This is a recording of FT News Summary podcast episode: ‘Magic Kingdom goes to war’
marc Filipinos
Good morning from the Financial Times. Today is Thursday, April 27, and this is your FT News Briefing.
[MUSIC PLAYING]
Microsoft’s biggest deal ever just went bust. British companies are running abroad for start-up capital One reason is the UK pension system.
Harriet Agnew
Pension funds already have the risks of being excluded from them.
Marc from the Philippines
Also, break up the popcorn. Disney is taking over as governor of Florida. I’m Marc Filippino and this is the news you need to start your day.
[MUSIC PLAYING]
We’ll get the latest on the US economy this morning. Economists expect gross domestic product to grow a modest 2% in the first quarter. That is on a year-over-year basis and will be slower than the previous quarter’s 2.6% growth. This number will tell us how effective the Federal Reserve’s interest rate hikes are.
[MUSIC PLAYING]
Disney is suing the governor of the US state of Florida. It says Ron DeSantis violated the company’s right to free speech when he allegedly retaliated against the company for speaking out against the so-called “Don’t Say Gay” law. The law prohibits public schools from teaching about sexual orientation or gender identity. Since then, the Republican governor has targeted Disney’s longstanding tax privileges in the state. I have now joined the FT’s Chris Grimes for more information. Hey, Chris.
Christopher Grimes
Hey, how are you these days?
Marc from the Philippines
So Chris, just to sum it up, Disney executives have spoken out against the “No Gay Talk” law. That angered Ron DeSantis, who then began pursuing Disney’s economic privileges in the state. Is it right?
Christopher Grimes
That is correct, yes. So Disney tried to maintain the power they had for 55 years to run the area around the theme parks however they wanted. And that’s the core issue they’ve struggled with for the past year.
Marc from the Philippines
So can you talk more about Disney’s legal case against DeSantis?
Christopher Grimes
So I think what’s really interesting to see here is that Disney is pushing a lawsuit based in part on the attack that they claim happened, on the First Amendment right to protect privacy. by American speech. Historically, I think especially Republican politicians like Ron DeSantis have always been staunch defenders of business rights, including freedom of speech. So I think this is an interesting point to this whole thing, that it shows how, you know, the party can get tangled up in some knots about these things.
Marc from the Philippines
Now, of course, we should also remind our listeners that DeSantis is considered a likely Republican presidential candidate in 2024 and that his campaign against Disney really fits the broad fight. greater than his on progressive liberal values.
Christopher Grimes
You know, he was able to take his position as governor of Florida and turn it into a kind of national spotlight for himself by talking about his fight when he woke up. He took other measures that really upset libertarians in Florida and across the country when he took over the board of a liberal college in Florida. You know, he’s revising school curricula on issues like, you know, Black History Month. So he’s really made a name for himself, eliminating diversity issues and things like that.
Marc from the Philippines
Chris Grimes is the head of the FT’s LA office. Thanks, Chris.
Christopher Grimes
Sure. Thanks a lot. [MUSIC PLAYING]
Marc from the Philippines
British regulators yesterday blocked Microsoft’s $75 billion acquisition of video game maker Activision Blizzard. The move will likely kill Microsoft’s biggest deal ever. Microsoft said it would appeal. Activision makes the famous video game call of duty. It criticized the regulator and said Britain was clearly “closed for business”. Activision’s stock price fell more than 11% yesterday. Shares of Microsoft rose 7%, but that was due to Tuesday’s strong earnings report.
[MUSIC PLAYING]
Activision’s criticism of Britain, as it is quoted as saying, is “closed to business”, may have hit existing anxiety. In the UK, there are growing concerns about the country’s ability to retain entrepreneurs. British companies have struggled to get the capital they need, and many have gone abroad to source equity capital, often in the US stock market. And a big reason they can’t raise funds in the UK is the UK pension system. FT’s Harriet Agnew joins me for more talk. Hey, Harriet.
Harriet Agnew
Hi Mark
Marc from the Philippines
So, Harriet, your story is about a biotech company called Immunocore. It was spun off from Oxford about 20 years ago, and it pioneered new drugs for cancer, viral infections and other ailments. What happened to this company?
Harriet Agnew
Initially, it managed to secure some support from UK investors, but then as it grew, it failed to raise more money in the country, so ended up having to tap investors. in U.S.A. And then when thinking about where to do the initial public offering, they naturally chose Nasdaq over London. And I spoke to Sir John Bell, one of the UK’s leading immunologists and chairman of Immunocore. And he told me the main problem is just the lack of access to long-term scaling capital in the UK ecosystem. The way he put it is that UK venture capitalists don’t have enough pockets and domestic pension plans are not profitable because they are too cautious when it comes to investing in the growth sector.
Marc from the Philippines
OK, so you just mentioned pension plans. I want to make a connection between this and startups, and the connection is that pension funds are the kind of institutions that investors can invest in, you know, buy shares, to support startups. company like Immunocore.
Harriet Agnew
If you look at other countries like Canada and Australia, you’ll see pension funds and sovereign wealth funds have more time from regulators to invest in early stage companies, listed companies in other asset classes. I think the Canadian model is a pretty interesting one. So we spoke to the Ontario Teachers’ Pension Plan, which has an enviable investment record. They have made almost 10% a year since it was founded in 1990 and last year they were at 4% when nearly every global market sold off. And they will say that much of this is due to the way they are set up to allow them to make bold choices about where they invest and have maximum flexibility. It is also set to be able to capitalize on its long-term horizon by making large allocations to private assets such as your own stake in things like the operator of the Camelot National Lottery at the National Lottery. flies the City of London and also has a stake in Birmingham Airport .
Marc from the Philippines
So why don’t UK pension funds have such flexibility?
Harriet Agnew
I think risk aversion from UK pension funds plays a huge role. And all of this stems from the introduction of a new accounting standard in 2000. And it required companies to calculate the surplus or deficit on their defined benefit pension schemes each year. And then they have to disclose any shortfalls as financial liability in their accounts, just like they do with a bank loan or a bond issue. Corporate boards were appalled by both the size and volatility of liabilities, so they rushed to shut down these defined benefit schemes. And then the trustees of the plans started shifting assets from stocks to government bonds that were supposed to be low-risk. And then the end result of this big move of DB pension schemes out of equity and into fixed income is that UK companies are increasingly undercapitalized from the investor base. their domestic investors who really should be natural investors to them.
Marc from the Philippines
Harriet Agnew is the editor of Fox Asset Management. She is co-writing a series on the UK pension system. Thank you, Harriet.
Harriet Agnew
Thank.
[MUSIC PLAYING]
Marc from the Philippines
You can read more about all of these stories at FT.com, and to keep listeners informed, all of the stories we include in the program notes from here on are free to read. So how about it? This is your daily FT news summary. Make sure you check back tomorrow for the latest business news.
