Read It And Eat 26/03

Welcome to ‘Read it and Eat’ — your go-to for bite-sized updates on corporate actions in finance, AI and anything I consider newsworthy. Join me twice a week for quick reads, where I serve up the latest insights that matter in the world of business.

Major Headlines

• Newly Qualified Struck Off For Inflating Timesheet:

• A newly qualified solicitor in the U.K. has been struck off the roll (disbarred) after a partner discovered that he had been recording “inaccurate” and “misleading” time sheets. Matthew Nester joined Hugh James Solicitors as a solicitor in 2021, having just qualified and was only six months into the job when a partner noticed that he had recorded 30 minutes of time for a quarterly file review, which was “unusual” as the file was closed and it was not Nester’s role to conduct the review. The partner held a meeting with Nester to question him about the time entry. The NQ forwarded a document supposedly showing the work done, but the partner noticed that it was created after their meeting. The partner ran a time recording report for Nester, and the NQ fessed up to inaccurately recording seven and a half hours, across two days, for reviews on several files. Nester admitted other issues to the partner regarding his time recording, including that he had recorded excess time on a file and added entries for work that he had not undertaken. The partner alerted HR, the firm fired Nester and reported him to the SRA, and the NQ also self-reported. The panel concluded that Nester was dishonest and had acted in a way to mislead his firm, and struck him off the roll. No order was made for costs. [Legal Cheek]
  

• Tech CEOs and Other Execs are Selling their Tech Stocks:

• American billionaires are selling stocks and not in small numbers at all. So what has happened in the past few days? Apollo Global Management’s Leon Black enacted his first-ever sale after 34 years shedding $172.8 million in his equity firm. Walmart’s Walton family sold $ 1.5billion in a week. In the final two months of 2023, Mark Zuckerberg sold nearly half a billion dollars of Meta Platforms Inc. shares. Jeff Bezos sold another 14 million Amazon shares, worth around $2.4billion bringing the total number of shares he has sold in the firm to about 50 million. Experts do not see this as a good sign as they said that this could be because of looming US presidential elections this year. Finance firm consultant Alan Johnson told Fortune last month, ‘If you’re reading the tea leaves and looking at what may happen with our politics in the next year or so, things are pretty good right now — the markets are up. With our politics and everything else going on geopolitically, maybe it won’t be as good a year from now or two years from now.” Insider sales by high-level execs of large amounts of stock are never a good sign, it’s quite simple,” said Elson from the University of Delaware. “It means they have found a better place to deploy their assets than the businesses they’re running.” [Financial Times]
  

• Boeing CEO, David Calhoun and Other Execs To Resign Amongst Turbulence for Company:

• On Monday Boeing CEO Dave Calhoun said he intends to leave the beleaguered company by the end of the year in a major shakeup of the company’s leadership. Boeing’s chairman and the head of the commercial airplane unit are also leaving. The company also announced that Stan Deal, CEO of Boeing Commercial Airplanes, is retiring. Stephanie Pope, Boeing’s chief operating officer since January, is taking his place effective immediately. Boeing has been buffeted by more than five years of problems with its airplanes, including two fatal crashes of the 737 Max in 2018 and 2019 that killed 346 people, and most recently a door plug that blew out of the side of an Alaska Airlines 737 Max in January, leaving a gaping hole in the side of the plane. The problems have led to multiple groundings for safety issues and more than $31 billion in cumulative losses. We also discussed the convenient death of the whistleblower in the middle of the trial and giving testimony against the company. “The eyes of the world are on us,” he said in announcing his departure plans. “We are going to fix what isn’t working, and we are going to get our company back on the track towards recovery and stability.” [Financial Times]
  

• The Expose Of The All Boys Club in the UK That Has Supreme Court Justices and The Head of MI6 As Members:

• In October 2011, Brenda Hale, who was then the only female judge in the Supreme Court, gave a speech to a diversity forum, organised by the law firm Norton Rose, and expressed her dismay that so many of her colleagues were members of the men-only Garrick Club. At that time the club’s members included the president of the Supreme Court, three Supreme Court justices who sat alongside Hale and an estimated 25% of the most senior male judges in England and Wales. “I regard it as quite shocking that so many of my colleagues belong to the Garrick Club, but they don’t see what all the fuss is about,” she said. Hale became the third person and first woman to serve as president of the Supreme Court. The full membership list of the men-only Garrick Club reveals its central position as a bulwark of the British establishment, featuring scores of leading lawyers, heads of publicly funded arts institutions, the head of the civil service and King Charles. Members also include the deputy prime minister, the secretary of state for levelling up, the chief executive of the Royal Opera House as well as Richard Moore, the head of the Secret Intelligence Service (MI6), and Simon Case, who as cabinet secretary is the prime minister’s most senior policy adviser and the leader of nearly half a million civil servants. Made public for the first time by the Guardian, the club’s closely guarded membership book lists a supreme court judge, five court of appeal judges, eight high court judges, about 150 KCs, dozens of members of the House of Lords and 10 MPs, plus heads of influential think-tanks, law firms, private equity companies, academics, prominent actors, rock stars and senior journalists. [The Guardian]

