February 2024
Article
4 minutes

Perspectives on Progress #8

Ben James – Portfolio Director

Key Points

  • Hybrid deliveries exceed petrol engine supercar deliveries at Ferrari and Redwood Materials expands its Toyota collaboration
  • Coupang is to buy Farfetch, the leading global platform for the fashion industry, and Epic Games wins its antitrust lawsuit against Google
  • Shopify is integrating its ‘Sidekick’ AI tool across its platform in a move that could revolutionise entrepreneurship

As with any investment, your capital is at risk.

 

Ferrari

Driving the future of luxury

Released just before Christmas 2023, ‘Ferrari’ is the movie centred on the life of Italian race car impresario Enzo Ferrari – “the most famous man in Italy after the Pope”. He makes the most coveted cars in the world,  known as “ravishing red beasts that roar out of his factory…and into the world’s fastest, most lethally dangerous races, where records, machines and bodies are routinely broken”.

Ferrari, the company, the car, and the brand, still retain that magic and allure today. A mark of its tight control over its luxury brand stewardship is that fewer than 250,000 cars have been produced since production began in 1947. Key to this ongoing success will be its ability to maintain this legacy while adapting to new technologies and customer demands.

As part of Ferrari’s transition from internal combustion engines to hybrid and electric technologies, hybrid deliveries surpassed traditional supercar deliveries for the first time in Q3 2023. By 2030, the company is aiming to sell 40 per cent electric, 40 per cent hybrid and 20 per cent petrol cars, giving customers the freedom to choose how their cars are powered.

Remaining true to the vision of its founder and the spirit of ‘Ferrari’ is no small challenge, but given its cars remain sold out until 2026 with strong demand across all geographies, not to mention the potential brand boost from Lewis Hamilton joining the F1 Ferrari team, the company remains on the road to long-term success.

Coupang

Coupang's luxury leap

In a move that has surprised many in the retail industry, Coupang, the South Korean ecommerce powerhouse, has made an opportunistic and strategic acquisition of Farfetch. Farfetch is the leading global platform for the luxury fashion industry and has  been encountering financial difficulty. It seems Coupang is making a calculated bet to move beyond dominating South Korea to challenge major global players.

Coupang's newly launched ‘Rocket Luxury’ service, which offers super premium beauty products within 24 hours, will be complemented by Farfetch's extensive list of luxury brands. With only 12 per cent of personal luxury sales in South Korea occurring online in 2023, compared to the global average of 19 per cent, there is considerable growth potential in this sector.

The acquisition will also provide Coupang with valuable experience, supply chains and local knowledge to penetrate international markets, particularly in China, where Farfetch has previously partnered with JD.com and Alibaba.

This move is not without its challenges. Firstly, the deal needs to be approved, and there is a legal challenge from a group of Farfetch debt investors. If and when the deal is completed, integrating Farfetch's high-end offerings with Coupang's existing platform will require significant effort and restructuring.

But Coupang has an impressive track record of execution, and the rewards could be enormous. If the deal goes ahead and Coupang can execute, it is poised to become a major player in the global luxury ecommerce market.

Shopify

Lütke’s bold AI pivot

Shopify, the ecommerce giant, has made a daring move that could supercharge small to large enterprises globally. It’s decided to sell its low-margin delivery infrastructure business and is instead betting big on AI to revolutionise entrepreneurship. Chief Executive (CEO) Tobi Lütke is leading the charge, declaring AI fundamental to the business and integrating it into every part of Shopify's platform. The crown jewel of this AI push is 'Sidekick', an all-knowing AI tool that answers entrepreneurs' every question and completes their to-do list. This bold pivot is a prime example of how product-focused founder CEOs stay ahead of the curve and why Scottish Mortgage favours founder-run businesses. Will it pay off? Only time will tell, but early signs suggest it might be a game-changer.

