What's going on?
The battle for control of Barclays heated up further on Monday after a prominent activist investor published a letter to other shareholders warning that the British banking giant was in a precarious position.
What does this mean?
Edward Bramson, whose company owns a 5.5% stake in the bank, reckons that unless Barclays trims its investment banking activities it’ll have to raise extra money from investors – making existing shares worth less. While investment banking delivered half of Barclays’ profits last year, it can be an expensive and unreliable business – which might have something to do with Barclays’ investment banking head prematurely stepping down two weeks ago.
Raising extra cash is a sore subject at Barclays – when it did so at the height of the 2008 financial crisis, the bank’s then-bosses allegedly misled investors. The jury in a landmark fraud trial against four former Barclays executives – all of whom deny the charges – was mysteriously discharged on Monday.
Why should I care?
For markets: Barclays is in uncharted waters.
Barclays’ stock fell slightly on Monday. While Bramson’s views aren’t new, they’re getting louder as he pushes for a seat on Barclays’ management board. Perhaps investors selling the stock agree with Bramson. Or perhaps they’re keeping an eye on the court case, worried about the protracted negative impact of a possible retrial. If the eventual verdict is not guilty, there may be less cause for change at Barclays – which, depending on where investors stand, could be a good or a bad thing.
The bigger picture: Activists pack a punch.
US-listed shares of electronics giant Sony jumped 8% on Monday on news that another activist investor was building a stake in the company in order to pressure management to make changes, including potentially selling Sony’s movie studio. Both Amazon and Netflix are said to have expressed interest in the studio – and with Disney also building content for its forthcoming streaming service, competition could be fierce.