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MINOR NEWS

• The owner of the bakery chain, Gail’s is looking to sell the company.[Sky News]

• Crypto Job Listings make a strong comeback due to the current crypto bull run. [Bloomberg]

• London Stock Exchange will start an ETN marketplace for Bitcoin, Ether and other crypto. [Nasdaq]

• Stanley seeks to replicate the Water Bottle Hype amongst men. [Wall Street Journal]

• China to investigate PWC for its role in the $78Bn Evergrande fraud. [Bloomberg]

• Vodafone and Three $16Bn merger faces anti-trust scrutiny of the deal. [Bloomberg]

• Florida to institute a social media ban for children under 14. [Bloomberg]

• Chime Financial aims for a 2025 IPO in the U.S.A. [Bloomberg]

NEWS OF THE DAY:

Shrinkflation:

On the assumption that you have heard the term “Getting more for less” which if you haven’t heard of it, means that you get more value for a lower price. This is considered a good deal particularly for the consumer. However, as the broken system of Capitalism, and its incessant drive for unending growth and increasing profits, every quarter would have it, businesses usually employ some measures to artificially generate those returns and profits for their shareholders.

Shrinkflation is one of those tactics and measures that are being used by businesses. Shrinkflation is the practice of altering products or packaging so consumers get less while the prices stay the same (or even increase). In essence, you are “Getting less for more” For example, the shape of the Gatorade bottle changed, the old bottle held 32 ounces and the new shape now holds 28 ounces, slightly insignificant but again, less for more. Pepsico said that they changed the bottle shape to make it easier to hold. These companies rely on the fact that the end consumer doesn’t really remember the shape and size of the packaging coupled with the fact that the reduction on the micro-scale is insignificant but on the macro-scale, it leads to incredible cost savings for the company. In terms of the Gatorade example, the 4 ounces may not really matter to one individual but that means, if the math checks out, for every 7 bottles they sell, they save the equivalent of filling up 1 extra 28-ounce bottle which means they get to sell even more. In the UK, Listerine Fresh Burst mouthwash shrank from 600ml to 500ml, but the prices subsequently rose by 52p in Tesco. This meant that the consumers paid 21% more for 17% less. Equalling to a unit price per 100ml increase of 46%. Similarly, PG Tips The Tasty Decaf Pyramid tea bags went from containing 180 teabags to just 140 at several supermarkets. While many retailers also dropped the price, at Ocado the price actually rose from £4 to £5.09 despite the size reduction — that’s 22% less tea for a 27% higher price or a 64% cost increase per tea bag.

I have recently become obsessed with perfumes and in the industry there are reformulations which usually occur, to update or improve the scent which usually means changing the ingredients without changing the smell. There have been reformulations to my favourite and nostalgic perfume brands, for example, the Paco Rabanne Black X’s which holds “scentimental” value to me has been reformulated and also become the victim of shrinkflation. When reading the notes and ingredients of the reformulated perfume I realised that not only did the reformulated perfume have an increased dilution percentage of the perfume oil, but it contained different and inferior quality of ingredients. This is called Skimpflation and occurs when the company “skimps” (cuts back) on the quality of the product or service while it maintains the same price, or even increases the price of it so that it can still be profitable. It differs from shrinkflationn as it has to do with the quality of a thing and not volume or size. This has affected most if not all industries from the fashion industry, and the rise of polyester in clothing or inferior leather in luxury products, to the aircraft industry which serves progressively worse in-flight food if it provides it at all.

The problem with Shrinflation and Skimpflation is that it is not sustainable and there is no “ground” level, a baseline that the quality, size and amount would not go below. Companies have a regular corporate spiel that they use to respond to the public outcry and backlash. The typical response is: ‘We’re facing higher costs for raw materials. We’re facing higher labour costs. We’re facing higher gas prices.’ It suggests to me that manufacturers are very cognisant that consumers will notice more readily a price increase, rather than a decrease in product, quantity, or size of the package and that the raw material cost and the labour costs are much more than compensated for their price increases, and there is no reason whatsoever to decrease the quality or the quantity in the packages that we’re so used to. In essence, there is no reason for them to shrink or skimp on the product while also increasing the price of the item. This is done just because they wish to declared record-breaking profit levels to their shareholders every quarter. The problem with that is that for every quarter that record profits are declared, the company has to exceed the previous level as that previous level would be considered the new normal and would be considered the bare minimum to the shareholders in the next quarter. That means, if Walmart for example declares $4Bn in record profits in Q1 of 2024, shareholders would expect at the Q2 meeting, profits exceeding $4Bn as the Q1 profits would be the new baseline. [The Guardian]

Gen-Z Word Of The Day

Hillability

This is defined as the potential for something to be Southern or being Southern in nature. Southern means the States of Texas, Tennessee etc in America which is famous for farming, huge land, great food and very thick accents.