“My whole working life is starting to become a memory.” That was the verdict of one technician in a long-running London theatre production.
When theatres were shut by lockdown in March, he was furloughed — paid up to £2,500 a month by the UK government through its coronavirus job retention scheme. Over six months later, his theatre remains closed and will not qualify for government money through a new job support scheme, announced last week by chancellor Rishi Sunak. So he is about to become redundant.
The notion of “furlough addiction” could not be further from the truth, he says. “It’s affected my mental health greatly. It’s been so long since I’ve done my job, [it feels like] it’s something I used to do. There’s nothing on the horizon.” Unable to disclose his name for fear of breaching confidentiality clauses in his redundancy deal, he is gloomy about the chances of returning to his old profession. “I’ll drive for Amazon or stack shelves at Tesco,” he says.
Some 9.6m UK jobs have been helped by the furlough scheme at some point this year. Daniel Tomlinson, senior economist at the Resolution Foundation, a think-tank, notes the latest official data is from July, but estimates about 3m people were still using the scheme at the start of September. Many of these will have been on ‘flexible furlough’, he adds, going back to work at least some of the time, but as many as 1m have not worked for months.
As the furlough scheme draws to a close at the end of October, attention has been focused on whether furloughed workers will keep their jobs. Yet this huge experiment has raised issues for businesses.
One manager complains of resentment among those who spent the summer working while their furloughed peers enjoyed — as they saw it — a paid holiday. Some have been liberated by leave, using it to retrain into new careers, develop side-hustles, care for sick relatives or homeschool children. One estate agent complained furlough fever might have affected a few of his peers who had resisted a return to work until their employer sent a stiffly worded threat of redundancy.
Anthony Wheeler, dean of the School of Business Administration at Widener University, resists characterisations of workers abusing the system. Humans are hard-wired over centuries to work. Nonetheless, he says furloughed staff’s return to work is “just as large a shock to an organisation as sending those employees out on furlough. It represents dramatic change.” Returning employees re-enter a different organisation. “So much will have changed. The culture will have changed. Expectations will have changed. All of this must be learned, and returning and non-furloughed employees will have to go through this re-socialisation process.”
For an employee who is used to a culture of presenteeism, remote working will be a shock to the system. A survey by Boston Consulting Group, the management consultants, of 2,000 workers on the jobs retention scheme found that one-third of UK employees returning from furlough feel trusted by employers to do their work remotely, compared to four-fifths of non-furloughed employees. Ann Francke, chief executive of the Chartered Management Institute, suggests partnering “new returners with those who have been working throughout to bring them up to speed quickly”, as well as support groups, attended by senior leaders, and training.
The experience of furlough will be affected by many factors but one key differentiator is how confident workers were about having a job at the end of it. Among my own friends, one researcher enjoyed the past few months because he was relaxed about his long-term prospects. Another, in events management, was gloomy. Despite exercising manically and taking up the piano, he started to feel despondent locked down with his wife, who was frantically busy at work. When friends were brought back from furlough he started to feel “a little ashamed”. His GP prescribed mild antidepressants.
In the end he was made redundant. It spurred him into action and luckily he found a new job. Nonetheless, he was “extremely nervous . . . I’d lost a lot of confidence.” A few weeks later he is thriving. Work, he says, “helped me recover”.
Rolls-Royce has announced plans to raise £2bn in a rescue rights issue, as well as drawing in government support for a new debt package of up to £3bn, in an attempt to bolster a balance sheet badly hit by the pandemic.
Shareholders are being offered 10 shares at 32p each for every three they own, in what amounts to a 41 per cent discount based on the theoretical post-rights price. The shares closed on Wednesday at 130p and were down 11 per cent in early trading on Thursday.
Warren East, chief executive, said the fundraising would help Rolls-Royce navigate the “current uncertain operating environment”.
“By raising additional capital now, we will improve our liquidity headroom and reduce our level of balance sheet leverage, while supporting disciplined execution and investment to ensure we maximise value from our existing capabilities,” he said.
