Legal Oil Fires

Plus: Manhattan landlords didn’t get the recession memo. ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌

February 10, 2023

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TOGETHER WITH

Good morning and happy Friday.

Yahoo removed the exclamation mark from its name around a decade ago, but after the latest round of layoffs it might want to add a question mark.

The search engine and email service turned Tumblr acquirer was merged with AOL by Verizon in 2017 and sold to private equity titan Apollo for $5 billion in 2021. Now the combined entity is laying off 20% of its remaining staff, all in its ad tech business, a 1,600 headcount cut that will commence this week and play out through the second half of the year. We just checked ourselves and in case you are wondering, Friendster and MySpace remain defunct and unpunctuated.

Morning Brief

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The call is coming from inside the house for Shell.

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Global investors are pouring into China.

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Is it 2008? Because the Rent is Too Damn High!

Energy

Activist Shareholder Sues Shell Board Over Climate Strategy

Big Oil’s profits are flowing freely, but now it’s facing a legal blowout.

Shell’s board of directors got hit with a lawsuit by activist shareholder ClientEarth on Thursday. The lawsuit, filed in the High Court of England and Wales, argues that by failing to implement an effective climate change strategy, Shell’s directors are endangering the company’s long-term survival.

Oil Be Back

Oil firms have had a terrific 2022, with Shell reporting its best annual profit in its 115-year history last week. Fellow British oil goliath BP also registered record profits this week, and simultaneously backtracked on many of its climate promises, saying current circumstances (we’re looking at you Putin) mean it’ll need to cling to fossil fuels a little longer than planned.

The record profits driven by, let’s face it, human misery in Ukraine, have intensified calls for windfall taxes on oil companies, but ClientEarth has been ahead of the curve, notifying Shell’s board of its intentions last March, shortly after Putin’s invasion began. But it’s not the first activist shareholder to ruffle an oil giant’s feathers:

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In 2021 Engine No. 1, a small hedge fund, managed to snag three seats on Exxon’s board by convincing other, much bigger investors that looking to the long-term benefits of clean energy was essential for the business’ future.

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Climate change litigation globally is gathering (non-coal-generated) steam. The number of climate change lawsuits doubled between 2015 and 2022 with 25% of those cases filed since 2020, according to data from the Grantham Research Institute and the Sabin Center for Climate Change Law.

“There haven’t been that many cases in this vein in the past, and the best-known one (People and Planet v. HM Treasury) clearly affirmed that companies (and their directors) have a wide discretion in how they fulfill their obligations. So ClientEarth does face challenging odds,” Prof. Veerle Heyvaert, an expert in climate law at the London School of Economics, told The Daily Upside. “On the other hand, that case is from 2009, and a lot has changed in the meantime. Courts around the world certainly take climate-related claims a lot more seriously now than 10 years ago.”

Plastic Punks: ClientEarth already has some savoir faire regarding climate litigation. Last month it was one of three groups that filed a lawsuit against French consumer giant Danone, famous for its dinky yogurt pots and bottled water empire, accusing it of being lackadaisical about its contributions to plastic pollution. ClientEarth took advantage of a relatively new French “duty of vigilance” law which forces companies to monitor and publish details about environmental and human issues in their operations. Quelle vigilance!

– Isobel Asher Hamilton

International

China is Happily Engaging With the Global Economy So Far This Year

Tensions between the US and China may be at an all-time high (some 60,000-feet-of-altitude high, to be precise). And yet, when it comes to commerce that doesn’t involve bleeding-edge semiconductors, the western world and the Middle Kingdom are co-mingling quite cordially.

The first six weeks of the year have seen the most foreign investments into China ever. Meanwhile, Shanghai-based car-sensor developer Hesai Technology became the largest Chinese firm to list publicly in the US in two years on Thursday.

Locked-Down and Out in Shanghai and Shenzhen

Foreign investors have reason to be excited about China’s economy again. President Xi Jinping has finally relaxed the stringent zero-Covid policies that trapped the world’s second-largest economy in a brutal cycle of economically destructive lockdowns and grounded China’s GDP growth down to just 3% last year, lower than 2021 levels. Meanwhile, new economic data published by the country late last month has investors optimistic about the nation’s growth prospects, with manufacturing expanding for the first time in three months. That was enough for rating agency Fitch to adjust its 2023 forecast for China up a full percentage point to 5%.

