Raphael Stevens

Trade unions rarely look to corporate raiders for inspiration. Yet the Strategic Organising Centre (SOC), a coalition of North American workers groups, is mounting the sort of campaign normally associated with hedge funds. The group’s target is Starbucks, a coffee-shop chain with a market capitalisation of $107bn. Whereas traditional activist investors take a chunk of a company and pressure its management to change strategy, hoping to gain from a bump in the share price, the SOC owns a mere $16,000-worth of Starbucks shares, and ultimately wants to improve the lot of the firm’s workers.Its pitch is that the interests of shareholders and workers are, in fact, aligned. Starbucks is wasting money and alienating customers with its approach to “human-capital management”, the group argues. Productivity would be higher, and spending on consultants lower, should Starbucks follow its workplace advice. Therefore it wants three of its candidates appointed to Starbucks’s 11-person board. The hot-drinks behemoth is less convinced. The board is already stocked with “world-class business leaders”, says a representative, who adds that in the last fiscal year a fifth of profits went towards wage increases, training and new equipment.Five years after the Business Roundtable, a 200-strong group of chief executives at some of America’s biggest companies, embraced stakeholder capitalism, the mood is now rather different. Most bosses would prefer to leave politics to the politicians and avoid the boycotts and bad publicity that come with wading into culture wars. They are content to focus on shareholder returns, rather than trying to improve society at large. But although chief executives have mostly abandoned their flirtation with stakeholder capitalism, they are still living with its consequences.This year’s proxy season, which gets under way in the spring, will probably surpass even 2023’s for proposals of non-binding resolutions. That year marked a record for environmental, social and governance (ESG) motions. At the large and small American companies that comprise the Russell 3000 index, 513 of the 836 proposals put to shareholders focused on such questions, according to the Conference Board, a think-tank. The increase reflected a legal shift. In 2021 the Securities and Exchange Commission (SEC), a regulator, said that it would no longer allow companies to exclude measures as irrelevant if they focused on a “significant social policy”.Conservatives are also mobilising. Last year’s proxy season included 92 anti-ESG proposals, up from 54 the year before. On February 28th at the annual meeting of Apple, a tech giant, shareholders were asked to consider five such proposals, including one asking the firm to report on the risks of failing to consider “viewpoints” in its equal-opportunities policies. The supporting statement says there is evidence that conservatives may be discriminated against in Silicon Valley. Another two, submitted by conservative pressure groups, asked the company to report on how it arbitrates between government and consumer interests, in particular in its dealings with China. For their part, liberals offered only one resolution: asking Apple to change how it reports on racial pay gaps. The company recommended that shareholders reject every one, which they did.Politics by other meansWill other campaigns find more success? In 2023 the average environmental proposal received the support of just a fifth of shareholders, down from a third the year before. Shareholders are being more disciplined, says Lindsey Stewart of Morningstar, a research outfit, only backing climate-change resolutions that are focused on the emissions over which companies have direct control or that they will have to disclose to satisfy regulators, rather than those in their supply chains. Financiers have realised that it is not their job to set energy or industrial policy, he explains. Meanwhile, anti-ESG proposals fare even worse: on average they receive the support of only 5% of shareholders.Although such campaigns are rarely successful, they do matter. ExxonMobil, an oil supermajor, is taking the unusual step of suing its own shareholders who have put forward green proposals. Arjuna Capital, a hedge fund, and Follow This, a campaign group, used a stake of less than $4,000 to advance a non-binding proposal to accelerate greenhouse-gas reductions with targets and timelines. The proposal has been withdrawn, but Exxon is still pursuing the case. It says the underlying issue with the SEC’s approach is still unresolved: clarity is needed about proxy-voting rules that “are increasingly being infringed by activists masquerading as shareholders”. Many companies quietly agree.And as the Starbucks case suggests, crusades are becoming increasingly ambitious. More shareholder-activist campaigns began in 2023 than ever before, according to Lazard, an investment bank. Smaller groups, including the SOC, have been helped by rules known as “universal proxy”, which were introduced in 2022 by the SEC and mean that both a company’s and its dissident shareholders’ nominees to the board of directors must be on the same ballot. Instead of shareholders choosing one slate or the other, they can now mix and match with outsiders and insiders. The SOC has spent about $3m on its fight. The result will indicate whether unions can enlist Institutional Shareholder Services and Glass Lewis, which advise institutional investors, to their cause.Other small shareholders are pursuing similar strategies. In Europe Bluebell Capital, a tiny hedge fund, has begun a battle with BP, another oil supermajor. The fund argues that BP should quit the offshore-wind business, which it says is destroying value for shareholders. It would prefer BP to increase oil and gas production, as well as to return money to shareholders, who could then invest in better green options, says Giuseppe Bivona, a partner at Bluebell, defending the fund’s environmental credentials. “Contrary to probable superficial appearances, we believe BP is pursuing an ‘anti-woke’ strategy,” the fund’s letter to shareholders argues.Dissident investors do not need to win board seats to achieve some sort of victory. After presenting its latest set of results to shareholders, BP increased the pace of buybacks to placate investors who are cool on its green-energy strategy. Meanwhile, the SOC hopes that Starbucks’ defence against its campaign might include concessions. Traditional activist investors urge companies to break up, divest assets or return cash to shareholders. Even without campaigns being launched, boardrooms have come to do these things so as to avoid attracting the attention of corporate raiders in the first place. A new generation of corporate raiders, taking advantage of cuddly capitalism, will hope their campaigns have a similar impact. ■For more expert analysis of the biggest stories in economics, finance and markets, sign up to Money Talks, our weekly subscriber-only newsletter. More