Rolls-Royce also said the UK Export Finance agency had agreed in principle to guarantee a further £1bn loan, in addition to the £2bn granted in July. However this was still subject to agreement of terms with lenders and a successful completion of the rights issue, so there was no guarantee this would complete, the company said.
Rolls-Royce also intended to raise at least £1bn through a bond offering, while banks had agreed to a new two-year term loan facility of another £1bn.
The UK group has been driven to the fundraising by the worst crisis to hit the aviation industry. The global collapse in air travel has grounded many of the large aircraft flying its big engines, severely affecting its “power by the hour” model where it is paid for the time its turbines are in the air. The long-haul segment is not expected to recover before 2024, according to many analysts, which will put further pressure on the group’s cash flow.
The cash call is vital to restore the balance sheet, which will suffer a roughly £4bn cash outflow this year. Rolls-Royce’s net debt has soared, and is expected to rise from £993m last year to a forecast £3.5bn by the end of 2020. About £3.2bn of the company’s debt falls due next year, putting it under pressure to refinance those borrowings.
Credit rating agencies have downgraded its debt to junk status, a severe impediment to striking new long-term contracts with airline customers.
The group’s credibility now rides on whether investors take up the offer. The share issue has been fully underwritten, with BNP Paribas, Citigroup, Goldman Sachs, HSBC, Jefferies and Morgan Stanley acting as joint global co-ordinators.
Crédit Agricole CIB, Santander, SMBC Nikko and Société Générale are acting as co-lead managers. Goldman and Greenhill are acting as financial advisers to the company. Jefferies and Morgan Stanley are acting as joint sponsors.
The UK's furlough rules go through a major change from today, Thursday, October 1, the last major change before the system is scrapped at the end of the month.
After October 31 the Job Retention Scheme will be ended and replaced with a Job Support Scheme. Instead of paying up to 80 per cent of salaries for people unable to work that will pay up to two thirds of salaries for people working at least a third of their hours.
But the furlough scheme remains in place through October - with a big change.
Instead of the Government paying 80 per cent of your pay, they will now pay just 60 per cent, up to £1,875.
Your employer will have to pay a minimum of 20% of your wages, up to a cap of £2,500.
The change comes after the original 80 per cent system was wound down to a 70 per cent contribution from the Treasury last month.
The Government also ordered employers to start paying National Insurance and pensions contributions for all staff.
Your monthly earnings will be at least 80% of your salary with money from the Government and your boss.
It is then up to each individual employer whether they want to top up the remaining 20% to give you 100% of your salary.
The furlough scheme will end on October 31, 2020.
From November 1 a new job support scheme for part-time workers will be launched.
The government will then top up the wages of workers in “viable jobs” for six months, when they are working at least a third of their normal hours.
The FTSE 100 made a sprightly start to proceedings, taking its cue from Wall Street and Asia’s main markets.
The start of the final quarter of the year has led to some early stock-taking. While the UK blue-chip index is around 1,700 points, or 22%, off its peak, US markets have remained resilient in the face of COVID.
How long that can continue with the presidential race now starting to ramp up remains to be seen.
Richard Hunter, the head of markets at Interactive Investor, expects the election to be “an aggressive affair” that will challenge “brittle” recovery Stateside.
Meanwhile “in the background unemployment remains a thorn in the politicians’ side”, he added.
Back here at home, the lockdown of large swathes of the north looks set to hobble any recovery, while fears of further, more draconian action continues to keep a lid on any positivity.
It's the real thing....
Topping the Footsie was bottler and distribution group Coca Cola HBC (LON:CCB), which was up 3.5% after a Goldman Sachs upgrade to ‘buy’.
A 5% rise in the share price of Rank (LON:RNK) had the market wondering whether the bingo and casinos group would be the next sector takeover target now that William Hill (LON:WMH) has agreed to be acquired.
Among the tiddlers, Digitalbox (LON:DBOX) rose 16% after it said it was buying the student publisher The Tab for what looks like a bargain £750,000.
