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Two Big UK Companies That Won’t Survive
Both household names, both dead men walking...
Tim Vollans
November 01, 2023 • Estimated Reading Time: 7 minutes
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The downturn’s coming. Looking five years out, it’s nearly impossible to see these UK companies surviving that long.
First up… ASOS and this horrific chart.
Almost back to the IPO price and down 50% in six months. Shares fell by 10% today after the fashion retailer warned yet again on future sales.
They are however, trying to implement a massive turnaround. If you want to dig in, the CEO explains it all here.
(will probably go better than SoftBank’s turnaround plan for WeWork, reportedly filing for bankruptcy next week)
Just Vibes
The fact is, ASOS has lost (too much) ground in a hugely competitive industry, and the vultures are already circling.
Reports that the company will sell off the TopShop brands they bought two years ago (for ÂŁ265 million) are doing the rounds.
And as with any UK clothing company that gets into a spot of bother, Mike Ashley, on a one man mission to control the entire UK clothing industry, is been buying up shares too.
His Frasers group now holds a 22.8% stake in ASOS.
Our View: ASOS either fails under the weight of losses, higher debt servicing costs (plus forced asset sales hitting their ability to earn), or they get absorbed into the Ashley blob.
Either way. NGMI
No Bounce For Roo
"My confidence in our ability to drive growth and deliver on our goals for profitability and sustainable cash flow generation has never been stronger"
Sorry to break it to you Will, but if you can’t turn a profit when interest rates are RIDICULOUSLY low, making consumption cheap as chips…
Or when people are locked in their homes all cashed up with nowhere to go…
It’s not gonna happen.
Especially if we head into a recession and discretionary spending falls.
Which it usually does…
One thing Deliveroo does have is runway. Sitting on a pile of cash with no debt, the firm can keep chugging along for a while yet.
But can they make it another five years…?
Especially if…
The higher rate environment persists and they decide to ask debt markets for some buffers
They keep spending that cash pile to buy back shares & keep shareholders happy
Five years is a LONG time...
@fink.tok Here’s TWO UK companies that you use A LOT that i dont think will be around in 5 years 👀 #ukeconomy #ukstocks #ukequities
🧠The Big Brain
Goldman Hating on Healthcare Stocks
Healthcare stocks are supposed to be one of those classic defensive sectors.
You hide out in them when the economy’s not doing so well, because people can’t really cut back on health spending. It’s essential.
Or so the theory goes…
Goldman Sachs piled in negatively on the sector this week, saying that they’ve abandoned their patriotic duty to protect wealthy investors in a downturn (or something like that, I drifted off)
Fortunately, The Veteran’s taken a closer look and examines whether Goldman’s actually right…
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đź’ˇ The Lightbulb
«I Don’t Recall»
“No, but I might have.”
If you don’t already know about FTX - the crypto exchange with the magic box that made customers deposits disappear - then congratulations. You probably didn’t lose any money with them.
However, loads of people did and they’re pretty angry with this guy because of it:
TL;DR: Sam Bankman-Fried committed an $8 billion fraud. One of the largest of all time.
The trial has been glorious. I know you’re not supposed to enjoy other people suffering, but there are always exceptions.
I also enjoy good writing. So when those two things come together, I get excited.
This article, summing up the last days of the trial (with SBF in the stand) ticks all the boxes.
The prosecutor (Sassoon) has been brutal.
In some sense, she has an easy job.
SBF had self-sabotaged with so many incriminating public statements that he may as well have walked himself directly to jail and saved everyone a lot of time.
Still, there’s a cross-examination to be done, and the prosecutor’s doing it with style.
Had Bankman-Fried referred to FTX as safe in numerous public statements? He couldn’t recall. Did he remember tweeting that the acceptable number of issues when it comes to a client’s money is zero? He couldn’t recall. Had he tweeted that lying to customers broke “sacred rules of conduct” everyone knows to follow? He couldn’t recall. Did he remember that he supported regulation only as long as it protected consumers? He couldn’t recall.
Every single question was followed by evidence of Bankman-Fried publicly using the precise language Sassoon had offered. Several journalists were in the courthouse — some even in the courtroom — as their articles about Bankman-Fried were read aloud. It was obvious to everyone in the courtroom what was going on. Bankman-Fried stuck to his “do not recalls” anyway.
“Oh you don’t recall? Don’t worry, here’s the evidence of you saying it. You’re so lucky I’m here to help you Sam…”
Sassoon immediately followed this with direct messages Bankman-Fried had sent to Kelsey Piper, in which he said this was all just public relations, and “fuck regulators.”
Almost cringing for him here…
Almost
At this point, my notes simply read “Jesus fucking Christ” in all caps.
And the conclusion…
I understand Bankman-Fried went to MIT and majored in physics and was a successful trader on Wall Street. But sitting on the stand, he resembled nothing so much as a child who’s broken a family heirloom and is insisting his invisible friend did it.
Glorious.