May 10, 2021

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Alex Brummer: Clouds are rising above the UK buoys


Alex Brummer: The seamless access of Darktrace on the London Stock Exchange will be a boost for the next batch of IPOs on the highway

The key to successfully floating technology is quality intellectual property. If investors believe in the safety of the science behind the company, that goes a long way when they come to the market.

Darktrace passed this reliability test by floating in London despite the burden of support from Invoke, the investment vehicle for Mike Lynch, the freelance businessman fighting extradition to the United States.

The company learned important lessons from Deliveroo’s excessive float. Initial hopes were set at a valuation reasonably close to £ 3 billion by founder and CEO Bobby Gustafson, a refugee with Autonomy.

By posting second-tier investment bankers, Jefferies and Berenberg, in place of the bigger names of Goldman Sachs and JPMorgan, which were involved in Deliveroo Imbroglio, greatness was avoided.

Success: The key to being successful in floating technology is quality intellectual property

Darktrace uses artificial intelligence developed by Cambridge to help clients spot cyber attacks and unusual behavior from within.

She is not alone in this universe. The Israeli Varunis Systems, quoted on the Nasdaq Stock Exchange, Microsoft and the Pentagon are among their clients, using superb technology that sieves email and other systems for rogue behavior.

Early Deliveroo investors received a placement due to the herd behavior of corporate governance personnel among longtime UK investors.

But it is possible that some individual fund managers will eventually decide that concerns about the working conditions of the Deliveroo commuter may be overblown.

There is a tendency to forget that Amazon shares, which were first priced at $ 1.73 (£ 1.26) in May 1999, were also given a wide berth at first for ethical reasons. The investors disagreed with destroying the bookstores and hitting the publisher’s pricing ability. Amazon shares are now trading at $ 3,471.31 (£ 2,534) a share, after the latest stunning first-quarter results.

This doesn’t mean Deliveroo will be the next Amazon. To do so, it will require finding new and more powerful income streams, as Jeff Bezos has done with cloud computing. But as Kingfisher President Thierry Garnier pointed out in his interview with The Daily Mail this week, the final winners in the e-commerce space are those companies with the fastest turnaround times from order to front door. Deliveroo is good at that.

Darktrace’s seamless access to the London Stock Exchange will be encouraging for the next batch of IPOs. Broker Numis estimates that there may be as many as 25 suitably sized buoys weighing the front of London.

Among the most ambitious is the fintech firm Wise, which has several years of profit to show. It transforms the overseas payments market by imposing small transparent fees ranging from 0.4 percent to 0.5 percent and eliminating the greedy 3 percent to 4 percent shift that some banks make on currency transactions.

There is no shortage of unicorns waiting to appear on the market.

Staley wins

In line with other UK banks on High Street, Barclays performed well in the first quarter. CEO Jess Staley’s faith in investment banking has been rewarded once again.

Barclays is the only European financial group that keeps pace with the Wall Street giants by acquiring a decent share of its IPO and commercial income.

Retail banking also performed well, aided by advisor Rishi Sunak’s homebuyer breaks and burgeoning credit card lending.

Provisions: Unlike HSBC, Lloyds and Natwest, Barclays has chosen not to move money from bad debt provisions to dividends

Provisions: Unlike HSBC, Lloyds and Natwest, Barclays has chosen not to move money from bad debt provisions to dividends

Despite the bank shooting all cylinders, with returns over 10 percent, better than expected earnings and Stally’s upbeat words, the shares tumbled.

No one can be sure of the continuation of IPOs, bids and deals and the recovery of the market. Unlike HSBC, Lloyds and Natwest, Barclays chose not to move money from bad debt provisions to dividends despite the UK economic recovery. It is unclear if Barclaycard will do well with the economy opening up and affluent consumers dipping in their savings to spend.

All this may be excessive caution. But as the financial crisis has shown, a strong balance sheet is a virtue when the tide recedes.

Aviation hazards

The wounds from AstraZeneca vaccine problems with the European Union would have benefited from some direct diplomacy being undertaken face-to-face from its French CEO, Pascal Soriot. Instead, he chose to remain stuck in Sydney with his family despite the anxious murmur of the chalkboard. Anger may be dampened by booming China sales, advances in cutting-edge cancer drugs Lynparza and Imfinzi and a 4.3 percent jump in stocks. However, Suryut must finish drifting and catch up on the next flight.

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