6.43 am: Front foot start predicted
The FTSE 100 looks set to begin the fourth quarter on the front foot, as equity markets broadly find support.
London’s blue-chip benchmark is seen about 17 points higher with CFD firm IG making a price of 5,882 to 5,885 with just over an hour to go until the open. FTSE 100 ex-dividends take 4.93 points off the index this morning.
US politics remain a focus for traders, albeit not the televised shouting contest between Donald Trump and Biden which whilst making much noise has yet to move markets.
Attention has been on the US Treasury Secretary, Steven Mnuchin, and the prospects for COVID-19 economic reliefs which continues to a political football. Republican Mnuchin seeks to engage with Demoncrats over stimulus, amidst a two-month political standoff, and evidently it appears to salve trader sentiments too.
“Earlier this week, the Democrats called for a scheme that was lower than previously proposed, they put forward a package worth $2.2 trillion. The Republicans are believed to be keen on a deal worth roughly $1.5 trillion, so there is still a big gap in when both sides want,” said David Madden, analyst at CMC Markets.
“The commentary from Mr Mnuchin gave dealers hope that some sort of a compromise might be achieved.”
On Wall Street, the Dow Jones added 329 points or 1.2% on Wednesday to close at 27,781.
The S&P 500 gained 0.83% to mark a close at 3,363 and the Nasdaq finished 0.74% higher at 11,167.
The small-cap focused Russell 2000 benchmark, meanwhile, notched up just 0.2% to 1,507.
In Asia, Japan’s Nikkei was trading flat at around 23,184. There is no trading in Hong Kong or Shanghai due to the National Day public holidays.
Around the markets
The pound: US$1.2938, up 0.14%
Gold: US$1,892 per ounce, up 0.28%
Silver: US$23.68 per ounce, up 1.39%
Brent crude: US$40.95 per barrel, down 0.19%
WTI crude: US$40.23 per barrel, up 2.39%
Bitcoin: US$10,824, up 0.7%
6.45 am: Early Markets: Asia / Australia
Japan’s Tokyo Stock Exchange halted trading today due to a technical issue and markets in China, Hong Kong, South Korea and Taiwan are closed today for holidays.
The other markets in Asia Pacific rose with Singapore’s Straits Times index advancing 1.26% while India’s Nifty 50 was up 1.37%.
In Australia, the S&P/ASX 200 is off to a great start to October by rising 76 points or 1.31% to 5892.
This follows a positive lead from Wall Street which rallied yesterday on hopes of US Congress getting closer to another stimulus package to help boost the economy.
9Spokes International Ltd (ASX:9SP) has completed a A$10 million two-tranche placement which will support the company’s focus on continual enhancements of its platform for around two years.
Australian Strategic Materials Ltd (ASX:ASM) has produced a large 7.5-kilogram sample of a high-purity dysprosium metal through partner Ziron Technology Corporation at its commercial pilot plant in South Korea.
Bellevue Gold Ltd’s (ASX:BGL) extensional and infill exploration drilling at the Bellevue Gold Project in Western Australia has intersected high-grade mineralisation both outside and within the existing known resource boundary.
Castillo Copper Ltd (ASX:CCZ) has entered into a binding agreement with private group Wyloo Metals Pty Ltd to acquire two tenements complementing existing tenure in the Broken Hill area of far western NSW.
Legend Mining Ltd (ASX:LEG) has identified a new, strong electromagnetic (EM) conductor at Hurley prospect which enhances the potential of the Rockford Project on WA's Fraser Range.
CV Check Ltd (ASX:CV1) has implemented a live launch of their most recent technology integration with RealMe, the digital identity service managed by New Zealand’s Department of Internal Affairs.
Eclipse Metals Ltd (ASX:EPM) has confirmed further mineralisation at the Mary Valley Manganese Project near Gympie, southeast Queensland, following stage-1 drilling.
Tietto Minerals Ltd (ASX:TIE) is taking big strides towards developing the Abujar Gold Project in central-western Côte D’Ivoire with a resource upgrade expected and a pre-feasibility study (PFS) close to being finalised.