The year is 2034. America’s “magnificent seven” firms comprise almost the entirety of the country’s stockmarket. For Jensen Huang, the boss of Nvidia, another knockout quarterly profit means another dizzy proclamation of a “tipping point” in artificial intelligence. Nobody is listening. The long march of passive investing has put the last stockpickers and stock-watchers out of a job. Index mutual and exchange-traded funds (ETFs)—which buy a bunch of stocks rather than guessing which ones will perform best—dominate markets completely. Capitalism’s big questions are hashed-out in private between a few tech bosses and asset managers.In reality, the dystopia will probably be avoided: markets would cease to function after the last opinionated investor turned out the lights. However, that does not stop academics, fund managers and regulators from worrying about unthinking money, especially in times of market mania. After the dotcom bubble burst in 2000 Jean-Claude Trichet, a French central banker, included passive investment in his list of reasons why asset prices might detach from their economic fundamentals. Index funds, he argued, were capable of “creating rather than measuring performance”. America’s red-hot markets have brought similar arguments back to the fore. Some analysts are pointing fingers at passive investing for inflating the value of stocks. Others are predicting its decline.image: The EconomistSuch critics may have a point, even if some are prone to exaggeration. It seems likely there is a connection between the concentration of value in America’s stockmarket and its increasingly passive ownership. The five biggest companies in the S&P 500 now make up a quarter of the index. On this measure, markets have not been as concentrated since the “nifty fifty” bubble of the early 1970s. Last year the size of passive funds overtook active ones for the first time (see chart). The largest single ETF tracking the S&P 500 index has amassed assets of over $500bn. Even these enormous figures belie the true number of passive dollars, not least owing to “closet indexing”, where ostensibly active managers align their investments with an index.Index funds trace their origins to the idea, which emerged during the 1960s, that markets are efficient. Since information is instantaneously “priced in”, it is hard for stockpickers to compensate for higher fees by consistently beating the market. Many academics have attempted to untangle the effects of more passive buyers on prices. One recent paper by Hao Jiang, Dimitri Vayanos and Lu Zheng, a trio of finance professors, estimates that due to passive investing the returns on America’s largest stocks were 30 percentage points higher than the market between 1996 and 2020.The clearest casualty of passive funds has been active managers. According to research from GMO, a fund-management firm, an active manager investing equally across 20 stocks in the S&P 500 index, and making the right call most of the time, would have had only a 7% chance of beating the index last year. Little wonder that investors are directing their cash elsewhere. During the past decade the number of active funds focused on large American companies has declined by 40%. According to Bank of America, since 1990 the average number of analysts covering firms in the S&P 500 index has dropped by 15%. Their decline means fewer value-focused soldiers guarding market fundamentals.Some now think that this trend might have run its course. Students embarking on a career in value investing will consult “Security Analysis”, a stockpickers bible written by Benjamin Graham and David Dodd, two finance academics, and first published in 1934. In a recently updated preface by Seth Klarman, a hedge-fund manager, they will find hopeful claims that the rising share of passive money could increase the rewards yielded by pouring over firms’ balance-sheets.Fees charged by active managers have declined significantly; perhaps election-year volatility will even help some outperform markets. A few might gather the courage to bet on market falls. If they are right, their winnings will be all the bigger for their docile competition. But for the time being, at least, passive investors have the upper hand. And unless the concentration of America’s stockmarket decreases, it seems unlikely that the fortunes of active managers will truly reverse. ■For more expert analysis of the biggest stories in economics, finance and markets, sign up to Money Talks, our weekly subscriber-only newsletter. More

