ESG stands for Environment, Social, Governance.
And it’s an increasingly big thing in the asset management world.
The basic premise is that if you can get the biggest investment managers to collectively commit to ESG-focused principles in their strategies — whether that be through active engagement as shareholders or divestment strategies — capital will eventually be pulled from the type of corporations that routinely undermine or undercut the standards society judges to be important — from pollution and environment, to labour rights and fraud — forcing them to adapt their behaviour.
The idea is to send bad corporates to capital-unavailable Coventry. Read more
Set the scepticism dial to 10 — on the basis that memories of German carmaker buying Chrysler is the sort of thing to make car executives wake up in a cold sweat. However Fiat shares were up more than 4 per cent at pixel time for a reason…
That reason is a story in the German manager magazin which reports major shareholders are in conversation about a potential takeover of Fiat by VW, with Chrysler the key to solving VW’s US problems.
Der Volkswagen-Konzern steht vor dem nächsten großen Coup. Auf Großaktionärsebene finden bereits Gespräche über eine Übernahme von Fiat statt. In einer Integration von Chrysler sieht Volkswagen einen möglichen Lösungsansatz für die eigenen US-Probleme.
Car sales are related to economic growth and consumer confidence, says Citi. But wait! The bank’s analysts, Philip Watkins makes the journey to that humdrum conclusion interesting — with a detour through the banks, psuedo-banks, and financing operations of the European car companies.
Even if sales are tied more to GDP than to interest rates — seven in every ten new cars are sold on credit these days. Plus, the financial companies hiding within the automakers have around €400bn of assets and produce a sixth of of pre-tax profits (click chart to enlarge). Read more
Suzuki Motor has called into question its co-operation with Volkswagen, as tensions between the two partners flared again on Monday, reports the FT. Suzuki and Volkswagen formed a partnership in 2009 to co-operate in small cars and new technologies. However, reports of tensions between the partners soon emerged. Yasuhito Harayama, Suzuki executive vice-president, confirmed on Monday that the groups have not co-operated on any projects in the 19 months since the alliance was formed.
Volkswagen has formally launched its €13.8bn ($19.8bn) takeover offer for MAN that is likely to pave the way for Europe’s biggest carmaker to integrate the truckmaker more closely into its broad stable of brands, reports the FT. The takeover offer announced on Tuesday is seen as a low-cost way for VW to achieve a much closer partnership between MAN and Scania, the Swedish truckmakerthat VW already controls. VW is making a lowball bid for MAN and the offer – at €95 per share for the truckmaker’s ordinary shares, and €59.90 per preference share – is unlikely to appeal to many investors. But under German rules VW will be free after its offer to acquire more shares in MAN in the open market when it chooses. Bringing MAN, Scania and VW together has been an objective of Ferdinand Piëch, VW’s supervisory board chairman who also chairs MAN. But VW’s initial aim is only to control enough of MAN so the truckmaker is treated as an affiliated company and not as a rival.
Porsche has warned that a widening probe by prosecutors into two of its former top executives could derail its planned merger with Volkswagen, reports the FT. The German sportscar maker said the probability of completing the merger this year, as planned, had sunk from “70% to 50%” – and could even be abandoned – on news that prosecutors would continue their probe until at least December. The news shocked investors, and drove down shares of both companies, Porsche’s by 11% to €55 and VW’s by 3% to €112.45. Porsche and VW also warned that German tax issues and a US lawsuit could also scupper or delay a merger by up to three years. DealBook notes the that the German probe tracks similar accusations by large investors.
Volkswagen on Tuesday announced a wide-ranging management reshuffle designed to give its truck business a push and accelerate the integration of Porsche’s sports car business, reports the FT. Porsche confirmed that Matthias Müller, currently VW’s head of strategy and responsible for the group’s model line-up, would replace Michael Macht as the sports car maker’s chief executive on October 1.
The events of October 2008, when all those hedge funds betting against the runaway price of VW got their proverbials squeezed, were rather lost amid the chaos of the banking crisis at the time. But the wreckage is still being sorted – and the litigation is growing.
A fraud and stock manipulation suit begun by Elliott Associates in January has just doubled in size, with 35 funds now claiming more than $2bn in losses. Read more
Volkswagen increased its investment budget for China by €1.6bn ($2.1bn) on Monday, in a move to keep up with rapidly growing demand in the German carmaker’s single biggest market, reports the FT. Europe’s largest carmaker said the additional money, mostly earmarked for two new plants, would bring its total investment fund for the next three years for China to €6bn.