Redwood Materials

Redwood charges on

Redwood Materials, founded by Tesla co-founder JB Straubel, was featured in Perspectives on Progress #4 in May 2023. Since then, it’s continued making progress towards creating a closed-loop battery materials supply chain. It raised over $1bn in Series D funding in August (Scottish Mortgage participated as an existing investor), then acquired Europe's leading lithium-ion battery recycler, Redux Recycling, to expand its operations in Europe. Redwood's collaboration with Toyota also expanded. The world’s largest automaker agreed to source valuable metals from Redwood’s recycling activities for its upcoming North Carolina battery manufacturing plant. This will be the first time an automaker is recycling their end-of-life hybrid electric vehicle batteries for use in their future electric vehicles. While significant investment is still required to continue scaling, Redwood is leading the way in creating domestic circular supply chains for critical battery components in the US.

To hear more on Redwood Materials, watch this short stock story film with investment specialist Claire Shaw which you can find here.

Epic Games

Epic Games Levels Up

Private company Epic Games emerged victorious in a high-profile antitrust lawsuit against Google in December. The jury in a San Francisco Federal Court found Google guilty of all 11 antitrust claims, marking a significant win for the Fortnite creator. The case lasted for several weeks, and Epic cast Google's 'Project Hug', which offered incentives to major game developers to keep their games on its Play Store, as anti-competitive. Epic’s victory was unexpected as it came two years after its defeat against Apple in a similar battle. This ruling marks a stunning defeat for Google, which operates one of the world's biggest app stores. It could potentially upend the entire app store economy, giving developers more sway over how their apps are distributed and how they profit off them. Google has said it will appeal the decision.

And hot off the press! Disney and Epic announced they would be collaborating on “an all-new games and entertainment universe that will further expand the reach of beloved Disney stories and experiences.” Disney also invested $1.5 billion in Epic Games. This is another exciting development at Epic.

About the author - Ben James

Portfolio Director

Ben James is a portfolio director serving Scottish Mortgage’s shareholder base. Ben joined the Scottish Mortgage team in 2023 and has worked with Tom Slater as the US equity investment specialist at Baillie Gifford since 2015. A former soldier, he developed a passion for the power of investment to drive progress during his overseas deployments. Ben works closely with the managers, meeting with portfolio companies and conducting in-depth portfolio discussions with shareholders. Alongside this, he creates engaging content that makes the Scottish Mortgage portfolio accessible to all its shareholders.

Regulatory Information

This content was produced and approved at the time stated and may not have been updated subsequently. It represents views held at the time of production and may not reflect current thinking. Read our Legal and regulatory information for further details.

A Key Information Document is available by visiting our Documents page. Any images used in this content are for illustrative purposes only.

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Baillie Gifford & Co and Baillie Gifford & Co Limited are authorised and regulated by the Financial Conduct Authority (FCA). The investment trusts managed by Baillie Gifford & Co Limited are listed on the London Stock Exchange and are not authorised or regulated by the FCA.

Baillie Gifford Asia (Hong Kong) Limited 柏基亞洲(香港)有限公司  (BGA) holds a Type 1 licence from the Securities and Futures Commission of Hong Kong to market and distribute Baillie Gifford’s range of collective investment schemes and closed-ended funds such as investment trusts to professional investors in Hong Kong.

Baillie Gifford Asia (Singapore) Private Limited (BGAS) is regulated by the Monetary Authority of Singapore as a holder of a capital markets services licence to conduct fund management activities for institutional investors and accredited investors in Singapore. BGA and BGAS are wholly owned subsidiaries of Baillie Gifford Overseas Limited, which is wholly owned by Baillie Gifford & Co.

Europe

Scottish Mortgage Investment Trust PLC (the “Company”) is an alternative investment fund for the purpose of Directive 2011/61/EU (the “AIFM Directive”). Baillie Gifford & Co Limited is the alternative investment fund manager (“AIFM”) of the Company and has been authorised for marketing to Professional Investors in this jurisdiction.

This content is made available by Baillie Gifford Investment Management (Europe) Limited (“BGE”), which has been engaged by the AIFM to carry out promotional activities relating to the Company. BGE is authorised by the Central Bank of Ireland as an AIFM under the AIFM Regulations and as a UCITS management company under the UCITS Regulation. BGE also has regulatory permissions to perform promotional, advisory and Individual Portfolio Management activities. BGE has passported its authorisations under the mechanisms set out in the AIFM Directive.