It is, by now, a familiar story. A metal previously only traded in a sleepy corner of commodity markets becomes vital for the energy transition. Constrained supply and geopolitical jockeying meet forecasts for ever-rising demand. Prices surge as investors foresee a crunch. The only wrinkle in the story is that this time the metal is not used in electric vehicles or solar panels; it is used in the decades-old technology of nuclear reactors. Uranium prices are blowing up.Hoarding uranium oxide—which, once processed and enriched, is the main fuel for nuclear bombs and reactors—might seem like a strategy more suitable for supervillains than investors. But speculators now have a number of ways to gain exposure. Stockmarket darlings include Yellow Cake, a firm that buys and stores the stuff, whose share price is up by 160% over the past five years, and Sprott Physical Uranium Trust, a fund that does the same and has enjoyed returns of 119% since its launch in 2021. Hedge funds have got in on the action, too, reportedly stockpiling the metal and buying options on uranium from banks.According to UXC, a consultancy, prices on the spot market have more than tripled from $30 a pound in January 2021 to a recent peak of over $100, the highest in 16 years. An initial rise was spurred by speculation that Western governments would impose sanctions on Rosatam, a Russian firm. A coup in Niger in July prompted another rise. Then in September Kazatomprom, the world’s biggest supplier, warned that a shortage of sulphuric acid would reduce production.At the same time, Western countries are trying to build their own supply chains, since Rosatom currently has more than half the world’s enrichment capacity. In December America, Britain, France and Japan together committed $4.2bn to build facilities to separate uranium-235 isotopes, the only naturally occurring material that can undergo fission, from the more common uranium-238.The world needs reliable low-carbon electricity and nuclear power is one of the few options available. Governments have announced plans to expand capacity: Sweden has pledged another two reactors by 2035 and the equivalent of ten more by 2045; last year Japan restarted three that had been mothballed; America recently connected its first new reactor in eight years. All of this is small-bore compared with China, which plans to build another 150 reactors over the next decade. Little wonder that investors are pouring in.Yet there are reasons for caution, which start with the supply crunch. Although Niger’s coup was dramatic, the country is only the seventh-largest uranium supplier and it is not clear that there will be a permanent reduction in output. Moreover, many governments have stockpiles, often acquired for defence purposes, which can be released for civilian use. Investors can only guess how much policymakers will be willing to let out. And energy firms have stockpiles of their own, which are often sufficient to keep them going for a few years.Then consider demand. Nuclear’s history is one of false starts: it has never delivered the too-cheap-to-meter power once promised. During oil shocks in the 1970s uranium prices rose more than sixfold, reaching a peak of $44 in 1979, equivalent to $198 today. Owing to subsequent falls in oil prices, uranium prices had halved by 1981. Later, in the 2000s, a bubble grew. Prices jumped from $10 in 2003 to $136 in 2007 as investors forecast a nuclear renaissance thanks to “peak oil”, a supply crunch and dwindling Russian stockpiles. Things went wrong during the global financial crisis of 2007-09; Japan’s Fukushima accident in 2011 appeared to be the final nail in the coffin.For a happy ending this time, nuclear power must finally come good. Demand—from energy firms, not just speculators—must rise, which will require someone to pay nuclear’s colossal upfront costs or make the power source cheaper. Both are plausible: net-zero targets might mean governments are willing to spend big; a number of startups are working on small modular reactors, which would lower construction costs if successful. China, which has the most ambitious plans to build capacity, has so far managed to contain costs.But return to the example of other metals. When prices surge, more supply is almost always found and customers discover cheaper alternatives. That is what happened with cobalt, lithium and nickel. High prices are the solution to high prices, goes the saying in commodity markets. How confident can investors really be that uranium is different? ■Read more from Buttonwood, our columnist on financial markets: Should you put all your savings into stocks? (Feb 19th)Investing in commodities has become nightmarishly difficult (Feb 16th)The dividend is back. Are investors right to be pleased? (Feb 8th)Also: How the Buttonwood column got its name More