Consumer brands, in particular, stand to benefit from the end of lockdowns. “We believe the reopening may lead to a V-shaped recovery in the share prices of China’s consumer brands in early 2023. The recovery could be driven by pent-up demand, high savings, and a wealth effect as real estate prices recover,” Xiaolin Chen, international head of investment management firm KraneShares, told CNBC. The upshot is that global interest in Chinese stocks is rebounding from its recent severe lows:

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The CSI 300 — China’s benchmark index for its largest companies — has increased over 13% since the end of October. And so far this year, foreign investors have poured an astonishing $21 billion into Chinese equities— more than double last year’s record.

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“The money has really come back in now that the market has got reassurance that 2023 will be all about growth,” Frank Benzimra, head of Asia equity strategy at Société Générale, told the Financial Times.

Sensor Sensibility: The warm and fuzzies are mutual. While foreigners pour into Shanghai- and Shenzhen-listed companies through the Hong Kong Stock Connect program, exchange executives are hoping Hesai Technology’s forthcoming IPO on the Nasdaq stock exchange will spark a revival of Chinese listings on US exchanges. Think of it as a trial balloon. The company, which supplies autonomous car companies with critical LiDAR laser sensors, climbed as much as 29% following its debut — and closed up 11%. From the looks of it, business leaders regard all this Cold War talk as nothing but hot air.

– Brian Boyle

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Real Estate

Manhattan Rents are Way Up There, Report Says

(Photo Credit: Joe Taylor/Unsplash)

Somebody forgot to tell Manhattan landlords about this recession everyone’s talking about.

In January the median rental price for a Manhattan apartment rose 15% to $4,097 compared to the same time last year. And the average rent shot up more than 13% to $5,142, according to a report from real estate company Douglass Elliman and consultant firm Miller Samuel. For anyone keeping score, that’s more than double what you’d pay in Miami.

Y’all Come Back Now, Ya Hear

At the height of the pandemic, NYC experienced an exodus as office jobs went remote and employees no longer had to factor in a manageable commute to their daily schedules. According to a Cornell analysis by the end of 2020, 336,000 New Yorkers – roughly 4% of the city’s population – had migrated to less crowded locales with yards, driveways, and birds other than pigeons. Manhattan saw the biggest dip with nearly 120,000 residents leaving the island.

But even with a recent wave of tech and Wall Street layoffs, the local job market is strong. In a report last summer, the US Bureau of Labor Statistics found that NYC’s job rate growth was 5.3%, higher than the national average of 4%. Manhattan is once again open for business and workers are returning to the office, but now they need a place to live, and that’s gonna be a little bit harder to find if y’know what we’re sayin?:

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During peak COVID, Manhattan’s vacancy rate hit an astonishing peak of 12%, but by this past October, it had fallen back down to a little over 2%. So not only are prices going up, there are fewer new listings.

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Federal guidelines say people should spend 30% of their income on rent and utilities lest they become rent-burdened. If you go by that standard, your household would have to be making more than $163,000 a year to afford a median-priced Manhattan apartment. But according to US census data, the median household income in Manhattan is only $70,600, not even halfway there.

Jess Levine, a top broker at Douglass Elliman who oversees more than 200 private investor apartments, said rents should stabilize and level out in the coming months. “Rental bidding wars have generally subsided compared to this past summer,” she told The Daily Upside. “We’re well above pre-covid rental prices. Pricing is key to a successful rental in this market.”

Down in Kokomo: As the owner of the Miami Dolphins and an NYC real estate magnate, billionaire Stephen Ross knows a thing or two about both cities. In an interview with Bloomberg this week, he said, “People are looking from the Northeast and relocating for jobs — not retirement — and companies are looking (for offices). It’s tax issues, and there’s the security issues. There’s just the ease of living.” In the past two years, companies like Goldman Sachs, Blackstone, and Point72 have expanded to offices in the Sunshine State. Florida is starting to look less like God’s waiting room and more like Wall Street’s boardroom. And the rent’s a lot cheaper, too.

– Griffin Kelly

Extra Upside

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Hops are no longer on top: Spirits surpassed beer for US market share.

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The billionaire space race reignites: the FCC said Amazon can send satellites into orbit.

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Just For Fun

Don’t look down.

Moving the goalposts.

Have a great weekend!

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