Breaking pre-market news on Thursday,
- Qatar paid Porsche €80 per VW share — Reuters report. Read more
Porsche plans to increase its capital base by at least €5bn in a move to bolster its sagging balance sheet ahead of a planned, though controversial, integration of carmaking operations with its German rival Volkswagen, the FT reported. The sports car group gave few details of the structure of any capital boost and said nothing on the future of its chief executive Wendelin Wiedeking; nor did it comment on speculation that the emirate of Qatar would be taking a stake.
Porsche’s family owners were poised to settle their feud over a rescue of the ailing German sports car maker with a compromise deal that would wipe out almost all its debt. The plan includes a sale of half the sports car business for as much as €4bn to Volkswagen, a €5bn capital raising and the sale of options that can be converted into VW shares. The Qatar Investment Authority and the two families, the Porsche and Piëch clans, could inject cash and assets to strengthen the balance sheet.
… according to Germany’s business weekly WirtschaftsWoche:
FRANKFURT, July 15 (Reuters) - Porsche SE’s embattled chief executive, Wendelin Wiedeking, is leaving the company, Germany’s business weekly WirtschaftsWoche reported on Wednesday, without citing sources. Read more
The cost of insuring against the possibility of default on European corporate bonds rose slightly on Tuesday, in spite of a growing number of high grade companies seeking to raise funds in the market.
ArcelorMittal, the world’s largest steelmaker, announced plans to raise E2.5bn via issuance of a dual-tranche eurobond, comprising 4-year and 7-year options. The move follows similar ones from a raft of companies, including French cement group Lafarge and Carlsberg Breweries, entering the market last week, in a sign of growing optimism in economic conditions. Read more
European credit markets saw an abrupt trend reversal on Monday as the cost of protecting against default on a range of higher-risk corporates widened suddenly after a week of falling prices.
Having tightened by almost 80 basis points last week, the Europe Markit iTraxx Crossover index, which tracks the 45 most liquid names in the junk-grade sphere, reflected a receding appetite for risk and fresh worries about a jump in corporate defaults later in the year. The Crossover, which had touched a low of 730bps last week, was trading at 755bps during early trade on Monday – 15bps wider than Friday’s close. Read more
Holger Haerter is a man who knows a little bit about car-crashes. Market ones, that is.
Principal CFO of Porsche LLP and therefore, thanks to some creative fun with call options, a nemesis to the hedge fund world. Read more
This just in from Germany.
29 October 2008 – Partial Settlement of Hedging Transactions Planned Short Sellers Responsible for Extreme Price Movements in Volkswagen Ordinary Shares Stuttgart.
Volkswagen’s shares more than doubled yesterday after Porsche moved to cement its control of Europe’s biggest carmaker and hedge funds, rushing to cover short positions, were forced to buy stock from a shrinking pool of shares in free float. VW shares rose 147 per cent after Porsche unexpectedly disclosed that through the use of derivatives it had increased its stake in VW from 35 to 74.1 per cent, sparking outcry among investors, analysts and corporate governance experts.
This CDS report was written by Markit’s Gavan Nolan
In the past, CDS spreads and stock prices have endured a steady, if inverse relationship. When one goes up the other comes down and vice versa. However, in recent weeks this relationship has become increasingly fractured. Today, for example, the major stock indices were lower earlier while the Markit iTraxx Europe index was tighter. The ratio of names in the index that have tightened compared to those that have widened is around 5 to 1. Read more
Porsche will soon control Europe’s largest car and trucks empire after an emergency meeting of its supervisory board on Monday gave the go-ahead for the German sports-car maker to increase its stake in Volkswagen from 31% to more than 50%. Hours earlier, VW, Europe’s largest carmaker, agreed to buy more than two-thirds of Sweden’s Scania which, together with its controlling stake in Germany’s MAN, will form the continent’s biggest truckmaker. The twin deals reshape Europe’s automotive industry and crown the spectacular career of Ferdinand Piëch, the controversial chairman of both VW and MAN, as well as a controlling shareholder of Porsche. Lex, however, notes potential concerns about both the Porsche-VW and VW-Scania deals.