Since 2017 Chinese car conglomerate Geely’s founder and chairman Eric Li has been building Ecarx, that offers software and chip systems for digital car cockpits and driver-assist.
Ecarx co-founder and CEO Ziyu Shen told CNBC that Nvidia currently has an edge when it comes to AI-based autonomous driving systems, but that Ecarx is aiming for the mass market and is about to announce products that compete directly with Nvidia’s offerings.
Ecarx plans to benefit from selling to local Chinese companies that need to buy from domestic firms due to geopolitical reasons, Shen said.
He expects the overseas market to be a growing business for the company as well and something that offers it an edge over Chinese competitors such as Huawei.

Chinese automaker Geely unveils first model of its new Lynk & Co brand in Berlin. 
Ullstein Bild Dtl. | Ullstein Bild | Getty Images

BEIJING — Companies from Nvidia to Huawei are chasing the market for in-vehicle tech as the electric car industry booms, with Ecarx emerging as a new contender.
Since 2017, Chinese car conglomerate Geely’s founder and chairman, Eric Li, has been building Ecarx that provides software and chip systems for digital car cockpits and driver-assist.

The company on Wednesday reported its fourth-quarter revenue surged 22% from a year earlier to $263 million. Geely’s car brands, such as Lynk and Co, made up 70% of that revenue.
For the same quarter, Nvidia reported automotive revenue fell 4%, year on year, to $281 million, even as CEO Jensen Huang has called the segment the company’s “next billion-dollar business.”
Nvidia counts Geely’s premium electric car brand Zeekr as a customer for its Drive Orin chip, which uses artificial intelligence to power driver-assist capabilities known as “system on a chip.” Li Auto, BYD’s Denza brand and Xiaomi are among Nvidia’s other automotive customers.
Ecarx co-founder and CEO Ziyu Shen told CNBC in an interview this week that Nvidia enjoys an edge when it comes to AI-based autonomous driving systems.
“We can’t compete with them in this area,” he said, but noted there’s still about 70% or 80% of the car market that doesn’t need such advanced tech, and can buy simpler driver-assist tech focused on safety.

“Safety will be a very important entry point for us,” he said in Mandarin, translated by CNBC.

Ecarx sells its own “system on a chip” Antora 1000 that’s used by Lynk and Co.
Shen claimed his company’s current products compete directly with Qualcomm’s Snapdragon chips, and that new offerings set to be announced on March 20 will be at the same level as Nvidia’s Orin X.
So despite conceding Nvidia’s current primacy in AI-based tech, Shen is looking at diverse ways to grab more market share in autos.

Geopolitical advantage?

