The Lex Newsletter: Coming back stronger?

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Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.

Dear reader,

Comebacks are hard to do, and even harder to do well. Pulling off a business revival, whether it is pivoting to a new opportunity (generally as a core market fades) or resurrecting a business from a scandal or mishap, is difficult stuff — full of ambitious promises, false dawns and dashed hopes.

There are plenty of companies — and people — trying to find a path back at the moment.

1) The biggest fightback of them all is required from Boeing. Shares in the company are down by a quarter this year after the terrifying door panel blowout on a 737 jet mid-flight in January. The idea that Boeing needs a reset isn’t new: David Calhoun took over as chief executive four years ago in the aftermath of two deadly crashes. But the reputational storm engulfing the company — which I wrote about in January — was always going to require sharp changes to management, from regulators and in terms of its corporate culture. Putting an engineer at the helm instead of another bean counter would be a good start, said Lex. Read more here.

2) It would be tempting to describe the listing of Trump Media & Technology Group, via a Spac merger, as the ultimate comeback — except, of course, its founder is going for another one. The TMTG stake of the former president and current Republican candidate was valued at $5.5bn after shares in the nascent social media business soared in early trading this week. Tapping into Donald Trump’s superfans might mean this is simply a way to monetise Maga through the public markets, said Lex. But with scant revenues and a questionable business plan, TMTG looks like a rightwing meme stock combined with the classic pathologies of the Spac bubble. Find out more.

3) The desperate state of the UK — and indeed European — telecoms market is long established: ex-growth and an effective place to incinerate capital. UK mobile revenues have fallen a fifth in real terms in less than a decade, while data traffic is 30 times higher. The industry and its suffering investors are looking to the UK’s Competition and Markets Authority, which is at present investigating a proposed tie-up between Vodafone’s UK operations and Three UK, for signs of a turnaround. Will it ring the changes?

4) Those finding life on UK markets tough going have, in recent years, found the idea of an easy valuation uplift and a more forgiving attitude to executive pay in the US rather appealing. Lex isn’t convinced that the UK valuation discount is significant or enduring; nor are our colleagues at the Unhedged newsletter. But the next likely departure is Flutter, with the betting group’s shareholders set to vote on a switch of primary listing. In the face of mounting UK regulation, US growth has already lifted Flutter’s shares far ahead of rivals. And the early mover into US sports betting looks like it can defend its position, even as others such as Disney’s ESPN pile in. Read more here.

5) Lloyd’s of London — the world’s oldest insurance market — acquired a reputation for inefficiency, complacency and boorish behaviour. Yet last year’s performance was the best for 16 years. Lex looked at how the time-honoured institution is reviving its fortunes and where its recent progress appears fragile. Upstart centres such as Bermuda have benefited from nimble regulation, challenging the Lloyd’s business. That ingredient is missing at the moment from a Lloyd’s fightback. Read more here.

Quick links

Do you know any Afols? Adult fans of Lego create a market for costly, complicated kits that has helped boost the Danish company’s success. The group has also been well served by its distinctive corporate structure.

Every investor should love Next, the UK retailer widely praised for its strong management and clear communications. Now the group is doing good business hoovering up the “squeezed middle” of UK fashion.

What do you do when the antitrust watchdogs get tough? Maybe try an “acqui-hire”. Microsoft’s artificial intelligence talent raid will challenge regulators and venture capital groups alike.

Have a great weekend,

Helen Thomas
Head of Lex