rates prompted them to buy into businesses more tightly linked to the economic recovery’. The technology-heavy Nasdaq Composite index closed 3.3 percent lower on Wednesday, its worst day since February 2021, while a sell-off in the $22 tn US Treasury bond market intensified.
The ‘fierce rotation’ out of tech stocks since the start of the year, which has favored shares of banks and big industrial groups, has also been propelled by expectations that the Omicron Covid-19 variant will be less disruptive than previous strains of the virus. ‘Spec-tech is getting wrecked,’ the FT quoted Hani Redha, a portfolio manager at PineBridge Investments, as saying, referring to the unprofitable, ‘speculative’ technology companies with high valuations that are being hardest hit.
– Nikkei Asia reported that China is set to implement new rules to increase its oversight of Chinese platform firms looking to list on overseas stock markets. The move is the latest by China in its plan to increase control over its ‘sprawling technology sector’. The Cyberspace Administration of China (CAC) said the new rules come into effect on February 15 and require platform companies with data on more than 1 mn users to undergo a security review before listing their shares overseas. ‘With stock market listings, there is a risk that key information infrastructure, core data, important data or a large amount of personal information could be impacted, controlled or maliciously used by foreign governments,’ Nikkei Asia quoted CAC as saying in a statement.
– The Wall Street Journal (paywall) reported that the Financial Accounting Standards Board (FASB) plans to propose new rules on how companies disclose expenses. It also plans to propose important changes to its long-term agenda this year. FASB in recent months has received more than 500 letters in which companies, investors, academics and other stakeholders shared their opinions on what it should focus on. Many finance executives and investors want it to write rules on how to account for cryptocurrency assets and on financial instruments tied to ESG issues. In both cases, there are no specific rules companies can follow.
– The EU proposed treating nuclear energy and natural-gas investments as similar to renewables in coming years as part of efforts to reach a carbon-neutral economy but the approach faces criticism from some member state governments, according to the WSJ. The proposal from the European Commission spells out changes to what counts as investment in environmentally sustainable energy. Known as the ‘green taxonomy’, it is being closely watched by investors and industries including power generation, transportation and manufacturing.
– Financial News (paywall) reported that top Wall Street banks took their biggest ever share of the deal-making fee pool from European rivals in 2021 as revenues ‘swelled to a record $128 bn’ last year. ‘US investment banks stretched their lead over European competitors in a year when [M&A] and equity capital markets activity spurred the hottest ever streak for deal-makers,’ it said.
– The WSJ reported that since the Omicron variant has emerged, Wall Street banks have hit the brakes on bringing workers back to the office. The banks hope the pause is short-lived but, even after Omicron subsides, they could find themselves facing a more deep-seated problem. Many of their employees have grown used to more flexible working arrangements and aren’t willing to go back into the office full time. How their return-to-work experiment plays out could set the stage for other white-collar industries.
– Elsewhere, CNN reported that New York City Mayor Eric Adams is not pleased with the shift back to remote work by Wall Street banks and other major employers. ‘We have to open up,’ he said. ‘I need my city to open. And we have to be safe, we have to double down on vaccinations and booster shots. We have to double down on testing. But we have to reshape our thinking on how we live with Covid.’ Adams is concerned that empty offices will hurt the broader ecosystem of businesses that rely on office workers and business travelers, including dry cleaners, restaurants and hotels.
– The Philippine Stock Exchange canceled trading on Tuesday because of a technical glitch at the start of the session, reported Nikkei Asia. The stock exchange operator said 43 of 125 brokerage firms registered with it could not connect to the bourse’s trading engine and the news agency said that under the bourse operator’s rules, it can halt trading if a third of brokerage firms cannot access the system. The trading halt came after the Philippines’ broader index fell 1.4 percent on Monday, marking the bourse’s worst opening since 2016, ‘weighed down by rising Covid-19 infections that have prompted the government to tighten curbs’.
– In Japan, the FT reported that Toshiba’s plan to break itself into three companies ‘faces early derailment’ after one of its largest investors demanded an extraordinary meeting to vote on the split and ‘revive talks with potential buyers to take the whole conglomerate private’. The request for the EGM came from Singapore-based fund 3D Investment Partners, which, with a 7.6 percent stake, is Toshiba’s second-biggest investor. The move sets the Japanese conglomerate ‘on course for another potentially bruising clash with activist shareholders,’ said the paper.