| |  | TOGETHER WITH |  | | | Good morning.
Due to an outage at the Spotify-owned podcast hosting service Megaphone, listeners were unable to download or stream dozens of popular shows Monday night into Tuesday morning.
The error occurred because Spotify failed to renew Megaphone’s Secure Sockets Layer (SSL) certificate, a data encryption tool used by over half of the internet’s top million websites and easily maintained by legions of hobbyist website owners.
Still, it was enough to bring a $21 billion tech titan, and large swaths of the podcasting industry, to its knees. Here’s hoping we get the full scoop on tomorrow’s episode of The Daily — assuming we’re able to download it. | | | • | | Greenwashing allegations hit Deutsche Bank, FIFA, and the fashion industry. | | • | | A new merger deal would create the world’s fourth-largest mining company. | | • | | Zombie firms may be inching closer to death. | | | | |  | Environment | Greenwashing Allegations Wash Over Deutsche Bank, FIFA, Fashion |  | (Al Wakrah Stadium - Doha, Qatar; Photo by Matt Kieffer) Last month, the NFL announced the league’s first-ever regular-season game in Germany. They won’t bother sending the Las Vegas Raiders, because Germany already has the Frankfurt Raiders. On Tuesday, a phalanx of 50 federal agents raided Deutsche Bank’s headquarters in the country’s financial capital over greenwashing allegations. Meanwhile, the governing body of the other football, FIFA, was accused of greenwashing this year’s World Cup. The fashion industry took one on the chin, too. As more and more organizations wade into the trendy world of environmental, social, and corporate governance (ESG), it’s clear not all will emerge squeaky clean. | Prosecutors Say the F Word | | DWS, Deutsche's asset management unit, has been under scrutiny since its former chief sustainability officer alleged last year that it misleadingly characterized €459 billion assets as ESG “integrated." DWS’ latest annual report dropped the amorphous integrated designation in favor of the more straightforward term: “ESG assets,” which it pegged at €115 billion. Regulators are now throwing a challenge flag.
“Sufficient factual evidence has emerged that, contrary to the statements made in the sales prospectuses of DWS funds, ESG factors were not taken into account at all in a large number of investments,” said the Frankfurt public prosecutors’ office, which added the unit potentially committed “prospectus fraud.” On Wednesday morning, DWS CEO Asoka Wöhrmann announced his resignation, hammering home how greater scrutiny on ESG will lead to more than just bad publicity going forward.
Red Card: FIFA and World Cup host nation Qatar asserted the 2022 tournament will be carbon neutral, but a new report by Carbon Market Watch attributed that claim to "creative accounting." Just how creative? The carbon footprint of six newly-built stadiums was calculated by dividing the number of the days in the tournament over the entire estimated lifetime of the stadium. The only problem, in the eyes of Carbon Market Watch, is the stadiums are being purpose-built for the World Cup, and will likely be collecting dust in the years to follow. The climate watchdog estimates the true emissions are being understated by a multiple of eight.
No Logo: On Tuesday, The Business of Fashion released its second annual survey of sustainability efforts at the fashion industry's top 30 biggest publicly traded companies and found that no company scored more than 49 out of 100 on a series of metrics touching on emissions, waste, materials, chemicals, and transparency. If you wear Puma sneakers you’re in luck — the athletic clothing company was ranked at the top of the underwhelming heap. | | | | | | | | Mining | South Africa's Gold Fields Buying Canada's Yamana to Create World's Fourth Biggest Miner | | Here’s a business deal for gold times’ sake.
On Tuesday, South African mining firm Gold Fields announced a deal to buy Canada’s Yamana Gold in a $6.7 billion, all-stock deal. While the acquisition would make Fields the world’s fourth-biggest mining company and help buttress its balance sheet amidst falling gold prices, the steep premium it agreed to pay is causing Yamana shareholders to say “thanks a bullion.” | No Country for Gold Men | | Gold Fields produces 2.4 million ounces of gold annually from sites in Australia, Ghana, Peru, and its home country South Africa, where 60% of the company’s reserves are. South Africa, however, is considered one of the least attractive jurisdictions for global mining, ranking 75th out of 84 locations as measured by ‘geologic attractiveness’ and local policy in a Fraser Institute survey.