Auteco Minerals Ltd (ASX:AUT) (OTCMKTS:MNXMF) is set to deliver a new generation of growth after a productive eight months since acquiring the Pickle Crow Gold Project in Ontario, Canada.
YPB Group Ltd (ASX:YPB) has signed a non-exclusive Master Services Agreement (MSA) with India’s Optimum Interface Consulting (OIC) which provides investigative and risk mitigation services including the provision of anticounterfeit technology solutions.
US tech firm Palantir, known for supplying controversial data-sifting software to government agencies, has fetched a market value of nearly $22bn (£17bn) in its debut on the New York Stock Exchange.
It's a lofty figure for a firm that has never turned a profit, been hit by privacy concerns and relies on public agencies for nearly half of its business.
But the company, which takes its name from the "seeing stones" known for their power and potential to corrupt in Lord of the Rings, says the need for the kind of software it sells "has never been greater".
The firm, which launched in 2003 with backing from right-wing libertarian tech investor Peter Thiel and America's Central Intelligence Agency (CIA), builds programs that integrate massive data sets and spit out connections and patterns in user-friendly formats.
Palantir expansion
The firm - sometimes described as the "scariest" of America's tech giants - got its start working with US soldiers in Iraq and Afghanistan, but now supplies software to police departments, other public agencies and corporate clients.
It is active in more than 150 countries, including the UK, where it was one of the tech firms the government enlisted this spring to help respond to coronavirus.
In the first half of 2020, Palantir revenue rose 49% year-on-year, topping $480m (£373m). And at its direct listing on Wednesday, in which investors sold some of their existing shares to the public, shares opened at $10 each - above the $7.25 reference price - giving it a value of roughly $22bn.
Mark Cash, equity research analyst at Morningstar, who has estimated the firm's value at $28bn - even higher than the valuation reached on Wednesday - said the firm is well-positioned in a growing industry.
"Data integration at this scale for the government is very complex and I think if you tried to stop spending on that and it just goes away, you're going to have some big problems," he said. "We think it's very hard to switch away from once you're in as a customer."
ICE and privacy protests
But Palantir's rise has been shadowed by concerns from privacy experts, who say the firm's tools enable surveillance and analysis of data - everything from drivers licenses and social media posts to DNA swabs - that skirts people's right to privacy and is ripe for abuse.
In the US, the use of its technology by immigration authorities to help round-up undocumented immigrants has drawn heated protests and in the UK, the health data handled by the firm has also raised alarms.
Ahead of the firm's listing, Amnesty International issued a report saying the firm was failing its responsibility as a company to protect human rights with inadequate due diligence into who it is working for.
"We have to move away from the idea that data analytics and data collection is objective or clean or immune from all the pathologies that we're seeing play out right now," said Paromita Shah, executive director at Just Futures Law, which focuses on immigration law.
"Our governments are the problem because they don't want to set up oversight, but Palantir takes advantage of it."
'We have chosen sides'
Palantir told Amnesty that it had deliberately declined some work with border authorities in the US due to the concerns.
But the company has also vigorously defended its government work, maintaining that its clients own and control the data. It says it has a team focused on civil liberties issues, but it is government's job to craft policy, not Silicon Valley's.
It has contrasted its commitment to some other tech firms, such as Google, which stopped work on an artificial intelligence project with the Pentagon after a backlash from employees.
"Our company was founded in Silicon Valley. But we seem to share fewer and fewer of the technology sector's values and commitments," chief executive Alex Karp wrote in the filing announcing its plans to sell shares to the public. "We have chosen sides, and we know that our partners value our commitment".
The outspoken defence is perhaps little surprise, coming from a firm co-founded by Mr Thiel, who famously abandoned Silicon Valley in 2018, decrying its liberal politics.
Mr Thiel, whose estimated $2.1bn fortune was fuelled by the sale of PayPal and an early investment in Facebook, funded the Hulk Hogan invasion of privacy case that bankrupted gossip news site Gawker and has given generously to conservative politicians.
