Friday, 24 April 2015

Weekly Wrap Up: Flash Crash brings Fast Cash?

The City has been in the PR mire for some time. Since the financial crash, institutions and individuals have been scrambling to save face, only to be undermined by a stream of negative press.

This week, that negative press has been provided with the flash crash case of Navinder Singh Sarao. A self-employed day trader, he faces extradition charges to the US, where he is accused of playing a significant role in, momentarily, taking up to $1 trillion off Wall Street. In a 45 minute period, almost 1000 points were knocked from the Dow Jones Industrial Average, the US’s premier exchange. The premise was simple, Sarao added sell orders which could be seen around the world, and caused others to add sell orders, panicking about a potential fall in their market. Following the cancellation of his orders, Sarao would then track the market down, and buy for supposed huge personal profits. This crime carries the potential for 380 years in prison, not something to be sniffed at.

In addition, Deutsche Bank, one of the largest financial institutions in the world, accepted a record libor fine of £1.6 billion for its role in fixing international interest rates during 2005-2010. These two crimes accurately portray the various flaws in City institutions. Firstly, the ability to undermine and subvert the system, and secondly the damage that can be done to its image.

Having been caught on the back foot when the markets fell, the financial regulators have now taken the fight to the institutions, inflicting more stringent fines. However, more needs to be done. Whilst America can be seen setting a hardline with its sentencing, 150 years for Bernie Madoff springs to mind, the UK needs to work harder at finding those who have abused the system criminally guilty.

The banks themselves, seemingly reticent to move on from their glory years, need to be seen doing more in the public eye to clear up their act. Possibly fearful of their pariah status, heads of UK banks have been notable in their absence from British screens in the last seven years. It will take strong character, but to move past the current public perception, banks need to work as never before to root out those who are abusing the system, and prove to the country and the world that this vital part of our economy is worth sustaining.

This week, Abchaps hosted multiple events including two Market Lunches, one focused on Mining and the other focused on the Environment, whilst also entertaining Northland Capital, after successfully working on TechFinancials IPO together. We also met with Richard Dunnett of Director Magazine, in order to learn more about how the magazine operates; and attended the Entrepreneurs Breakfast, a joint initiative between Smith & Williamson and, which brought together multiple entrepreneurs at breakfast with keynote speaker Christopher Baker-Brian.

N+1 Singer appointed Nic Hellyer as Director in its Corporate Finance team from HSBC, whilst Nicole Martin was hired as Audit Partner in BDO’s Technology and Media practice. Meanwhile, Standard Chartered appointed Sir Iain Lobban to the bank’s board Financial Crime Risk Committee.

“Flash Crash” – A word which has entered the lexicon as quickly as the crime was purported to take. Having taken five years to work out a potential culprit, one feels that we will be reminded of the flash crash for some time to come.

If you’re an athlete you might be heading to the London Marathon this weekend. But for the less active among us, you will probably want to avoid Central London.

For those not running, there’s still a chance to celebrate England’s Patron Saint this weekend: The Mayor of London's throwing a party in his honour at Trafalgar Square on both Saturday and Sunday, where Robbie Boyd is headlining from 4pm-5pm on Saturday.

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Friday, 17 April 2015

Weekly Wrap Up: An Affair to Forget

True to the core values of its business, the company that owns adultery website Ashley Madison has decided to stray from its home market when it goes public. The Toronto-based Avid Life Media made headlines this week when it announced its plans for a London listing this year. But it wasn’t the announcement itself that generated extensive press coverage. It was the Company’s reason for deciding to list in Europe that has received the attention.

The Company’s Head of International Relations, Christoph Kraemer, told Bloomberg that “Europe is the only region where we have a real chance of doing an IPO”. Why is that? Even though half of the adultery site’s users are based in the United States, Kraemer claims they have to list in London because Europe is more tolerant of adultery.

Except that’s not exactly true, according to the Pew Research Centre. In a poll asking respondents if “married people having an affair is morally unacceptable”, 84% of Americans did agree that cheating is bad. And in France, less than half of the respondents condemned affairs, with only 47% agreeing.

Avid Life Media is not, however, planning to list in France. And the UK has much less of a laissez-faire attitude towards infidelity: 76% of those who were asked considered it wrong. That is the same percentage as Canada, and not too far behind the Americans. Simply put, listing in London doesn’t make sense based on society’s attitude towards adultery.

Avid Life Media and Ashley Madison are obviously not concerned with this inconvenient fact. It’s also hardly believable that Ashley Madison is worried about investor morality in the US. Anyone who has seen the Wolf of Wall Street knows that stateside investors wrote the book on immorality. But claiming otherwise gave the story of the Company’s potential listing an angle that was picked up in much of the mainstream media in the US and the UK. It’s simply a tasteless PR strategy – and based on what the Company represents, no one should be surprised by this tactic.

Here’s what’s really happening: Avid Life Media is desperately trying to drum up interest after a failed attempt to raise money in Canada. But even an amateur investor could see that their growth strategy of expanding into new markets is limited – and potentially dangerous. Women will inevitably suffer far greater consequences if caught committing adultery; in many parts of the world it still results in ostracisation and violence. Investors would have to be prepared to accept this uncomfortable truth.

