💧 Thames Water nationalised?

Good morning. In today’s update - the government considers a potential nationalisation of Thames Water amid debt troubles, houses are increasingly being sold at a discount, BrewDog eyes a 2024 London IPO and the US is considering controls on chip exports to China.

Markets

• UK stocks pushed on from yesterday’s advance, with the FTSE 100 gaining 0.5% and the FTSE 250 surging 2.0%.

• Ocado fell 5% after reports that Amazon had denied it was looking to acquire the online supermarket.

• Insurer Admiral (+3.3%) also suffered after being downgraded by analysts at JP Morgan

• Going the other way - accounting software group Sage advanced 5.1% (its highest level in over 20 years), after an analyst upgrade from JPM.

Corporate News

After an abrupt departure from CEO Sarah Bentley the day before, the UK government scrambled to come up with contingency plans for Thames Water on Wednesday over fears it could collapse under a monster debt pile; the company - which supplies water to London and parts of the South-East - is battling £14bn in leverage and could potentially end up being nationalised under government plans. (Link)

Direct Line came under fire on Wednesday after the FCA ordered it to investigate accusations it had underpaid a number of motor claims; the announcement came after the FCA declared in December it had found evidence of underpayment for motor insurance customers, without naming any firms in particular. Shares dropped 4.5%. (FT)

The CEO of luxury brand Mulberry warned the loss of VAT-free shopping for foreign nationals (‘tourist tax’) was weighing on its UK sales, alongside broader economic challenges; revenue in the UK - its biggest market by far - dipped to £87.7m over the last 12 months, down from £88.5m the year before. (Link, Mulberry)

Boohoo raised red flags over behaviour at online makeup retailer Revolution Beauty, after a dramatic 24 hours in which shareholders fired three senior directors, who were then immediately re-hired by remaining independent director, Jeremy Schwartz; Revolution Beauty shares were reinstated today after being suspended since September and, despite the mayhem, surged 29%. (Link)

Deals

Despite Brexit being a “catastrophe” for British business, a London IPO is still the preferred route for BrewDog; the craft brewery will look at listing in late 2024 or, failing that, partner with a private equity firm in a similar fashion to its deal with TSG back in 2017. (BBG, Link)

Thomson Reuters agreed to acquire UK-based Imagen for an undisclosed amount; the company - a digital asset management platform - helps businesses manage their content libraries and will slot into Reuters’ News Agency division. (Link)

In today’s VC update:

• Nothing - a London-based smartphone maker - raised $100m ahead of the launch of its first device (“The Phone”); Highland Europe, Google Ventures, EQT and musicians Swedish House Mafia all participated. (Link)

• Unaric - a London-based aggregator buying up small Salesforce software vendors - raised $35m led by LocalGlobe. (Link)

Economy / General

Over 40% of home sellers accepted a discount of at least 5% in the last two weeks to ensure a sale goes through, according to Zoopla; the platform said the number had been creeping up recently as rising interest rates “spooked” buyers - the year-to-date average is 35%. (Link)

According to an industry review, business travel appears to be making a full recovery post-Covid; the report showed UK bookings (covering air, rail and accommodation) reached 90% of pre-pandemic levels during the first quarter, with April exceeding 2019 levels. (Link)

🌎 Global Snapshot

News

The US is reported to be eyeing restrictions on the sale of AI semiconductor chips to China, requiring firms to apply for a license before doing so; the move will further strain relations between the two nations, whilst Nvidia CFO Collete Kress said it would result in a “permanent loss of opportunities” for the US to compete in the world’s second-largest economy. Nvidia shares lost 1.8% after the news. (Link, WSJ)

French bank BNP Paribas has opened discussions with Orange about taking on its banking clients; the French mobile operator has reportedly been looking for partners for the unprofitable Orange Bank for a while, with investors such as Cerberus and Ripplewood previously passing on the opportunity. (Link)

Micron - the largest US-based producer of memory chips - delivered a positive update to markets on Wednesday, signalling that sluggish demand for phones and computers is fading; the company expects revenue of $4.1bn in Q4, above market estimates. Shares bounced 3.6% in after-hours trading. (Link, Micron)

Considering the purchase of a luxury Swiss watch? Now might be the time - prices for brands such as Rolex, Patek Phillippe and Audemars Piguet are at their lowest levels in two years, according to the Bloomberg Subdial Watch Index. (BBG)

Markets

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