In 2016, he donated more than $1m to US President Donald Trump, though he is reportedly sitting out this election cycle.
By contrast, chief executive Alex Karp, who met Mr Thiel when they both attended Stanford Law School, is a self-described neo-Marxist and "card-carrying progressive", with a doctorate degree in neo-classical social theory from a Goethe University in Germany.
He displays Tai Chi swords in his offices, according to Bloomberg and the firm's presentation to investors this month opened with a video of him racing up a hill in orange exercise gear.
Prospective investors have to be "comfortable" with the firm's leaders - especially since, under the terms of the listing, they will continue to wield outsize voting power over the firm, even after ownership shifts to the public, said Mark Moerdler, senior research analyst at Bernstein Research.
His team also warned in a recent note that the controversies could hurt the firm's efforts to win private sector clients.
"Politics has entered business in a way we haven't seen before and you see large companies being influenced by employees and others in interesting ways," Mr Moerdler told the BBC. But, he added, "I don't think it will fundamentally impact their ability to grow the business if the opportunities are as large as they believe they are."
Palantir may be an American company, but it actually employs more people in London - just shy of 600 - than in either its Silicon Valley base or Denver headquarters.
That reflects both the work it does for European clients including BP, Airbus and Ferrari - but also its UK government contracts, which predate the coronavirus pandemic by several years.
These - a source told me - have included work with GCHQ's cyber-spies as well as publicly declared work for the Ministry of Defence.
Big data analytics may sound like a dry subject, but speak to the firm's staff and they can speak passionately about a job that they say has involved helping fight drug cartels, catch child predators and prevent terrorist attacks.
But while Palantir might like to highlight the lives it helps save, it has also been accused of having "blood on its hands" by civil rights protesters. They object to its tech bring used to identify places where illegal immigrants are working so the properties can be raided and those arrested deported.
In fact, the firm has effectively become the boogeyman of surveillance tech.
Shareholders will have to be aware that while many states and companies see benefit from using its software, there are also many with an interest in exposing any further controversies it might be involved in.
Palantir financial prospects
Just how big those opportunities are remains an open question.
While its efforts to make inroads in the corporate world were rocky initially, Palantir's commercial business has grown. It now accounts for 53% of revenue and includes customers such as French airplane-maker Airbus and energy giant BP.
And Palantir has said it is well-poised to continue to win government work, thanks to a lawsuit it won against the US military in 2016, which requires the government to consider commercially available products first.
The firm's finances have also improved in recent years, amid pressure from early backers to list shares publicly and allow them to cash out.
In 2019, the firm brought in $743m in revenue, up 25% from the year before, with some 60% of sales from outside the US.
But Palantir still posted a loss of nearly $580m last year and relies on a relatively small number of clients for the majority of its revenue.
Its nearly $22bn opening valuation was only a bit higher than the $20bn private investors valued the firm when it fundraised five years ago.
And as Palantir starts to trade publicly, scrutiny has only grown. This month, liberal US politicians, including Rep Alexandria Ocasio-Cortez, asked financial regulators to investigate the firm, saying the information it had provided to investors lacked transparency on key areas of risk, including data protections and work with foreign governments.
Growth will depend on landing new, large deals every year while retaining their profitable clients - and the firm hasn't shared much about its record, said Mr Moerdler.
"If they can make the product critical to an organisation, it can be sticky, but the road there is long," he said. "In terms of growing, it still needs to be proven."
Shares in Palantir closed below their debut price on Wednesday, dragging the data analysis company’s market value $4bn under the high water mark it reached five years ago.
Palantir stock initially surged more than 10 per cent above its $10 opening price but ended the day at $9.73, giving it a market value of $15.8bn. The valuation is short of the $20bn it reached in private hands in 2015, a gap partly explained by investors’ uncertainty about its attempted shift from a consultancy to a full software company.
The flotation was one of two direct listings on the New York Stock Exchange on Wednesday. Asana, the business software company led by Facebook co-founder Dustin Moskovitz, opened at $27 and ended the day at $29.96, valuing it at more than $4.6bn.