Gold Fields was on the hunt for a deal, to try and hedge against the exposure at home: | • | | With Yamana, Gold Fields will add projects in Canada, Brazil, Argentina, and Chile to its portfolio. “We don’t have any projects in the pipeline or any way of countering the decline in production that is due to come from Gold Fields over the next number of years,” Gold Fields Chief Executive Chris Griffith explained to The Wall Street Journal. | | • | | If the deal is approved, Gold Fields shareholders will get 61% of shares in the $15.6 billion combined company, and Yamana Gold shareholders the remaining 39%. Gold Fields is paying a 34% premium on Yamana’s average 10-day share price, which sent Gold Fields shares tumbling 11% as investors wondered if that was too much — Credit Suisse analysts said the premium is "considerably higher" than other recent gold deals. | | | | "You will not be relevant if you are less than something like $20 billion in market capitalization," Neal Froneman, CEO of mining company Sibanye Stillwater, told S&P Global Market Intelligence in 2020, reflecting analyst concerns that more consolidation is needed in the mining sector.
Great Mines Think Alike: Earlier this year Canadian mining firms Kirkland Lake Gold and Agnico Eagle Mines completed a $10 billion merger, and Australia’s Newcrest Mining’s completed a $3.5 billion takeover of Vancouver-based Pretium Resources. Call it gold fusion. | | | | | | Sponsored by The Ascent | Want To Max Out Your Cash-Back? Try This Card | Is there anything better than making money when you spend money? We’ll answer that for you: Nope. That’s why we like The Ascent. They keep us in the loop on the best offers in the credit card world, including everything from the best cash back options to zero-interest balance transfer cards and beyond. Their latest recommendation includes: | • | | 0% intro APR on purchases | | • | | 0% intro APR until 2023 on balance transfers | | | | | | | | | | Credit and Lending | A Tight Lending Market is Squeezing Zombie Firms | | They’re lumbering, stumbling, and hooked up to life support. They are, as some economists have dubbed them, “Zombie Firms.” Think American Airlines and Carnival Cruises — massive companies propped up by big-time name recognition and a friendly lending environment.
But with monetary policy tightening, the bill may soon come due for some 600 zombie companies struggling to pay off the interest on pandemic-era loans. | Night of the Living Debt | | Approximately one-fifth of the 3,000 largest publicly-traded companies in the US are considered zombie firms because they're failing to earn enough cash to cover interest expenses, according to Bloomberg. When interest rates were low, these companies could sustain themselves by raising more cheap capital. And historic government efforts to boost private sector liquidity gave zombie firms access to months, if not years, worth of debt financing.
But the Fed's run of interest rate hikes, and record inflation, may be enough to push a wave of companies from undead to dead dead: | • | | US corporate profits fell the most in two years in Q12022; in the past year, earnings at 620 companies fell short of interest payments — well above pre-pandemic 2019 levels — according to Bloomberg. | | • | | Securing loans is now a tall task: Junk-rated companies, as denoted by S&P Global Ratings and Moody’s Investors Service, have only borrowed $56 billion in the bond market so far this year, down 75% year-over-year. May saw new loan starts of under $6 billion, a massive dropoff from January's $80 billion. | | | | A Zombie Cure? Even if bankruptcies rise, it may be imprudent to expect a government bailout. “Unless we have another full-blown financial crisis, I don’t think the Fed’s capacity to bail out is necessarily that high,” NYU economist Viral Acharya told Bloomberg. “Especially when they are explicitly saying they want to reduce demand. How is that consistent with keeping these firms alive?” | | | | | | Extra Upside | • | | Their turn: inflation in the Eurozone hit a record 8.1% in May. | | • | | But: consumer confidence in the US slipped for the second month in a row. | | • | | In Volatile Markets, Diversification Matters Even More: 2022 has been an important reminder that sophisticated portfolios need to be diversified, including important alternative assets like VC. Alumni Ventures makes it easy for accredited investors to add professional venture capital to their portfolio. Access highly-competitive private investments via smart, simple venture funds. Start today with Alumni Ventures. *Partner | | | | | | |  | Just For Fun | | | | | Written by Sean Craig and Brian Boyle. | | No longer want to receive these emails? Unsubscribe here. Copyright © 2022 The Daily Upside, LLC., All rights reserved. 1230 York Avenue, Box 154, New York, NY 10065 | | | | |
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