Ecarx plans to benefit from selling to local Chinese companies that need to buy from domestic firms due to geopolitical reasons, Shen said, adding that the company works with nearly all major automakers except for BYD in China.
He expects the overseas market to be a growing business for the company as well and something that offers it an edge over Chinese competitors such as Huawei.
In the last few months, Huawei has disclosed several agreements to sell its operating system and other car tech to automakers in China but has yet to announce major overseas deals in the sector. The company also sells electric cars through its co-developed brand Aito.
“I think it is very difficult for Huawei to go global because it is a sanctioned company,” Shen said. “I think it will be very hard for Western companies to cooperate with them.“
When asked about the impact of U.S. restrictions on Chinese tech, Shen claimed his company has isolated China operations from its overseas business, and follows local compliance requirements pertaining to AI chip-related business in the U.S. as well as intellectual property protection.
Ecarx’s website lists offices in the U.S. and Europe, as well as China.
Shen aims Ecarx to grow its overseas sales from around 10% of current revenue to at least 25% next year, and to at least 40% in the next four or five years.
“To be honest, if we can’t serve the world’s five largest automakers, it’s very hard for us to become a big company,” he said, “because none of China’s [original equipment manufacturers] are among the world’s top five.”
BYD was by far the largest car company in China last year, followed by Volkswagen’s local joint venture with FAW, according to data from the China Passenger Car Association that included fuel-powered vehicles. Geely ranked third.
In new energy vehicles, which include hybrids and battery-powered cars, BYD ranked first, followed by Tesla, GAC’s Aion brand and then Geely, according to association data. More

Paramount Global missed revenue expectations for the fourth quarter but posted a surprise quarterly profit.
Paramount+ reached 67.5 million subscribers during the period, a net increase of 4.1 million.
Paramount has been exploring sale options for all or parts of its business in recent months

Getty Images

Paramount Global missed revenue expectations for the fourth quarter on Wednesday but posted a surprise quarterly profit and posted strong results from its streaming platform Paramount+.
Here’s how Paramount performed in the fourth quarter compared to Wall Street estimates from LSEG, formerly known as Refinitiv:

Earnings per share: 4 cents vs. an expected loss of 1 cent
Revenue: $7.64 billion vs. $7.85 billion expected

For the last three months of 2023, Paramount reported a profit of $514 million, or 77 cents per share, up from $21 million, or 1 cent per share, the year prior. Adjusted for one-time items, earnings per share were 4 cents for the period.
Paramount — home to brands such as CBS, Showtime, BET, Nickelodeon and its namesake movie studio — reported a 6% year-over-year revenue decline but posted notable strides in its streaming segment.
Paramount+, its flagship streaming service, reached 67.5 million subscribers during the period, a net increase of 4.1 million, and recorded 69% revenue growth year over year. The company expects to achieve profitability for Paramount+ by 2025, it said Wednesday.
Subscription revenue in the fourth quarter grew 43%, partially driven by price increases, and revenue across its entire direct-to-consumer segment grew 34%.
Paramount saw a 27% jump in global viewing hours across Paramount+ and Pluto TV during the fourth quarter.

“Looking ahead, we continue to be focused on maximizing the return on our content investments and scaling streaming, while transforming the cost base of our business,” CEO Bob Bakish said in a press release. “And I couldn’t be more thrilled with the early momentum we’ve had across every platform in 2024, demonstrating the power of our strategy and assets.”
Paramount has been exploring sale options for all or parts of its business in recent months as the media landscape rapidly changes. Paramount has struggled without a solid growth narrative, with shares down more than 50% over the past two years.
Warner Bros. Discovery had been in preliminary talks to acquire Paramount, but those talks have since halted, CNBC’s Alex Sherman reported Tuesday.
Paramount announced about 800 layoffs earlier this month, just a day after the company revealed it had reached record viewership numbers for this year’s Super Bowl.
The company on Wednesday reported its TV media revenue declined 12% year over year. Advertising revenue declined 15% due to overall “softness in the global advertising market and 5-percentage point impact from lower political advertising,” according to the earnings release.
Revenue in Paramount’s filmed entertainment sector sank 31% year over year, driven by lower licensing revenue.
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