Asana sells task-management software used by organisations including Google and Nasa. At its most recent equity fundraising in November 2018, the company was valued at $1.5bn.
The duo enter a hot market for tech listings, following cloud computing company Snowflake’s $3.4bn initial public offering earlier in September. That marked the largest IPO of the year and the biggest on record for a US software group.
At the end of day, Palantir was valued well below other recently listed software companies, at 15 times this year’s expected revenue, despite a projected growth rate of more than 40 per cent. However, Brendan Burke, tech analyst at PitchBook, said even this looked high, and that it was “speculative” to assume Palantir would achieve the predictable growth typical in the software industry.
Shyam Sankar, chief operating officer, said Palantir had originally planned to go public late next year, giving it more time to demonstrate that its attempted shift to a pure software business model was bearing fruit. But he said the pandemic had brought a flood of new business and accelerated the company’s plans.
The twin debuts were also a test for direct listings, a process that has emerged as an alternative to the traditional IPO. Unlike in an IPO, the companies had to match demand from public investors with supply from existing private shareholders to execute their first trades.
Palantir and Asana used Morgan Stanley as lead adviser and Citadel Securities as the market maker overseeing the trading for both listings.
“Both companies are fast growing and highly unprofitable,” said Bill Smith, chief executive of Renaissance Capital, a fund manager of IPO exchange traded funds. “Asana has achieved a sticky customer base and strong net retention, and Palantir has long contracts with its customers.”
On Tuesday, the New York Stock Exchange released a reference price of $7.25 for Palantir, implying the company would have a market capitalisation of about $11.7bn. The exchange put Asana’s reference price at $21.
Reference prices, based on private trades, act as a guide to the market but are not the same as an IPO price, which is the amount investors pay for shares in a typical flotation. Both Slack and Spotify, which went public through direct listings, traded above their reference prices upon listing.
Palantir stands apart from the Silicon Valley tech establishment for brandishing its close ties to the national security community.
The company is led by Alex Karp and co-founded by Peter Thiel, the venture capitalist whose support for President Donald Trump has placed him at odds with his more left-leaning peers. Along with another co-founder, Stephen Cohen, they will retain control of the company through a complex voting structure that has raised concerns among corporate governance watchdogs.
Unlike in similar direct listings, Palantir will keep the majority of its stock locked up for months after it goes public, allowing only a portion of its class A common stock to trade on the first day.
The direct listings join 11 IPOs this week, making it one of the year’s busiest. The run of flotations has tracked the booming stock market rally against the backdrop of the Covid-19 pandemic.
Proceeds raised in IPOs for the year have already eclipsed every year since 2014, when Alibaba set a record for the largest US listing, according to Refinitiv data.
TSB revealed on Wednesday it was to close 164 branches, with the loss of more than 900 jobs, as it accelerates the shift towards digital banking.
The announcement builds on a wider exodus from the high street by major UK banks since the financial crisis that has resulted in tens of thousands of job losses and customer complaints about lack of access to staff and services.
TSB pointed to a spurt in numbers using its digital banking services during the COVID-19 crisis as it continues to rebuild trust following the IT fiasco in 2018 that saw almost two million customers locked out of their accounts for weeks.
Image:A customer using the TSB Online banking app
The TSB branches below have been earmarked for permanent closure on the following dates:
Aberdeen, Bucksburn - May 20
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Aberdeen, Culter - February 10
Aberdeen, Dyce - May 26
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Aldridge - February 25
Alexandria - May 11
Alford - February 9
Andover - June 24
Anstruther - March 10
Ascot - June 10
Banchory - February 16
Barnet - January 28
Barton-le-Clay - April 13
Bathgate - June 23
Bearsden - June 16
Benfleet - March 4
Berwick-upon-Tweed - March 3
Birmingham, Kingstanding - March 24
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Blackburn, Bastwell - January 26
Blairgowrie - May 5
Bolton, Daubhill - replaced by new city centre branch
Bolton, Horwich - replaced by new city centre branch
