Today's business and finance round up 13th September 2021
👀US activist investor builds major stake in WH Smith
13th September 2021
Good morning Huge congratulations to Emma Raducanu who won the US Open on Saturday. Playing in only her second grand slam, the 18-year-old is the youngest Briton to win a major. In just three months she has gone from A-level student and world number 338 to grand slam champion and world number 23. 👏
US activist investor builds major stake in WH Smith
20 years on from 9/11
RETAILUS activist investor builds major stake in WH Smith
What’s going on?US investor Causeway Capital has increased its holding in WH Smith to 9%. Causeway is now the high street retailer’s largest shareholder with its stake worth £178m.
Why is this important?
WH Smith has been trading for over 200 years but the pandemic has presented arguably its toughest challenge yet. Pre-Covid two-thirds of its profit was generated from its travel business i.e. the stores in train stations and airports. Lockdown restrictions and remote working all but decimated this.To add insult to injury WH Smith had acquired US travel retail chain Marshall Retail three months before the first lockdown.Causeway has $47bn assets under management and has been a large investor in WH Smith since March. It’s what’s known as an activist investor – it buys significant stakes in public companies in order to influence how the business is run.Causeway did this with Rolls-Royce last month. It bought 9% of the engineering firm and called for a board refresh and for some “fresh thinking”. But sources close to Causeway say that so far, the relationship with WH Smith is friendly and no demands have been made. Some industry experts think that the investor is simply betting on a travel recovery and thinks that WH Smith will benefit regardless of what management do.TakeawayAlready this year, British firms like BT and Aviva have also seen their shares snapped up by activist investors. However unlike others, Causeway doesn’t appear to be calling for a major shake up in WH Smith. But it remains to be seen if this stance will change if the retailer continues to struggle to recover from the pandemic.
US20 years on from 9/11
Saturday marked the 20th anniversary of 9/11, the largest terrorist attack on US soil that killed almost 3,000. The horrific events shook the world and had far reaching impacts, some of which are still being felt to this day. Here we touch on some of the economic effects:
The attacks on the twin towers in New York and their subsequent collapse cost an estimated $60bn including damage to surrounding buildings, infrastructure and subway facilities. It took eight months, 3.1m man hours and cost $750m to clear 1.8m tons of debris at Ground Zero.
Before 2001 the US had been cutting military spending. In response to the attacks the US invaded Iraq and Afghanistan. In the 10 years after 9/11, military spending doubled to $700bn, or 20% of total government spending. The post 9/11 US wars in the Middle East have cost over $6 trillion.
The attacks on the World Trade Center struck the US financial industry’s central nervous system, where only streets away from the towers thousands of traders bought and sold stocks at the New York Stock Exchange.
Following the attacks, the US stock market closed for four trading days, the longest shutdown since the Great Depression in the 1920s. The week trading returned was disastrous. The S&P 500 fell 14% that week, wiping $1.4 trillion off the market’s value.
Even Hollywood had to make changes. After 9/11 disaster films like Deep Impact, Independence Day and Armageddon understandably fell out of favour. During the 2000s, the fantasy (Lord of the Rings, Harry Potter) and superhero (The Dark Knight, Marvel Cinematic Universe) genres took over cinemas, providing audiences welcome escapism.
Stat of the day
McDonald’s profit margin for fries is between 75-90% whereas for a double cheeseburger it's about 55%
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Interesting links from around the web