In the UK, Ashley Madison is currently banned from advertising on television because it is not deemed morally justifiable. And given that the UK’s attitude towards this type of business is on par with Canadians, it is likely that Ashley Madison’s attempt to raise money in London will soon be an affair the UK can altogether forget.

This week, Abchaps attended an interesting CIPR Speaker lunch with Ashley Armstrong, M&A Correspondent at The Telegraph. She touched on multiple topics, predicting 2015 to be a good year for M&A and purchasing influence of the Asian market to increase. As well as hosting a successful Malaysia focused Market Lunch, we attended the Election Debate Seminar, chaired by Vincent Wood, business Tax Partner at Moore Stephens. Discussions at the seminar included the truths behind the different parties’ pre-election pledges and asked the question whether the parties can realistically implement them.

Steve Frizell has been appointed Partner in PwC’s UK financial services risk assurance internal audit services team. Meanwhile, Standard Chartered has been promoted to Chief Economist and hired Ding Shuang as Head of Greater China Economic Research from Citigroup. Ian Sadler has become Partner and National Global Compliance and Outsourcing Leader at Baker Tilly.

“Morality” – usually considered the differentiation of intentions, decisions and actions between those that good and those that are bad. Although derived from Latin, this word apparently has a completely different meaning in French.

The Tweed Run is happening on Saturday, which sees cyclists take to the streets in their well-pressed best, cycling past London’s most iconic landmarks kitted out in the far more flattering tweed and brogues, compared to the de rigueur Lycra.

The Southbank Centre have an interesting take on election season, with their Changing Britain series this weekend taking in the period from 1945-1979, a seminal junction in British political life, with the welfare state as we know it today being born.

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Friday, 10 April 2015

Weekly Wrap Up: Co-op’s Comeback: Value vs Values

The Co-operative Group, the UK’s biggest mutual owned by 8.5 million people, announced this week that it has returned to profit. This development will likely surprise anyone who remembers when chief executive Richard Pennycook was forced to admit that, '2013 was a disastrous year, the worst in our 150-year history'.

The Co-op, which once had funeral, pharmacy, insurance, banking and a supermarket among its businesses had lost a staggering £2.5 billion and faced the near collapse of its banking arm, which had a £1.5 billion hole in its finances. Former City minister Lord Myners, who resigned from the Group’s Board, blaming former managers, ‘who were allowed to run amok like kids in a sweet shop’.

If it wasn’t bad enough that mismanagement had almost run the mutual into the ground, there was also the matter of the Co-op Bank’s former Chairman Reverend Paul Flowers being charged with drug offences. The Group received extensive coverage not just on the business pages but across the front pages thanks to the so-called Crystal Methodist.

In short, it was a very public, very ugly meltdown.

The Group subsequently introduced a turnaround plan – Rescue, Rebuild, and Renew. So this week’s announcement that they are back in the black marks a major milestone for the troubled group: it’s the end of the Rescue phase of the program.

Now it remains to be seen if the Co-op can build on this momentum and successfully complete the turnaround. The group has returned to profit because it sold its pharmacy and farming businesses but there is still a lot of work to be done. What sets the Co-op apart from other businesses is that it promises that it is ‘not just about profit’. Before the Co-op became plagued by scandal, the Group’s 2012 accounts even stated, ‘In line with our member-owned model, investment decisions are not driven by the purely financial demands of shareholders, but by the wider concerns of our members’. And that promise is also exactly why this turnaround can’t just be about profit.

In order to restore its tarnished image, the Co-operative also has to find a way to regain the respect, loyalty and trust it once held. In other words, the comeback has to be as much about restoring these values as it is about restoring value to its businesses.

During this short Easter week, Abchaps hosted a Market Lunch, attended the Third Annual Nowruz Commission Gala Dinner at the Institute of Directors and caught up with Man Group.

Westhouse Securities announced that Andy Crossley will be joining as Managing Director from Peel Hunt. Meanwhile, Mike Falvey moves from Four Seasons Health Care to partner of the performance team at KPMG. Baring Asset Management also appointed Edmund Chong, previously of HSBC, as Head of Sales, Client Service and Business Development, distribution for Asia ex. Japan.

“Crystal Methodist” – A Methodist minister with a penchant for crystal meth and cocaine. A phrase whose origins can be traced back to the Daily Mail, if only because of the high number of headlines featuring the UK’s very own Crystal Methodist, Paul Flowers.

This Saturday is, of course, all about the Oxford Cambridge Boat Race. It's always quite the spectacle, so make sure you pick out a good spot along the river to watch the race unfurl. Not into the whole Oxbridge rivalry? Perhaps the Oxford Cambridge Goat Race is more your thing.

Head to the Garden Museum in Lambeth for an exhibition about the New Covent Garden Flower Market. Listen to excerpts of interviews about the market, what it’s like for people working there, the connection to the old Covent Garden Market and the changes that are happening now.

Grab a bargain on Sunday at Judy’s Affordable Vintage fair, at York Hall in Bethnal Green, with a selection of hand-picked stalls packed with affordable vintage fashion, accessories and homewares.

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