🕶️👠📈 Italian blogger and Instagram star Chiara Ferragni, who has almost 25 million followers, sent shares in an Italian eyewear firm soaring after she signed a deal to use her name on a line of glasses. Shares in Safilo – which will do all the design, manufacturing and distribution – spiked 14% following the news. It’s not the first time Ferragni, who sells herself as a “digital entrepreneur Boss baby”, has swayed financial markets. When the 34-year-old was appointed to the board of luxury shoemaker Tod’s in April, the stock jumped more than 12%.
Goldman looks back to the dark ages
☂️🏦 Goldman Sachs is “reinventing one of the worst ideas in the history of business”, says Matthew Lynn in the Telegraph. The banking titan’s private equity wing, Petershill Partners, announced this week that it was planning to list on the London market. “But hold on.” Even leaving aside the semantic point that a private equity fund isn’t exactly private once its shares are publicly listed, this just takes us back to a darker time in British business.
We used to have a name for public companies that collected lots of businesses under a single corporate umbrella – “conglomerates”. They rampaged their way through the 1970s and 1980s, turning industry after industry upside down. But they went extinct, largely because they ended up “destroying more value than they ever created”. The problem is they need bigger and bigger deals to keep on growing, which public investors force them to do. When a young conglomerate needs a £500m acquisition to double in size it’s not that hard to find a deal. When it needs a £10bn or £20bn deal it suddenly gets a lot harder. They may look like excellent investments in the short term, especially while markets are buoyant, but viewed over the medium term they do more harm than good, slashing costs without any positive vision and wrecking perfectly good firms in the process. They didn’t work 30 years ago and they won’t work now, “even if the City does manage to make some quick money in the process”.
Time for the stock market to take stock
🚀🚀🚀 Joby Aviation, an aerospace company that aims to launch an electric air taxi service in 2024, is worth more than Lufthansa and EasyJet. “Does that seem right?” asks Andy Kessler in the Wall Street Journal. Earlier this year Tesla was worth more than the next nine carmakers combined. Beyond Meat, which makes fake burgers out of pea protein, is worth more than the entire market for peas eaten globally. Airbnb is worth more than Marriott and Hilton put together. Carvana, an online marketplace for used cars, is worth more than Volvo and Ford.
“And check this out: in June, an Italian artist auctioned an invisible statue for $18,000.” It makes you wonder if fundamentals are a “quaint relic of a bygone era”. In reality, of course, fundamentals do matter. In 1989, property in Tokyo was selling for $139,000 per square foot, 350 times the value in Manhattan. “Not any more.” Yahoo was once worth $125bn, and AOL $200bn during the dotcom bubble. Both are worth 99% less today. Bullish investors should remember that when the selling starts, “fear of missing out turns into fear of losing everything” as speculators jump like rats off a sinking ship.