Belgium

The Company has not been and will not be registered with the Belgian Financial Services and Markets Authority (Autoriteit voor Financiële Diensten en Markten / Autorité des services et marchés financiers) (the FSMA) as a public foreign alternative collective investment scheme under Article 259 of the Belgian Law of 19 April 2014 on alternative collective investment institutions and their managers (the Law of 19 April 2014). The shares in the Company will be marketed in Belgium to professional investors within the meaning the Law of 19 April 2014 only. Any offering material relating to the offering has not been, and will not be, approved by the FSMA pursuant to the Belgian laws and regulations applicable to the public offering of securities. Accordingly, this offering as well as any documents and materials relating to the offering may not be advertised, offered or distributed in any other way, directly or indirectly, to any other person located and/or resident in Belgium other than to professional investors within the meaning the Law of 19 April 2014 and in circumstances which do not constitute an offer to the public pursuant to the Law of 19 April 2014. The shares offered by the Company shall not, whether directly or indirectly, be marketed, offered, sold, transferred or delivered in Belgium to any individual or legal entity other than to professional investors within the meaning the Law of 19 April 2014 or than to investors having a minimum investment of at least EUR 250,000 per investor.

Germany

The Trust has not offered or placed and will not offer or place or sell, directly or indirectly, units/shares to retail investors or semi-professional investors in Germany, i.e. investors which do not qualify as professional investors as defined in sec. 1 (19) no. 32 German Investment Code (Kapitalanlagegesetzbuch – KAGB) and has not distributed and will not distribute or cause to be distributed to such retail or semi-professional investor in Germany, this document or any other offering material relating to the units/shares of the Trust and that such offers, placements, sales and distributions have been and will be made in Germany only to professional investors within the meaning of sec. 1 (19) no. 32 German Investment Code (Kapitalanlagegesetzbuch – KAGB).

Luxembourg

Units/shares/interests of the Trust may only be offered or sold in the Grand Duchy of Luxembourg (Luxembourg) to professional investors within the meaning of Luxembourg act by the act of 12 July 2013 on alternative investment fund managers (the AIFM Act). This document does not constitute an offer, an invitation or a solicitation for any investment or subscription for the units/shares/interests of the Trust by retail investors in Luxembourg. Any person who is in possession of this document is hereby notified that no action has or will be taken that would allow a direct or indirect offering or placement of the units/shares/interests of the Trust to retail investors in Luxembourg.

Switzerland

The Trust has not been approved by the Swiss Financial Market Supervisory Authority (“FINMA”) for offering to non-qualified investors pursuant to Art. 120 para. 1 of the Swiss Federal Act on Collective Investment Schemes of 23 June 2006, as amended (“CISA”). Accordingly, the interests in the Trust may only be offered or advertised, and this document may only be made available, in Switzerland to qualified investors within the meaning of CISA. Investors in the Trust do not benefit from the specific investor protection provided by CISA and the supervision by the FINMA in connection with the approval for offering. 

Singapore

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Where the Trust is subscribed or purchased under Section 275 by a relevant person which is:

(a) a corporation (which is not an accredited investor (as defined in Section 4A of the SFA)) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor; or

(b) a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each beneficiary of the trust is an individual who is an accredited investor, securities or securities-based derivatives contracts (each term as defined in Section 2(1) of the SFA) of that corporation or the beneficiaries’ rights and interest (howsoever described) in that trust shall not be transferred within six months after that corporation or that trust has acquired the securities pursuant to an offer made under Section 275 except:

(1) to an institutional investor or to a relevant person or to any person arising from an offer referred to in Section 275(1A) or Section 276(4)(c)(ii) of the SFA,

(2) where no consideration is or will be given for the transfer;

(3) where the transfer is by operation of law; or

(4) pursuant to Section 276(7) of the SFA or Regulation 37A of the Securities and Futures (Offers of Investments) (Securities and Securities-based Derivatives Contracts) Regulations 2018.