Some high-powered knighthoods to start: Rishi Sunak put forward JPMorgan Chase boss Jamie Dimon and former Google chair Eric Schmidt for UK honours, people familiar with the matter said, as the British prime minister enters what may be his final weeks in office.
In today’s newsletter:
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SoftBank’s old adversary returns
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De Beers chief’s diamond plan
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The upstart benefiting from Nvidia ties
Elliott takes a second swing at SoftBank
SoftBank founder Masayoshi Son is having to deal with an old sparring partner once again: Elliott Management.
The US activist firm has built up a stake of more than $2bn in SoftBank and has been talking to senior management for the past few months in an effort to convince them to spend $15bn buying back their own shares.
The fund has swooped on SoftBank at a time when the gap between the combined value of the company’s assets and its market valuation has never been wider, hovering at around 50 per cent since October of last year.
Son, meanwhile, is back on the offensive, planning to use SoftBank’s much improved balance sheet in his hunt for deals in artificial intelligence.
He has built his current growth strategy around a roughly 90 per cent stake in UK chip designer Arm, whose surging stock market price has lifted SoftBank’s net asset value to a record $180bn.
While the conglomerate’s shares have risen by more than 50 per cent this year, its current market capitalisation stands at about $90bn.
For Elliott, that record discount represents an opportunity, both for SoftBank and for shareholders, and they want to see a large-scale buyback by the time August’s first-quarter earnings roll around.
The firm’s last investment in SoftBank involved building a stake of about $2.5bn in early 2020, when it had a similar focus on the discount. And SoftBank — whether in part due to Elliott’s pressure or not — did eventually buy back a lot of shares.
It feels significant that Son is due to speak at SoftBank’s AGM in a little over two weeks — he is expected to put some flesh on the bones of his plans to invest in AI and support Arm.
The question for Elliott and investors is whether he thinks he can put all of SoftBank’s capital to better use than buying back its own shares.
SoftBank stock popped over 5 per cent on Wednesday after the FT’s story was published. That gives some sense of what investors think.
Son, however, remains harder to scrutinise.
Lab-grown gems beware: De Beers’ chief doubles down
Every great love story has a beginning and middle, but no end.
This may be how De Beers markets its diamond engagement rings, but when it comes to its own romance with owner Anglo American, the love story seems to be winding down.
Just two weeks after Anglo unveiled plans to sell or list the world’s biggest diamond producer by value, De Beers chief executive Al Cook, a former oilman at BP, outlined a five-year strategy to recut the diamond miner into a leading global luxury jewellery house, the FT’s Harry Dempsey reports.
It’s clear there’s a need for more than just a polish. Core earnings last year at $72mn were the lowest since the Oppenheimer family took the company private in 2001, as lab-grown diamonds cannibalised demand for stones dug out of the ground.
The growing popularity of factory-made diamonds robbed the natural stones of a whopping $7bn of jewellery sales in the US last year, according to De Beers’ estimates.
A departure from Anglo — a shareholder since 1926 and majority owner since 2012 — would be a historic moment for the company. But the need for the diamond industry, led by De Beers, to grasp a future that lies “way beyond mining”, as Cook put it, has been clear for some time.
The diamond industry has been something of a bystander to the lab-grown threat, opting for denial over counteroffensive marketing campaigns.
Crucial planks of Cook’s plan are to more than double De Beers Jewellery outlets — visible in the luxury districts of Bond Street and Madison Avenue — to 100 stores globally by the end of the decade.
De Beers will also partner with the likes of top jewellers such as Signet and Chow Tai Fook on marketing campaigns. Also helping De Beers’ ambition to capture more value for its diamonds is a ploy to also sell polished diamonds for the first time (besides the exceptionally valuable stones).
A new owner, particularly a big name within luxury goods, would help De Beers go further in its desired strategic direction.
But analysts find it hard to imagine who would want to buy the diamond company, which suffers from being like its product: so unique that it’s hard to value.
The business receives a “vast variety” of valuations, says Cook, which he hopes to narrow down through more transparent reporting in the quarters ahead.
That would suggest to some that the route of an IPO is more likely with Anglo having a tried and tested model in spinning out thermal coal producer Thungela in 2021.
CoreWeave goes up against the giants
Amazon Web Services and Microsoft’s Azure have long dominated cloud computing. But there’s a new player in town.
New Jersey-based CoreWeave, which was founded in 2017 and started off as a cryptocurrency miner, is slowly gaining a foothold in the white-hot cloud computing market. Its valuation reached $19bn after it raised $8.6bn in debt and equity last month, the FT’s Tim Bradshaw reports.
The secret to its success? Riding the AI wave — with some help from Nvidia.
The chipmaking behemoth took a $100mn stake in CoreWeave last year which valued the company at $2bn. Other investors include hedge fund Magnetar Capital, Blackstone and Coatue.
Nvidia has somewhat of a halo effect. Some of the chipmaker’s magic seems to rub off when a company teams up with the group, with other partners such as Dell and Supermicro having enjoyed similar knock-on effects.
Armed with fresh capital, CoreWeave has set its sights far beyond Jersey’s borders. It’s looking to set up facilities in the UK and across Europe, and revealed plans on Wednesday to invest $2.2bn to build data centres in Norway, Sweden and Spain.
(It’s also scaling up in the US in part through a new partnership with crypto miner Core Scientific.)
The company essentially rents out a coveted stash of Nvidia chips to businesses that need seriously powerful computing — such as high-speed networking between groups of AI chips to liquid-cooled servers.
The backbone of CoreWeave’s business is made up of Nvidia graphics processing units, or GPUs. But CoreWeave’s chief executive Michael Intrator argued its competitive edge is more than just the sought-after chips.
“Nvidia is not giving us access to GPUs because they have some vested interest in us or because we have some advantageous access,” he said, adding the company has developed software that automatically manages and maintains the GPUs.
But are investors concerned by the idea of backing a business that had raised capital from Nvidia, only to spend a big chunk of those funds on that company’s products?
Intrator shot down the question, insisting Nvidia’s $100mn is a drop in the bucket compared to the other capital it’s raised.
“It’s such a crap narrative,” he said.
Job moves
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Azura Partners has hired Pauline Cahill as its chief people officer as the firm plans to double its headcount in the next three years. She was previously co-head of global strategic recruitment at Credit Suisse.
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Arini, the alternative asset manager founded by Hamza Lemssouguer, has hired Nabil Aquedim as head of real estate and asset-backed strategies. He previously worked at Goldman Sachs, most recently as a managing director.
Smart reads
Unbridled growth For centuries, the world’s only gotten richer. A new book written up in the New Yorker, Growth: A History and Reckoning, delves into the costs of that much growth — and whether it should be reined in.
Hamptons nightclub The owner of a hot Manhattan-based members-only club is looking to open up an outpost in the Hamptons. Locals aren’t pleased, the New York Times writes.
Data moment Investors, desperate for information on private markets, have fuelled a boom in data providers. Those firms are now looking to M&A to keep the momentum going, Lex writes.
News round-up
NBA nears $76bn TV deal, a defining moment for media and sports (WSJ)
StepStone raises record cash pool to buy venture capital stakes (FT)
Dollar Tree weighs sale of struggling Family Dollar discount stores (FT)
Investors pull cash from ESG funds as performance lags (FT)
Estée Lauder’s board plans to keep Its longtime CEO (WSJ)
Top lawyer of ex-Wirecard boss walks away after money runs out (FT)
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