EU Approves Microsoft-Activision Merger, New CEO Pay Disclosure, Buffett Bets on Capital One

Asian Equities Advance, Japan’s Topix Climbs

Most Asian equities advanced, and Japan’s Topix benchmark (TOPIXI:TOPIX) climbed to its highest level since 1990. The renewed push by Japan’s corporates to increase buybacks and focus on returns is helping boost sentiment, with the Nikkei 225 Stock Average (NIKKEII:NI225) leading gains among Asia’s major benchmarks. Chinese equities on the mainland slipped due to worse-than-expected economic data, with analysts forecasting more policy support later this year. According to John Vail, chief global strategist at Nikko Asset Management Co, “domestic and foreign investors are positive about Japan relative to the US and Europe, as it does not face an imminent recession and yet has very low valuations”.

EU Approves Microsoft-Activision Merger

Microsoft’s (NASDAQ:MSFT) $69bn merger with Activision Blizzard (NASDAQ:ATVI) has been approved by the European Commission, despite objections from competition watchdogs in the US and UK. However, the approval is conditional on Microsoft making Activision games available on other platforms. Microsoft’s American case will be heard in August, and the company plans to challenge the UK’s judgment.

Investors Must Focus on Margins, Says Private Equity Executive

Private equity executive Chip Kaye has said that higher interest rates have so fundamentally shifted the financial environment that investors must focus on a company’s ability to maintain margins rather than just its growth prospects. This moment is different from anything experienced in the last 40 years, with inflation proving stickier and interest rates higher than currently expected, and more complicated great-power politics adding to that dynamic.

Wells Fargo Settles Shareholder Lawsuit for $1 Billion

Wells Fargo (NYSE:WFC) has agreed to pay shareholders $1 billion to settle a class-action lawsuit that accused the bank of overstating its progress in cleaning up after its 2016 fake-accounts scandal. The bank’s shareholders alleged that Wells Fargo and its past leadership misled them about how swiftly they were fixing governance issues and risk-management systems that failed to prevent the bank from opening up perhaps millions of phony accounts. After the 2016 scandal led to a series of regulatory rebukes, the bank moved slower to address the problems than it suggested publicly, according to the plaintiffs.

New CEO Pay Disclosure

Companies are now tabulating gains and losses in the stock awards that make up much of the pay packages for CEOs. Historically, companies have reported executive compensation as it was valued when executives received it. The new measure, dubbed “compensation actually paid” under Securities and Exchange Commission rules, is designed to move disclosure beyond the moment-in-time snapshots that investors have considered for years. According to a Wall Street Journal analysis of data from MyLogIQ, in 2022, about two-thirds of the top executives at S&P 500 companies ended the year with smaller pay packages than they were awarded, at least on paper.

Buffett Bets on Capital One

Warren Buffett’s Berkshire Hathaway (NYSE:BRK-B) placed a $954 million bet on credit card and banking company Capital One (NYSE:COF) in the first quarter, one of the few new stakes added by the investment group in a period when it was dumping billions of dollars worth of stocks. The disclosure of the investment on Monday signalled Berkshire’s and Buffett’s comfort with the credit card industry and the health of consumers’ pocketbooks, even as several regional banks have been swept up in financial turmoil. Capital One describes itself as the third-largest issuer of Visa and Mastercard credit cards in the US.

Buffett’s TSMC Exit

In the first quarter, Taiwan Semiconductor Manufacturing Co. (NYSE:TSM) received a mixed verdict from top investors. While hedge funds Tiger Global Management and Coatue Management added new bets, Warren Buffett’s Berkshire Hathaway Inc. (NYSE:BRK-B) exited the stock after the firm slashed its holding by 86% late last year. Buffett told investors at its annual meeting earlier this month that concerns over geopolitical tensions between China and Taiwan motivated the move, which sent TSMC shares tumbling and investors spiraling.

Concerns Over Share Buybacks

A growing number of prominent investors are expressing concerns over the record levels of share buybacks, as the practice is boosting executive bonuses but providing only limited benefits to shareholders. According to research by asset manager Janus Henderson, the world’s 1,200 biggest public companies collectively bought back a record $1.3tn of their own shares last year, triple the level of a decade ago and almost as much as they paid out to shareholders in dividends. By contrast, total dividends have grown by just 54% in the past 10 years.

TPG Diversifies with Angelo Gordon

TPG (NASDAQ:TPG) is diversifying into credit-based investments with its first major acquisition since going public last year. The US private equity group has agreed to buy debt and real estate manager Angelo Gordon for $2.7bn, with the acquisition to be predominantly made in stock. TPG will pay $970mn in cash and the remainder in stock by issuing 62.5mn new shares in a deal it forecasts would increase its fee-based earnings by as much as 10% next year. In first-quarter results released on Monday, the buyout group generated $99mn in fee-related earnings, generally beating analysts’ forecasts.

Imperial Brands Volumes Decline

Imperial Brands Plc (LSE:IMB), the UK tobacco company and maker of Winston and Gauloises cigarettes, reported a decline in volumes in the first half of the year. However, it forecast an acceleration in second-half earnings, helped by price increases. Imperial exited Russia last year and saw gains in the US, Australia and Spain, which offset declines in Germany and the UK. The company said it is still on track to deliver faster profit growth in the second half, in line with its previous guidance.

Vodafone CEO Unveils Growth Plan

Vodafone Group Plc’s (NASDAQ:VOD) new Chief Executive Officer Margherita Della Valle has unveiled a plan to revive growth at the telecom giant. The Newbury, England-based company said in a statement that it will cut about 11,000 roles across the business over the next three years, work to turn around its German market and start a “strategic review” of its Spanish unit. Bloomberg reported last month that Vodafone had attracted takeover interest for its operations in Spain.