One of the leading companies in Europe has chosen the United States to go public again. Its largest shareholder has just made it official these days, raising a stir in government and finance by hurting the pride of the country. No, it is not Spain or Ferrovial -on which case we will go into more detail below- but it could be and it helps to understand what is happening in financial circles because it is more serious than it seems. It has happened in the United Kingdom with Softbank and its investee ARM, the company that seems destined to lead the chip industry in some segments to compete face to face with Intel, AMD or Nvidia.
Until the last minute, Prime Minister Rishi Sunak – a former employee of Goldman Sachs and The Children Investment (TCI) – has tried to seduce the shareholders of the British chip leader to go public in London or, failing that, opt due to the dual listing with New York but Softbank has slammed the door on the post-Brexit City and, incidentally, on the British pride that sees one of the jewels in the business crown escape. But why Wall Street? There are better financing conditions, more investors and larger ones. They are also willing to risk more and pay higher valuations for the shares. Simple, but it is not the only explanation for the regretful interest in crossing the pond from Europe.
There is a hidden attraction force that makes it not an isolated case. It is called the IRA, or Inflation Reduction Act (Inflation Reduction Act) and it is a program of immediate fiscal incentives of up to 500,000 million dollars between capital and debt that is attracting European multinationals such as Siemens, Volkswagen, Enel or Iberdrola, among others. Unlike the slowness and bureaucracy of the Next Generation funds, politically awarded, not very transparent and increasingly unprofessional, companies love the simplicity of the public-private program of the Joe Biden Government: welcome, take the money and invest. The new law is part of the policy for the relocation of productive capacity in the country. For example, there is public aid for the purchase of electric cars ‘Made in the USA’, energy efficiency or renewable energy generation equipment.
The railway case and its consequences
What is true for Softbank and ARM is also true for Ferrovial, at the forefront of information since this week after announcing a strategic corporate operation to be listed in the US before 2024 by the fastest possible route. It is the ultimate goal of a reverse merger that will first lead you to first transfer your tax domicile to the Netherlands to be listed on the pan-European Euronext, which groups the stock exchanges of Amsterdam, Paris, Dublin, Brussels, Lisbon, Milan and Oslo… All the of the Euromenos Frankfurt, on the one hand, and Madrid, on the other. The company’s motives are well known: to finance itself at a lower cost with the debt it issues, to attract more investors to become its shareholders and, as part of the latter, to be included in certain US and European stock market indices that are de facto restricted. to the Spanish stock exchanges of BME, whose headquarters moved to Zurich after the merger with SIX Group, by the way, with all the blessings of the current executive of Sánchez y Calviño.
Ferrovial has given a figure in its merger document that is unequivocal: 92% of its investments in the 2023-2027 period will be concentrated in the US, where it is involved in projects with a size of 15,000 million dollars of investment (Q1 of New York JFK airport, i-66 Virginia, North Tarrant Texas The big Anglo-Saxon funds and pension plans that put their money in this type of company are in Dublin, Amsterdam, New York and counting, some of them are prohibited from investing in companies that do not have a maximum quality rating (above A) and Ferrovial needs to climb a few steps to reach that level.The sovereign rating anchor weighs heavily on these ratings from agencies such as S&P, Fitch or Moody’s. The Del Pino family also needs to refinance 1,000 million euros between hybrid bonds and senior debt before 2024 in a scenario in which financing costs have multiplied for households, companies and l to own Administration.
The en bloc attack by the Government of Pedro Sanchez on Ferrovial for its planes means planting a red flag on the map for international investors at a time when financing is starting to be expensive and will be increasingly scarce, but also for everyone. for the Public Treasury that has to go out to refinance its debt and issue even more to cover the public deficit that Moncloa will incur for another year. That is why Sánchez has shot himself in the foot when airing an issue that, if he had managed correctly, was clearly an opportunity but they have turned it into a crisis in an attack of spite in the purest Shakira style.
What will end up transcending this step for international investors is that Ferrovial is going into exile persecuted by its government. In fact, some analysts have dismissed Moncloa’s uncontrolled reaction to an announcement that is actually a promotion to a club that no company can access, even if they ask it, as childish. Now everything has been poisoned to the point that international investors are going to carefully measure each step they take in Spain. Biden and those that aspire to companies like Ferrovial will get free thanks, among others, to Sánchez and the rest of the European leaders. From 2021 to 2022, Europe has multiplied its energy bill to 1 trillion euros and a good part of it has gone to buy oil and gas from the US, the new reference energy supplier after the war in Ukraine. Spain alone spent 90,000 million euros last year to bring fossil energy from other countries.
